An Introduction to Franchise Businesses: Your ultimate guide

FAQs: March 3, 2020

What’s a franchise business all about

When you buy a franchise, you buy into a proven system. The franchisor’s already sorted out any issues and created a solid foundation that you can then easily roll out. They’ll get everything ready for you before you start, including:

  • operations
  • supply chain
  • franchising
  • IT
  • marketing
  • store design and construction
  • food innovation
  • even customer satisfaction.

There’s a lot of information online about franchising that’s written in ‘jargon-ese’ with words so big they’ll make your eyes water. 

So instead, we’ve created a plain-English introduction to franchise business covering what you need to know when you’re considering whether or not a franchise business is right for you. 

First, what is franchising (and should you consider it)? 

In short, franchising is a way of doing business. It’s a defined business formula that one company (the franchisor) owns and sells to others (franchisees) to run as their own business for a given amount of time.

A franchise can offer several benefits over other types of businesses. Each franchise may have an established product (eg. fried chicken) and/or an established service model (eg. a Quick Service Restaurant, or QSR). All franchisors will have an existing reputation and image.

To maintain that reputation and image, each franchisor will demand a level of compliance and consistency. So if you’re someone who highly values creativity and individuality, a franchise business may not be the best fit for your personality.

Whether you’re an experienced business owner or just starting out on your entrepreneurial journey, the main qualities you’ll be assessed on are business acumen and passion.  A professional franchisor can help you with almost everything else.

For example, at Chicken Treat, we offer hands-on help to our franchisees in figuring out:

  • whether the site you’re planning is in the right place
  • who your local competitors are 
  • whether the site format you’re planning is the right fit for that area
  • how you’ll create and execute your franchise business plans
  • what best practices other franchisees have put into place that have helped them succeed.

Different types of franchise business models and arrangements

Within the overall category of ‘franchise businesses’, there are several different franchise models and arrangements. Here’s a quick introduction to the most common franchise business types to start you thinking about which will work best for you.

Firstly, there are four franchising model structures: 

  1. Manufacturer-Retailer: This model is where the franchisee sells the franchisor’s product straight to the public.
  2. Manufacturer-Wholesaler: This model lets the franchisee manufacture and distribute the franchisor’s product under licence. 
  3. Wholesaler-Retailer: In this model, the retailer (franchisee) buys products from a franchisor wholesaler in order to sell them. Often, they’re contractually obliged to buy from that wholesaling company. 
  4. Retailer-Retailer: This model lets the franchisor market their products or services through a network of franchisees. As part of the deal, each franchisee must use a common name and a standard set of systems and processes.

What’s a franchise business all about

Then there are a further four types of franchise arrangement: 

  • Single unit: This is the most common type of franchise, which allows you to open and operate one franchise unit.
  • Multi-unit: This arrangement lets you operate more than one unit, based on performance at existing single unit sites. 
  • Area developer: This lets you operate more units over a larger area, and keeps other franchisees from opening any units in your territory during your contract term.
  • Master Franchise: This arrangement gives you the most rights, allowing you to sell franchises (known as sub-franchises) to other people within your territory. What’s a franchise business all about

 

For more detailed information on each of these models and arrangements, check out our article on franchise agreements.

Do you want an existing franchise store or a new one?

Once you’ve chosen the type of model and arrangement that will work best for you, you still have one more decision to make. Would you prefer to start your own, completely new store, or do you want to buy an existing one from a franchisee who’s selling theirs? 

There are benefits to both options.

Buying an existing store

If you want to acquire an existing Chicken Treat franchise, you’ll negotiate a buying price with the current franchisee. On top of this, you’ll pay a set of fees to craveable brands (the franchisor company) that covers:

  • $12,500 plus GST for training 
  • $10,000 plus GST for admin and document creation
  • $40,000 plus GST for a new franchise agreement.

Benefits of this option include:

  • Simple induction process: Existing stores have a lot of trading history, so you’re getting a team of trained staff, existing equipment and existing trends that make the induction process easier.
  • Peace of mind: If the store’s been operating for a while, you can see its performance history across various market climates. That means you’re buying a reliable, dependable business that’ll see growth due to your fresh perspective.

Buying a new store

If you want to start your own new store, you’ll pay the same set of franchise fees to craveable brands as you would for an existing store. On top of those, you’ll also need to pay either:

  • shopfront fit-out up costs of around $350,000-$500,000 plus GST, OR
  • drive-through start-up costs of approximately $600,000-700,000 plus GST.

Benefits of this option include:

  • Fresh opportunity: Buying a brand new site means you can capitalise on a completely new opportunity, and put your own stamp on the store from the get-go. 
  • Fresh resources: New stores come with a keen team of people who are ready to learn as well as brand-new equipment.
  • Fresh impact: Finally, a new store gives you the ability to make a glowing impact on a new local community that hasn’t benefited from that franchise brand in the past.

How to buy a franchise: Step by step

Ok, so you’ve decided that buying a franchise is definitely the right choice for you, and you’ve identified which franchise model, arrangement and store type you want. What exactly do you do next?

Each franchise has its own unique process, but in general, the most common buying steps are:What’s a franchise business all about

  • Do your research: It’s crucial to thoroughly research any franchise before you jump into a franchise agreement. You need to ask yourself and your potential franchisor many questions and ensure you’re happy with the answers before proceeding any further.
    In particular, make sure you understand the Franchising Code of Conduct. Among the obligations it sets out is the minimum amount of specific information that any potential franchisor is required to provide to you.
    You can also find further information on franchising online, or call the ACCC Small Business Helpline on 1300 302 021.

  • Apply to be considered: Most franchisors will want you to apply and let them know why they should consider you as a viable option to join their franchisee team. If they accept your application, you’ll then meet with their sales team. You can apply to become a Chicken Treat franchisee by contacting our Franchise Manager Leisha – via the details at the end of this page.

  • Apply for funding: If you need financing, the good news is that banks often prefer to lend money for franchise start-ups, compared to independent new businesses. This is because a professional franchisor usually has a solid performance history. If you’ve decided to go ahead, your franchisor may also be able to help you apply for a loan.

  • Sign franchise agreements and leases: The franchise agreement sets out each party’s rights and responsibilities in relation to the franchised business, as well as to each other. At this stage you’ll also have an interview with our Franchise Manager and enjoy a day in an existing Chicken Treat store to get a feel for how it runs. We also check your references, assets and finance pre-approval status. And you’ll need to provide us with your initial Business Plan and Cash Flow Projections for your chosen location.

  • Induction and training: Once due diligence is completed and everything is signed, sealed and delivered, it’s time to have an interview with the State Manager and CEO. Success in any business is always a team effort. That’s why we then offer a full franchise business induction training program. In it, you’ll gain a full introduction to franchise business, learning everything from the key policies to budgeting, along with on-the-job training, such as how to make the perfect chicken.

  • Open your business: Your success makes your franchisor more successful, so they’ll surround you with a robust support system from the moment you start.

Why Chicken Treat is a fantastic franchise business 

  • We do things as a team. We have over 1,500 people working to satisfy hungry customers every day. We’re inclusive, and we like to collaborate and have fun with our franchisees.
  • We’re marketing award winners whose innovative creativity nabbed the 2016 QSR Best Digital Campaign. 
  • We really are an up-and-coming brand. We started in Western Australia in 1976 with one store, then expanded throughout WA and into Queensland. We became an iconic, well-loved brand in WA, and now we’re growing nationally and internationally.

Chicken Treat is THE franchise to buy if you’re looking for a future with a growing brand!

Want to open a Chicken Treat franchise business?

Leisha from our Franchising Team is here to help. Get in touch today!
Leisha Fontana – Leisha.Fontana@craveablebrands.com – 0408927750