We live in the most franchised nation in the world on a per-capita basis; there are three times as many franchises in Australia as the USA, and they account for about 14 percent of GDP.
Picking what sort of franchise to enter takes more than a few ideas and a lazy hour on the Internet.
You need to ask serious questions of yourself and the person whose business model you’re buying into.
Here are seven things to check off before taking the plunge:
Businesses succeed in places where they fulfil an unmet need. The clever franchisors are proactively looking for people to start-up in markets where they have the greatest chance of success.
That doesn’t rule out you going to a franchisor with an idea, but if they’ve never heard of the place you want to set up in then they probably won’t be a great fit.
Remember that you’re buying more than signage
You should be paying for more than physical assets when you become a franchisee. You should also be buying systems, broad-based advertising support, a supply chain and a brand.
You aren’t buying customers or an automatic flow of business through the door so you can just take the money.
A responsible franchisor will want your business to succeed as much as you but you must be be prepared to put in the hard work.
Go for growth
Nobody goes into business to not make money. Remember the old adage that if a deal sounds too good to be true, then it probably is.
Talk independent advice. Talk with the franchisor to agree on realistic growth targets that you are both happy with.
My line of business is tiles and bathroomware. I grew up with it and it’s something that my staff, franchisees and I all love.
Tiles add value to a home – the biggest asset people will ever own – but to us they’re as much a fashion item as a physical asset.
Ask yourself: Is this a business that I can be passionate about? If not, walk away.
Find a franchisor that will make you go the extra mile
Due diligence is exactly what it says it is. If a potential franchisor doesn’t seem like it’s doing its homework they’re not making you do the same, look elsewhere.
Even if you’re only planning to be a franchisee for a few years, the relationship should be durable enough to last much longer if you change your exit plan.
Believe that culture is more than a word
Look carefully at the franchisor company culture. Go undercover as a secret shopper. Does the company match your idea of an honest, ethical business and do its people treat customers as you’d like to be treated?
Supporting the communities in which we operate is a ‘must do’ for my own business and its partners.
My view is you should ask if the franchisor gives something back to people or is active in philanthropy. It not only makes good business sense but will make you feel good!
Support is everything
One of the reasons for becoming a franchisee is to be part of a group with economies of scale in purchasing, logistics, warehousing and marketing. Strong two-way reporting and support systems are essential.
Franchisors didn’t become successful without having these systems in place so use them to your advantage.
Many of my franchisees are ex-tradies looking to stay in the tiling business and make the most of their expertise. Most of them knew nothing about retail.
On the other hand, some of my best performers are mums who never laid a tile in their lives but related well to people or had a background in design.
The best businesses are a mix of people with different skills. The lesson is that if you’re not an expert, surround yourself with people who are – and learn!