The risks involved in business ownership loom large for potential franchisees, the Australian Franchise Outlook 2027 franchise buyer survey reveals.
There is plenty of enthusiasm for business ownership (70 per cent of those surveyed are keen to commit within a year) yet for many franchise buyers, fear of failure remains a major obstacle.
This is a shift from last year’s AFO report, which showed cost of entry was the main obstacle to franchise ownership. This year franchise buyers are less worried about the investment required to purchase a business.
However, financial concerns remain, with doubt about potential earnings listed as the second significant barrier.
Potential franchisees also saw a lack of industry knowledge or experience as a major obstacle.
Buying a franchise: barriers and concerns
- Fear of failure or business risk: 54.1%
- Uncertainty around earnings: 45.9%
- Lack of industry knowledge or experience: 45.0%
- Concerns about franchisor control or restrictions: 38.7%
- Legal complexity or contracts: 29.7%
- Difficulty securing finance: 28.8%
- Start-up costs: 24.3%
- Personal or family commitments: 14.3%
So what can franchisors do to ease potential franchisees concerns? The survey reveals that franchise buyers are hungry for information and knowledge, and that includes an understanding of how the franchise actually works, and details of what they are committing themselves to.
Asked what support they would most value, franchise buyers put information and knowledge top of the list. A smaller group of prospective franchisees wanted proof in the form of case studies, track records and evidence of returns.
Help with understanding the finances, getting mentoring and support were also important.
Potential franchisees indicated a sense of readiness or experience were important and, taken with the desire for detailed knowledge, reflect buyers’ needs for more support in the pre-purchase stage.
What would make franchise buyers feel more confident?
- Help understanding legal documents: 56.8%
- Mentoring from current franchisees: 48.6%
- Financial planning or funding advice: 47.7%
- Training or business education: 43.2%
- Case studies or success stories: 36.9%
To see the franchise buyer survey in full, alongside a consumer survey, and insights from industry experts, download the Australian Franchise Outlook 2027 here.
