Posted on: 23/06/2009 

Buy your own slice of a popular brand for a low-risk way to get into business.

Walk into any shopping centre from Darwin to Hobart and you'll have an eerie sense of deja vu. A Bakers Delight here, a McDonald's there, perhaps a 7-Eleven, a Donut King and a Gloria Jeans. Just like home!

Australia has gone crazy over franchising. After taking off about 15 years ago, there are now roughly 800 franchised brands in Australia, with more than 50,000 individual businesses, according to the Franchise Council of Australia.

Franchising takes several different forms but essentially works like this: the franchisor develops a product, brand or service concept. It then offers other people the right to trade using the brand and provide the goods or services to the public. The franchisee pays an initial fee, which usually includes training and the exclusive right to operate in a particular area, as well as a monthly set fee or percentage of turnover. The franchisee operates as a separate business entity, not an employee of the franchisor.

When Chris Butler decided to buy a video store after years of working as a graphic designer, a franchise was the only option he considered.

"Because of my knowledge and exposure to the video industry, I realised it was far more beneficial to be a member of a franchise group than having to buy product and do all the necessary things as an independent," says Butler, 44.

With his wife and parents-in-law as business partners, Butler bought a Video Ezy franchise for an upfront cost of about $280,000 and set up a new store at Baulkham Hills in April last year. While running a retail business for the first time has been a steep learning curve, Butler says the level of support from Video Ezy has helped the business to flourish.

"Video Ezy have the biggest order book and can therefore extrapolate the best deals from distributors. They also have their own marketing department which is dedicated to helping out franchisees. It's a huge benefit, I feel."

Depending on the brand, buying a franchised retail outlet usually means an investment of between $150,000 and $500,000. Over the past few years, however, there has been strong growth in more affordable mobile franchises, such as coffee vans, window cleaners and computer technicians.

"There are a number of better-quality franchises now in the $50,000 to $100,000 range which are much more manageable for younger people," says Grant Garraway of consulting firm the Franchise Company. "Many of the emerging franchises are van-based, which is a mechanism for taking the service to the customer."

Kai Rogers, 32, bought a Jim's Mowing franchise five years ago, "because I just got sick of working for idiots". Rogers spent about $25,000 on an existing franchise run in the western suburbs and pays a set monthly fee to Jim's. His daily work includes mowing, gardening and landscaping for residential and commercial clients. While Rogers had the necessary skills and experience to start an independent business, he felt that having a connection to the well-regarded Jim's brand was an advantage.

"Since it started, it's all been done professionally and I think a lot of people would rather have a Jim's guy than somebody else," he says.

While business is tougher than usual during the drought, Rogers is able to live comfortably and set his own hours. He starts early and heads home at 3pm. "It's just a quality of life," he says. "I'm still earning a living and paying all my bills and the kids get to spend time with their dad - you can't go wrong there."

As with any business, there are risks involved in buying a franchise. But franchisees have a considerably lower failure rate than other small businesses, Garraway says. "Your franchisor is generally interested in keeping the site going, even if you prove to be a square peg in a round hole. They will either find a buyer for you, or perhaps buy it back themselves. You might lose a little bit of money if it turns out not to be the right business for you but you tend not to lose everything."