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Franchises

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What is franchising
How does a franchise chain start?
How widespread is franchising?
What are the major growth sectors in 'business format franchising'?
What kinds of business lends themselves to franchising?
What should I consider before buying a franchise?
How can I be sure that the information provided in the disclosure documents is truthful and accurate?
Are there any other laws which protect me?
Would I make a successful franchisee?
Do franchised businesses have a better chance of success?
How do you explain the success rate for franchised business?
What are some of the drawbacks of being a franchisee?
What is the annual growth rate of franchising in Australia?
What are the main areas for consideration in choosing a franchise?
What is the best advantage that franchising has over independent small business?
Is franchising growing?
So What does all this mean to you?
Why join 'A Man's Toyshop' as a franchisee?
Why invest in a franchise?


Own Your Own Toyshop!

Our "A Man's Toyshops" are unique in our industry so this is an ideal opportunity for owner/operators to be leaders in our specialised business. Please read through the following documentation and at the bottom of the page you will find a link to the application form that you can send in over the internet.

For further information and details Phone Arthur Clarke or Ross Mylrea on
(07) 49228399.

What is franchising

Here are answers to some of the most common questions asked about franchising.

What is franchising

Franchising is a method of marketing and distributing products or services. At least two levels of people are involved in the franchise system, (1) the franchisor, who lends the trademark or trade name and the business system to (2) the franchisee, who pays a fee for the right to do business under the franchisor's name and system.

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How does a franchise chain start?

Imagine a store owned by an individual with a particular concept. If the business is successful, the owner may develop a second or third store and hire employees for the day-to-day operation. At that point, if the owner still wants to expand but prefers not to own and operate additional stores, he/she may decide to 'franchise' the store name and business system to an independent business person - the franchisee. In return, the franchisor may ask for an initial fee and continuing payment based on a percentage of that franchisee's sales. The business is now franchised.

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How widespread is franchising?

There are more than 700 franchised companies in Australia. This has grown from 184 in 1988. Officially:

  • There are 730 franchisors in Australia.
  • The total turnover of the franchising sector was $81.4 billion for the 1998 financial year.
  • The total number of employees working in franchise systems was 583,000 consisting of 167,000 permanent full-time, 34,000 permanent part-time and 382,000 casual employees. In addition there were 95,000 employed in automotive fuel and motor vehicle retail franchises.
  • In 1998 the number of business outlets operating under franchise was 50,100 of which 38,500 were operated by franchisees.
(Source: FRANCHISING AUSTRALIA 1998, Survey by University of Southern Queensland, August 1998)



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What are the major growth sectors in 'business format franchising'?

As we become a more service orientated economy, as more women enter the workforce, and as a larger percentage of the population grows older, growth areas in franchising are responding to these changes. While it is important to consider industry growth before investing in a franchise, it is more important to analyse an individual franchise company's track record, keeping in mind that quick growth does not always spell success. A franchise organisation that grows too quickly might not have a service team in place to support all of the units properly. Overall, long range trends indicate a steady, solid growth in business format franchising. Some will fall by the wayside, as is natural with any business, but others may well be the 'household name' franchise success stories of tomorrow.

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What kinds of business lends themselves to franchising?

Most service and retail based businesses lend themselves to franchising. The international Franchise Association (IFA) lists more than 60 categories to describe it's members. Printing and copying services and real estate are excellent examples of successfully applying franchising to established industries.

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What should I consider before buying a franchise?

  • The type of experience required in the franchised business,
  • A complete description of the business,
    The hours and personal commitment necessary to run the business,
  • Who the franchisor is, what his/her track record has been, and the business experience of officers and directors of the company,
  • How other franchisees in the same system are doing,
  • How much it's going to cost to get into the franchise,
  • How much your going to pay for the continuing right to operate the business,
  • If there are any products or services you must buy from the franchisor and how and by whom they are supplied,
  • The terms and conditions under which the franchise relationship can be terminated or renewed,
    How many have left the system in the past few years, and,
  • The financial condition of the company and it's system.
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How can I be sure that the information provided in the disclosure documents is truthful and accurate?

The mandatory Franchising Code of Conduct places very strict conditions on disclosure of franchise offerings, with remedies for breach available under the Trade Practices Act and recourse to the full force of the ACCC. Even though inaccuracy and misrepresentation carry civil and sometimes severe criminal penalties, there is no way to be absolutely sure. With the Trade Practices Commission's disclosure requirements, however, fraud and deception are less likely because at the very least the franchisor has answered a variety of very important questions that you can use to judge the offer. The history and reputation of the company and it's officers are also extremely important in this regard.



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Are there any other laws which protect me?

There are always adequate laws in place to protect those in a business relationship. The federal Government's "New Deal: Fair Deal" response to the Fair Trading Enquiry determined that the franchise sector required even greater regulation. As a result, from October 1998 franchisors are required to abide by the Franchising Code of Conduct which is in effect franchising legislation. Australia now has the most regulated franchise sector in the world with onerous requirements of disclosure - more than public officers and disclosure of financial information as far back as 10 years.

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Would I make a successful franchisee?

A successful franchisee should be suited to the industry which he or she intends to join, suited to the particular franchise company and suited to the franchise system generally. Important questions to ask yourself include: am I suited to the industry physically and by experience, education, learning capacity, temperament and financial ability? What type of work is most appealing to me? For example, do I enjoy working with food? Mechanical things? People? Property? Books? Computers? Sporting goods? Etc. Am I prepared to work hard and take a financial risk? Do my advisers, family and friends think I am adaptable and trainable? How do I react to controls? Am I a loner, resisting authority and restraints, or can I accept guidance and direction happily? How do I personally feel about the company's image, products and services? The right answers to these questions help determine your potential success as a franchisee.

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Do franchised businesses have a better chance of success?

Surveys conclusively show a very strong success rate for franchise owners. Whereas the failure rate for independent startup businesses is approximately eight out of 10 (within five years of starting), franchising has the opposite ratio of success where more than nine out of 10 are still operating after five years. This is one reason why it is easier for would-be franchisees to borrow from banks, especially if the prospective franchise is listed on their 'safe' list.

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How do you explain the success rate for franchised business?

The franchising system is designed to provide a pretested formula for success, plus ongoing advice and training. Many of the unavoidable business mistakes have been worked out of the system through experience. Most independent businesses fail because of lack of management skills. With a franchised business, your franchisor should be eager to help you overcome problems. Your hard work and the franchisor's expertise spell a strong partnership. No one can be 100% sure of success. Although the vast majority of franchise owners are satisfied, successful business people - some do suffer financial loss. Regardless of earnings claims made by the franchisor, recognise that success or failure ultimately depends on you.

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What are some of the drawbacks of being a franchisee?

In exchange for the security, training and marketing power of the franchise trademark, you must be able and willing to give up some of your independence. If you are a person who likes to make most decisions on your own or to chart the course of your business alone, a franchise may not be right for you. As a franchisee you will be required to comply with the various controls and procedures established by the franchisor. Then too, all successful businesses require a lot of dedication and plain hard work. You must be prepared to make that commitment.

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What is the annual growth rate of franchising in Australia?

Annual growth in the number of franchisee-operated outlets has averaged 17% compound between 1994 to 1998.
(USQ survey, August 1998)

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What are the main areas for consideration in choosing a franchise?

When investigating the purchase of a franchise there are six key areas for consideration. They are:

  • What will the franchisor do that you can't?
  • What territirial protection do you receive?
  • What help can you receive if things do not go totally as planned?
  • How much of the marketing budget will be spent in your area?
  • Terms and conditions, and,
  • The Franchisor's negotiations - on your behalf - with leasing agents, centre management, financial institutions, suppliers and others.
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What is the best advantage that franchising has over independent small business?

Franchisees are never alone, which is one of the best benefits that one could hope for in this tough business world. On one hand they have the franchisor to support them and on the other they have the franchisees who are having parallel business experiences. Furthermore, as a franchise matures, the brand name and trademark becomes more valuable. So as franchisees consolidate in the marketplace they are actually adding value to the group as a whole. Similarly, as a franchise grows in numbers, the multiplication of sites creates a stronger market presence, which benefits all franchisees.

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Is franchising growing?

Not a lot gets done in around fifteen minutes does it? Think about it. How long does it take you to drive to work each morning? Most of us take fifteen minutes for smoko and an hour for lunch.
On average, people spend around half an hour reading a newspaper. Mowing the lawn can easily take an hour or more, and preparation of the family dinner can take far longer. Even watching the evening news consumes half an hour!
All the more amazing then, that someone, somewhere in the world, opens a franchise every fifteen and a half minutes! imagine what that means to business.
Every sixty-two minutes the business world gets four new franchise businesses. Every year, nearly 40,000 new franchise businesses are added. By the year 2000, there will be nearly one million franchise businesses dotting the cities, suburbs, and country side's of the globe.
Now these figures from the University of Southern Queensland point to a dynamic and fast-growing franchise sector in Australia.
As of mid-1998, business format franchises (not including petrol retail and motor trade franchises) employed 583,000 people in 43,800 franchise outlets.
Growth continues to accelerate to around 17% per annum. Franchising is a marketing tool that can be used to sell almost any product or service - from home services to footwear, from educational products to donuts, from car detailing to coffee.

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So What does all this mean to you?

As a consumer, it means by the end of the year 2000, you'll spend nearly half your retail dollars in franchise businesses.
As a wage earner, it means you may become part of the franchise workforce which currently employs in excess of eight million persons worldwide and over half a million here in Australia.
And it may mean a business of your own!
On the other hand, franchising might not mean a thing to you. As a consumer, you won't escape buying from a franchise (you probably do it now without even knowing it), but you certainly can avoid working in one, and most people will never own one. In fact, most people should not own one.
However, because you're not like most people, you're probably reading this because you're looking for new challenges and considering a business venture.
So chances are that franchising is about to have a big impact on your life, your future and your ultimate business success.

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Why join 'A Man's Toyshop' as a franchisee?

A Man's Toyshop is a unique retail concept, having no parallels in our industry. Yet it's also a time tested and proven business.
Boasting strong and proud regional Queensland origins, A Man's Toyshop was established in 1974 by Ross Mylrea to provide tools and specialist supplies to farmers, builders, workshops, contractors and experienced handymen.
Since then, the company has prospered through a firm focus on providing our vast and ever growing client base with unequalled service excellence in terms of product range and quality, industry knowledge and expert advice, responsive service and value for money.
A Man's Toyshop will source specialist requirements from anywhere in the world. Our ongoing efforts in meeting customers' expectations have developed a very strong customer following. This is enhanced through our very active VIP club with personalised mailings every second month and catalogues twice a year.
Ross Mylrea and team recognise that to the majority of our customers, simply selecting the cheapest product with the lowest price is not always the best choice. That's why we are continually expending our time and energies in areas such as assessing customer needs and preferences, improving avenues of customer communications, the procurement of new and better products, improving service delivery and methods for quick turnarounds on orders, and in developing an overall awareness and understanding of our customers' individual and specific needs.
Our team's extensive industry knowledge, a huge range of quality products and value added services are supported by a highly competitive pricing structure, as we recognise that our customers have budgets... and that meeting those budgets is paramount to their sustained growth and profitability.
To help service the growing number and spread of customers attracted to 'A Man's Toyshop' it has been decided to expand into franchising. To best position the company for this move, what may be considered an unusual tactic was undertaken. Ross Mylrea and his management team started to dissolve the business processes and existing procedures to start from scratch. All stores were sold except the Rockhampton business, which is being used for restructuring and testing the internal company processes.
This restructuring also included development of an in-house computer software system that Ross Mylrea and one other team member have devoted over 4,000 hours to - not to mention the 25 years of hands-on experience. It is a system that Ross believes is A Man's Toyshop's competitive advantage when it comes to customer service delivery.
The company and our people are now ready to pass on not just this innovative system, but also the others that we have nurtured over the past two years in preparation to enter the franchise arena.

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Why invest in a franchise?

If you start a new business today, unless you have extensive experience in the specific industry that you are going into, the odds are stacked against you succeeding.
It's generally recognised that around four out of every five new businesses will fail within five years. The primary reason that the failure rate is so high is because the owners have to go through the learning curve of operating that specific type of business.
Unfortunately, the marketplace is not very tolerant of new inexperienced owners attempting to learn how to operate a new business.
And if you've chosen an extremely competitive industry to try your hand, you may get swallowed by the sharks very quickly. You may go under, you may lose some or all of your money, your credit, your home, your reputation and sometimes even your family. Failing in business can be an horrific experience.
Compare this with franchising which enjoys a success rate of over 80%. Very simply, franchising is a business model structured around risk minimisation. Franchising is as close as you will find in today's marketplace to a guarantee of success.
All the studies done have found that franchise new business startups rarely fail, and when they do it is usually because the franchisee did not stick to the franchisor's systems.
In all human endeavour there is a learning process involved. This learning process requires going through a series of trial and error encounters wherein knowledge is gained by trying and failing, trying and failing again and again and eventually trying and succeeding.
This process is generally called the learning curve. In the context of franchising, the franchisor has already gone through the learning curve and has learned the secrets of success for the specific business.
In franchising all that has been learned by going through the curve is transferred to the franchisee.
This is without doubt one of the major benefits of joining a franchise, to minimise risk and give yourself the best possible chance to succeed.
Another reason why it is prudent to join a franchise is that a franchise investment can be thoroughly researched before any significant expenditures are made. With a new business startup (non-franchise) you are always operating in the dark. No matter how much research you do it is very difficult to get a handle on so many aspects of the new business.
With a franchise, the franchisor has a wealth of information about the business, from the customer mix, to the best way of stocking your shelves.
Another very important reason to join a franchise is intertwined into its basic nature. Franchising inherently leads to strong growth, because the franchisees provide the expansion capital. There are few restraints to growth in franchising. As a franchise system expands, many positive things begin to happen. The name begins to become well known because people see it everywhere.
Most people associate size with success. The bigger the franchise the better it must be. The large number of units enables the franchise to advertise heavily, which tends to increase sales. A synergy begins to be created in which success builds success. The franchise can buy products in large quantity at significant discounts which it passes on to the franchisees. The synergy just grows and grows.
A recent Gallup Poll of franchisees found that over 94% considered themselves successful and that over 75% would join their franchise again if they had to do it over.
In summary the primary reason you should join a franchise as opposed to starting up a non-franchise new business, is to minimise risk and enhance your chances of success.s

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Yes, I am interested in "A Man's Toyshop" franchise

 

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