For many people franchising is the way to go and they have  made their money, but it always comes with its own risk and is not everyone’s cup of tea

Market estimates you’ll need between $10,000 and $50,000 to start a business from scratch, but franchises can cost a lot more.

The cost of setting up a greenfield site of a national franchise is eye-watering. For example, you would need up to $2 million in capital investment to open a new McDonalds in australia, plus pay the $60,000 franchise fee.

The capital cost of a new Autobarn is up to $600,000, Boost Juice Bar $250,000- $500,000, Angus & Robertson $250,000- $500,000, Subway $110,000-$325,000 and The Athlete’s Foot $250,000-$500,000.

According to the BRW "fast franchise list" the two big money makers, or fastest growing franchises by revenue, are both Queensland-based.

They are Wayne Ormond’s Refund Home Loans, which has around 170 outlets and an entry cost of $68,200, and Go Gecko Property Sales franchises, started by Geoff Doyle, with a franchise cost of around $60,000.

HOme loans refund

The popular Ecowash Mobile car cleaning  australian businesses are booming, and entry costs start around $55,000.

Big name franchising requires big bucks, generally the sale price of an existing franchise is three times a store’s earnings before interest and tax plus the cost of stock.

Goldman Sachs Secret Trader software worth $$$ Hacked and leaked out to germany servers

So you can hit paydirt if your $200,000 franchise doubles in value once it becomes profitable.

There are real opportunities for entrepreneurs with great ideas, according to Innovation Centre Sunshine Coast chief executive Colin Graham.

"In a recession there is less job security and sometimes for budding entrepreneurs who have been sitting on a great business idea for years, it is all the motivation they need to recruit themselves and become their own boss," Mr Graham says

——————————————

A franchise might promise a safe entry into  australian business but things can pan out differently.

A conversation that is taking place around lots of Australian dining tables at the moment goes like this: one of the family’s breadwinners has lost his or her job and is wondering what to do with the redundancy payout. On the list of options are paying off a chunk of the mortgage and other
debts, putting money into super, taking a holiday or buying into a franchise and becoming a small-business owner.

As the economy moves through a serious downturn and more people contemplate the prospect of unemployment, the franchise industry is gearing up for a period of growth.

The executive director of the Franchise Council of Australia, Steve Wright, says if the pattern of previous downturns is repeated, a lot of money is going to be invested in franchise licences over the next couple of years.

"Owning a small business is one of those dreams that many people have," he says. "A redundancy is a time to assess where you are going in your career and if you have a payout, you have the means to invest in a business."

He says the appeal of franchising is people who have no experience in running a business can buy entry into an operation that is already established, has a recognised brand and marketing strategy and provides support.

He argues that, as with any business investment, there are no guarantees but a franchise is a safer entry into small business than going it alone.

This is certainly the perception among people who buy into franchise systems. A survey of potential franchisees (people who planned to buy a franchise in the next two years) commissioned by the broker Mortgage Choice found the most common reason for going into a franchise was the
view that it was safer to run your own business than have a job in someone else’s hands.

BUT IS IT SAFER?

Given the recent failure of Kleenmaid, a white-goods retailer operating as a franchise system, and complaints by Wizard Home Loans franchisees about the way the sale of their franchiser company to Aussie Home Loans was handled, the view that franchising is safer needs to be examined.

The director of the Asia-Pacific Centre for Franchise Excellence at Griffith University, Lorelle Frazer, says she agrees with the idea that a franchise has the right make-up for an investor getting into business for the first time but says there is no evidence that the outcomes are really better.

Frazer says: "People often cite the Australian Bureau of Statistics finding that 40 per cent of small businesses

fail in the first two years. What the ABS is measuring is exits and we don’t know if those exits are due to business failure, change of ownership or some other cause.

"Our own study shows that the average time a franchisee spends in a franchise system is seven years. At first sight, it looks as though franchisees have a better survival rate than other small businesses but we are not comparing apples with apples."

Every two years, the Asia-Pacific Centre for Franchise Excellence puts together a report called Franchising Australia. What the latest study shows is that many franchise systems are relatively new and untested in a recession, many are too small to remain viable long-term, turnover in the
industry is high and there is a high level of dispute within systems.

One third of systems started up between 2000 and 2005 and one fifth since 2006. That means half the franchising systems currently operating are creations of Australia’s recent economic prosperity.

Between 2004 and 2006, the number of systems increased by 100. There were 200 new entrants and 100 that ceased franchising, so for every two new ones, one got out