Franchising is the action of using a businesses products and brands for an established period of time. It involves joining in partnership with an established company, bringing them fresh business while at the same time reaping the benefits of the parent company’s resources, reputations, and client base. Breaking into the world of business, especially in our modern global economy, is more challenging than ever before. Customers expect businesses to have established reputations long before they even open the front door, and with such a highly saturated market in most industries, this can feel nearly impossible for individuals who are trying to make it on their own in some entrepreneurial capacity. That is why start-ups, although trendy, are actually becoming a thing of the past. In their place, franchises are emerging once again as a solid option for anyone hoping to establish himself or herself in the business world.
Dr. Maurice Antoine Roussety (on Vimeo and other social media outlets) has studied the effects that globalization and franchises have had on the national economy of Australia. As an expert in franchising, as well as marketing, brand management, and finance, he supports the boost that globalization has had on the franchising industry and the opportunities it has made in the Australian market. In Australia, franchises generate revenues in excess of $144 billion and directly employ more than 460,000 Australians through over a thousand franchise systems. Rather than fighting an uphill battle in making a new business into a reality, many individuals around the world are turning their attention the benefits that joining up with a franchise has to offer, not least of which is reputation.
More than anything else, the reputation or ‘goodwill’ of a franchise’s parent company is helping in finding lasting success. Generating a client base through advertising and marketing is not only difficult, but it is also very expensive. Franchises have the benefit of tapping into a preexisting market through the success of their parent company. This minimizes the risk of starting their own business.
Dr. Maurice Roussety (on CrowdRise) studied and wrote about this effect in his Ph.D. thesis titled “An Integrated Economic Model for the Evaluation of Franchise Systems – A Synthesis of Agency and Finance Theories.” This paper led him to create the Franchise Risk Imputation Model (FRIM), which establishes a framework based on two cornerstones: risk-free rate and total risk as measured by the sum of market specific and company specific risks.