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Franchising popularity increasing

27th Aug 2009

Franchising popularity on the rise.Results from our first website poll are in and although only antedotal, may indicate a growing trend towards born franchisors (that is, businesses that plan to franchise from inception).

The majority of franchisors (34%) which responded to the website poll granted between two and five franchises in their first year of operation, followed by a quarter granting one unit.

Fifteen percent granted between six and ten units, and a further 15 percent granted more than ten units in the first year.

In our past academic research we’ve found most systems operate for three or four years before granting any franchises, so the poll results are quite interesting.

The results may indicate a shift from the approach used by many older franchise businesses where they started operating as an independent business and then ‘fell into franchising’ as an expansion model.

If this is the case, it means younger businesses are getting involved in franchising and there's pros and cons to that.

It means people with new business ideas can grow quickly which can be good for the community.

However the downside is the franchise business may not necessarily be thoroughly tried and tested which increases the risk for franchisees.

A lot of research indicates there is still merit in operating for a few years to prove your business concept prior to franchising.

Rapid growth, at any stage in the franchise lifecycle, but particularly in the early years can put enormous  stress and strain on the franchisor and the franchise business if they're not ready for it.

It's not the number of franchises you grant that is important, it's whether the growth of your franchise business is sustainable.  Sometimes slow and steady does win the race.

If you didn’t participate in the poll but would like to share your opinion or experiences about the optimal number of franchise units in year one, you can comment below.

(And a new website poll has been launched so check out our home page and vote to have your say).

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Read more: Lorelle Frazer

Reader Comments

I agree entirely that franchising in the first year or two in a new business is a risky venture. The nature of franchising is essentially to share a proven concept. I too have come across businesses that have never traded, but have had a "great idea". Fortunately I have been able to convince these entrepreneurs that it would not be wise for a potential franchisee to buy into a "great idea" alone. One would hope that no responsible franchising adviser would encourage an unproved business to franchise. This also demonstrates the need for potential franchisees to seek professional advice before embarking along an unproven franchising path.

Lorelle,

Nice post, and I hope franchising continues to grow in your country! I recently discussed Green Franchising in Australia on my blog. Care to add a comment?

Thank you!
The Franchise King
Joel Libava
USA

The franchise system has such a great appeal, i wonder if over the next 10 years there may be more capital raising issues as those exiting the workforce to move into franchising will have less funds coming out of redundancies due to shorter terms on tenure. It is interesting to see if Baker's Delight - Manage to Own model is copied. Have a look at http://fmcgblog.com.au/2009/09/more-than-one-option/ to see what they are doing.

Tim

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