Franchise success | Issues
or not the franchisor follows through on commitments to franchisees. Whether or not franchisees would choose to renew their agreement at the end of the term is another telling point but questioning former and dissatisfied franchisees on the cause of their departure or complaints is worthwhile – perhaps personal circumstances beyond the business are at play.
PROFIt A franchise network with franchisees displaying high turnover might look great on the surface, but what about the profit levels? We’re not talking franchisor profit here (though you want to see that too). Nothing is more likely to reduce franchisee satisfaction than a failure to achieve the return on investment they had hoped for. Franchise chains are increasingly focused on helping franchisees gain a profit in their business and every effort that is made to get poorly performing franchisees back on track is to be welcomed. Within any group there will be franchisees underperforming and star franchisees who can make success look simple. But what’s the proportion of franchisees making a profit? The figures may not be available (see TRANSPARENCY above) but if they are benchmarked, that’s a good gauge of how profitable the system is for the majority of franchisees.
point must be confidence that the model as it stands works – and you can work it.
INVeStmeNt Everyone wants a return on their investment, but neglecting to plough profits back into a business doesn’t give potential investors much confidence and it doesn’t build the business. A franchisor needs to invest in the business, and should be able to provide evidence that business development reflects the strategy. Investment could
OPeRatIONS At the heart of a franchise is the replication of business and an up to date, easy to follow operations manual is essential. Franchisees should consider how often the manual is updated, what form it takes (hard copy, online) and how successful it is as a guide to the business. Franchisees will be able to tell prospective investors whether the initial training was sufficient, and how much support was offered around the launch of
be in head office expansion, an increase in field team members, the introduction or upgrade of IT, an advanced training program, an enhanced marketing campaign on tv, overseas expansion, a much-needed
Within any group there will be franchisees underperforming and star franchisees who can make success look simple. But what’s the proportion of franchisees making a profit? their business. Was there, for instance, someone on hand from head office to help smooth opening day anxieties and deal with the inevitable hiccups? Did the franchisee have support during the first week or two as they got to grips with the operational aspects of the business? There’s no point coming to a franchise with grand ideas of improving the system, that’s not why people invest in an existing business concept, so the starting
brand overhaul, improved customer support, acquisitions of complementary companies, and so on. There are other markers to consider when reviewing a franchise option, and each of the nine points here can be drilled down further for a more thorough analysis of a franchise system. The most important consideration though is that taking shortcuts rarely leads to sustainable success; that’s true for the franchisor, and the franchisee. F www.FRaNCHISe.Net.aU
may/JUN 2013 FRaNCHISING | 103
Published on May 24, 2013
What should you look for in a franchise? Find out nine key elements to consider before you purchase in the latest issue of Franchising magaz...