If so, how would you define an established system? Opinions abound on what makes one business mature but not established, another established rather than emerging; with no one definition it is worth reading some of the
views from across the industry.

Buy an established franchise, cry the friends. Don't risk a new name, go for a brand that's established, insists the family. Invest in a business that's established and you know what you're getting, suggests the neighbour. When
someone is investigating franchising as a way to develop their future and run their own business, advice is easy to come by. Of course some potential franchisees don't want to purchase a well-known brand or get involved in an established franchise system; they are happy to match the often smaller investment in an emerging system with the higher risks of making it a success and reaping greater rewards.

But what can be one man's established franchise may be another's emerging system. So whatever the personal risk factor and investment under consideration, how exactly can an established franchise system be defined? Is it 100 stores, 50 stores? Is it age and experience? Is it the support structure?

Establishing whether a franchise system is established
According to long-time franchising advocate Andrew Terry, Professor of Business Regulation, Faculty of Economics and Business at the University of Sydney and consultant to DC Strategy, the first mover advantage operates in franchising as in other business endeavours and this has definite appeal.

As he explains, the early franchisees in a new system have the first choice of sites and territories, a closer relationship with the franchisor and, frequently, financial incentives through lower entry costs.

"But while first movers can benefit from committing to a new system that takes the country by storm there is of course a downside. New and emerging franchise systems present a risk. The hopes, dreams and aspirations of the franchisor, and its first mover franchisees, may not be fulfilled," he cautions.

By contrast, an established franchise may have a higher entry cost and preferred sites may not be available but it offers greater security, he says.

"There is a trading history. There is a large pool of information beyond the disclosure document which a prospective franchisee, with due diligence, can access.

"Determining whether a franchise system is in fact established is nevertheless not a mechanical exercise. A significant factor in the strength of the Australian franchise sector is that it is diverse and vibrant. There are over 1100 systems - big and small, young and old, local and foreign - which operate in virtually every industry sector. These and other factors can obscure the exercise.

"Is size a determinant? Perhaps. An established system is more likely to be a larger system but small systems may be established and large systems may not be. A large system may have captured the public imagination and may have grown quickly by utilising sub-franchising. But is the concept a fad which may have a short shelf life? Is the franchisor able to properly support the rapid growth? Are the sub-franchisors as committed as the original franchisor?"

Conversely, Terry suggests, a small system may be established but simply on a more conservative growth trajectory. "Every system needs to achieve critical mass to deliver value to both franchisor and the franchisee network but given the massive diversity of systems and sectors there is no magic formula to provide the magic number of network outlets."

So perhaps age is a determinant? "Possibly," he admits. "In an older system it is more likely that operations and systems and management and support services have been refined and documented. But longevity itself does not make a system established. A system that has been around for a long time but which is not going anywhere is a cause for substantial due diligence as to the reasons why.

"Is a track record overseas a determinant? Not necessarily," Terry continues. Success overseas does not automatically equate to success in Australia.

"There are many examples of successful international systems not making a successful transition to Australia because the business concept itself as well as the system which supports it has not been customised for this market."

What then is the key? Andrew Terry says: "For me it is the 'P' word, that the franchise is proven. Franchising doesn't work simply because it is franchising. It works because it is the application of proven business concepts and proven systems and proven management support and so on. This can exist at an early evolutionary stage in some dynamic new franchise systems yet not at all in some tired old ones.

"As always, informed and rigorous due diligence coupled with specialist advice provides the best protection for the prospective franchisee."

Franchisee support
Sergio Alderuccio, franchise consultant, says "What I would look for in an established franchise would be a track record and some of the features of this are stability due to the years of trading, the number of stores and locations, the number of multi-unit owners and the longevity of franchisees.

"I would expect a detailed understanding of the business through management information systems and the resources to invest in IT.

"Information counting and key performance indicators are a guide for franchisees to maximise their performance. But information is one thing, a qualified and committed group of people to assist in interpreting and guiding franchisees to enhance their performance is essential.

"I get worried if a franchise team is centred around one or two visionaries," he adds. "Management teams should be a mix of skills and personalities, number crunchers, visionaries, marketers. You want stability at the top."

A line up of franchisees who have renewed their terms and stayed with the business suggests they are happy with the system, Alderuccio points out. And the number of multi-unit owners is another positive, he suggests.

"People buying secondary sites are happy with the system. This indicates stability and that the franchisor is delivering the resources. Multi-unit ownership is a vote of confidence in the system."

Financially sound franchisors operating for at least five years, with at least 20 outlets, strong outlet support capacities and an effective and contemporary marketing program are attractive propositions. That's the view of Tony Maddock, general manager of Franchise Selection, which matches franchise systems to franchisees.

"These franchisors will have a well-established operations and procedures system to run the outlet the buyers choose. These systems have been developed to maximise sales and profitability," he suggests.

"First-class established systems free up operators because they take into account the common mistakes other operators have made. This helps new operators avoid making the same mistakes."

Maddock adds that buying a franchise outlet with an established system also means buying years of experience from outlets extremely similar to the one being considered.

"New operators with a tried, tested and secure operating and procedural system at hand also benefit from the continuing networking with the franchisor and other outlet operators.

"All of this gives the operator invaluable time to focus on short, medium and long-term sales and profits. And that's what franchising is all about," he believes.

Common denominators in an established franchise may be a proven business with support systems that provide a means for franchisees to achieve a profitable business. But what should this support entail?

Julia Camm, the principal of Corven, an organisation which conducts research on education in the franchise sector; is unsurprisingly clear about the role of training in franchise systems.

"At Corven we believe that established franchise systems should have a dedicated and documented education platform, outlining all the training and learning activities that occur during the course of a year for franchisees and their teams.

"A franchisee induction program that delivers day-to-day operational skills as well as small business management competencies [such as business planning, financial management, marketing, leadership and human resources and industrial relations] should be part of the system."

And the franchisee induction program should include assessments that verify competency achievement, suggests Camm.

Training conducted by qualified trainers who understand adult and workplace learning, ongoing training programs for franchisees and their teams and online access to training materials, webinars, podcasts and forums are all important indicators of an established system, she believes.

Putting in the numbers
So we have a proven system and business, marketing programs, franchisee profitability, support and training cited as elements of an established system. Of course the search for and purchase of an established franchise will more than likely involve backing from a financial institution so what is the view of the money men?

The more confidence in the system at the bank, the greater the chances of success in securing the funds required for the initial and ongoing investment. Bankers love numbers, and the more hard evidence they have of a system's competencies and successful trading the more favourably they view it.

Darryn McAuliffe is franchise development manager at NAB. "From a financier's perspective an established system will have generally been in operation for more than 10 years and franchising for longer than five years," he explains. The concept will have been successfully represented across a range of geographical markets, with at least 30 or 40 outlets in place.

"Established systems enjoy strong visibility and brand recognition. They are characterised by dependable and effective management who have established and developed a sustainable business model through several economic cycles," says McAuliffe. "A prerequisite for a legitimate claim to being an established (and successful) system is their ability to select good franchisees and good sites. Just as important as the initial franchisee selection and training are ongoing investment and support for franchisees.

"A review of the system's disclosure document and contact with past franchisees can be an effective starting point in verifying this aspect."

McAuliffe says many established systems will already have in place formal accreditations with one or more banks which can also simplify and shorten the loan approval process for prospective franchisees and existing operators.

"One of the most attractive features of an established system is the existence of a clear secondary market where outlets can be on-sold where the need or desire arises. This is a critical factor in franchisees not only recouping their initial investment but also building an asset which can promote personal wealth creation."

How we define an established franchise system is, as these comments show, distinct to a personal view. But there is an overriding sense that an established system must have been able to prove its trading abilities over time, have the structure, manpower and will to support franchisees, sport a recognised brand maintained with an effective marketing program, show franchisee profitability and the opportunity for return on investment.