Why is Australian franchising so strong?
What makes Australian franchising such a strong proposition for an incoming franchisee?
As a service franchisor seeking to grow our brand through franchising, we come across a lot of skepticism from prospective franchisees. Is it any wonder? The media is full of reports of rogue franchisors and unethical franchising practices, and yet, the franchise industry is continuing to grow and thrive in Australia. Perhaps this could in part be attributed to the additional security afforded to Australian franchisees as a result of the introduction in 1998 of the Franchise Code of Conduct.
Whilst the USA set the ball rolling with franchise specific legislation, the introduction of the Australian Franchise Code of Conduct in 1998 has raised the bar, with many countries looking to Australia for guidance in establishing their own franchise legislation. At this time, Australia is one of a very small group of countries requiring mandatory disclosure prior to entering a franchise agreement.
For the Australian Franchise Sector, the implementation of the Franchising Code of Conduct, the role played by the Franchise Council of Australia, and the availability of reliable franchise research and quality franchise education, has increased awareness of ethical issues and best practice franchising amongst its members. It is fair to say that the majority of Australian Franchisors, and particularly the team at Appliance Tagging Services, are very proud to be a part of this sector.
However there is still room for improvement at franchisee level. Whilst the prior disclosure provisions in the code certainly help to counteract the false promises that have been made in the past by unethical franchisors, and to protect franchisees from misleading statements, there is still a huge onus of responsibility on the prospective franchisee to undertake their own due diligence prior to committing to a franchise agreement.
The requirement within the FCC for a franchisor to advise prospective franchisees to seek independent advice goes some way towards highlighting the importance of prior investigation. However, the single most valuable information provided in a disclosure document is probably the contact information for current and previous franchisees. There can be no better way for a new franchisee to find out about the nuts and bolts of a franchise than by speaking to the people who have already walked that path.
Despite all efforts by the ACCC and the FCA to eliminate negative elements within the franchise sector, there is no magic formula for success for either a franchisee or franchisor and both parties need to take responsibility for their decisions.