Why doesn’t everyone want to be a franchisee? It’s a fair enough question. If franchising is as good as it’s meant to be why doesn’t everyone want to get a bit of it? 

There are over two million Australian small businesses of which about 60 percent are sole traders and 85 percent have less than five employees. Yet despite the acknowledged success of franchising there are only about 70,000 franchised units and a lesser number of franchisees given that many franchisees today operate multiple units. Every industry sector is represented in Australia’s 1000+ franchise systems so the argument that there is no franchise system servicing a particular niche is unlikely to be convincing. Why don’t the nearly two million independent small businesses operate as franchises and reap the real and well-documented benefits of this dynamic business strategy?

1. Independent business operators

Some – in fact many – independent operators aren’t franchisees because they don’t need to be franchisees. The micro service business does not necessarily need the resources that franchising can bring. At this level of neighbourhood business operation the personal reputation of the proprietor may be more important than a national brand. Economies of scale in purchasing and advertising, and plugging into another’s training and systems and support structures, may not be compelling reasons.

It would nevertheless be surprising if the move from independent business operator to franchised operator did not gather speed as independent business operators face increasing challenges in regulatory compliance, consumer expectations, technology change.

2. The franchising model

Some independent business operators are not franchisees because they aspire to larger and more sophisticated business empires than they believe possible through franchising. The original franchising model – the franchising of a single units to an owner who owned and managed the outlet – did constrain franchisee expansion. But today multi unit franchising is common and most established franchise systems seek to appoint franchisees who are capable of operating and managing a multi unit operation.  The opportunities for entrepreneurial franchisees to grow within a franchise system are real and considerable.

3. Loss of independence

Some independent businesses are not franchisees because they want total control over their business. Franchising offers many real and distinct advantages for franchisees but it is an underlying reality that it involves a loss of independence. The franchisee has the right – and the obligation – to apply the franchisor’s system in its entirety. Your dumplings may be better than your franchisor’s dumplings in the unanimous opinion of your friends and family – but they are the not the franchise system’s dumplings and can’t be served.

If you don’t like or can’t accommodate or can’t live with this reality then franchising is not for you. Good franchise systems will exploit the local knowledge of franchisees and, where possible, roll out franchisee inspired initiatives throughout the network but unilateral franchisee action cannot be tolerated.

Franchising is not an impossible dream for such entrepreneurs for whom control and power is important – but their franchising journey should be as franchisors and not as franchisees.

4. Cost of being a franchisee

Some don’t become franchisees for cost reasons – their reluctance to pay to do what they do anyway. Of course there is a cost in being a franchisee – the franchisor after all makes its money primarily from the continuing fees paid by franchisees. It is part of a franchisee’s due diligence to satisfy him/herself that the value add from being part of a franchise system more than compensates for the franchise costs.

There are other costs of course beyond the continuing royalty– but most of these are common to franchised and independent business and can be delivered more economically in the franchise context.

Life would be much less interesting without the prominent presence of independent small businesses which bring colour and diversity and innovation to our markets – and also provide the source of most of our new franchising opportunities. Franchising will nevertheless continue to expand its influence as small independent business proprietors better understand the advantages that franchising offers.