12. Work Book: Franchising and Legal Issues for Small Firms

Franchising has become one of the most successful forms of business model in recent years with business format franchising systems spreading rapidly throughout the world. Franchising offers the advantages of a proven business system, training and management support, and ongoing marketing. In this sense it is often viewed as being less risky than starting or buying an independent operation. However, franchising may be overly restrictive for many owner-managers and can incur high up-front and ongoing costs. Not all franchising is successful and franchisees may not make as much profit as independent operators. Care should be taken when selecting a franchise, the need for due diligence is no different to other forms of business purchase. Australia has introduced a Franchising Code of Conduct that aims to regulate franchises and protect franchisees. Franchising has proven a highly successful business model for exporting as it serves to reduce risk. Franchisors seeking to enter overseas markets are likely to seek partners to assist them to secure local knowledge and access to resources.