Buying A Franchise Business

You want to start a business?
But now seems a poor time - or is it?

With so much uncertainty in the marketplace right now, many are looking to proven business models rather than starting something from scratch. Franchised businesses with proven track records and good systems are still seeing new recruits despite the economic situation.

What do Franchises Offer?

  1. The opportunity to own your own business A franchise is a system that allows you to own and build a business within an existing proven framework. You have the opportunity to focus on the business without all the additional matters of sourcing products and negotiating prices. Like any new business venture franchising still requires hard work and investment, however the success rate is much higher.
  2. Choice. There are franchises in almost every area of business life. Many can even be run from home. There is bound to be a franchise that suits your skills and ignites your passion.
  3. Brand. As part of a larger group, brand marketing becomes affordable - visibility and awareness are greater. Right now customers are gravitating to known and trusted brands rather than risk their money on something unproven.
  4. Support. A good franchise system will have proven systems, good training and ongoing support, keep you up to date with any changes and help you grow the business. They will also make sure the brand is not compromised and consistency is maintained for the good of all. You also get to be part of a franchise community, supporting one another.
  5. Local Ownership. Franchised systems mean you are the face of the business locally, you get to build relationships with your customers and engage with the local community.
  6. Marketing. A good franchisor will have an overall marketing plan and provide you with strategies, designs and materials to do your own local marketing.

I’m a firm believer of franchising!

It appeals to those who have a passion to work in a chosen field while growing something of value for themselves.

However franchising is not for everyone - like anything else it requires hard work, consistency, commitment and a willingness to learn and grow. A franchise is a set model that works if followed correctly -  if you want to join a franchise model but still do your own thing, then franchising is not for you!

Selecting the right franchise

  1. A proven system. If the franchise has not been established for long, find out if they have invested in their systems. A franchise system includes the intellectual property, the supply chain and all the manuals.
  2. Ongoing support and training. Good ongoing support will include regular franchise meetings and an operational team who regularly visits franchises with advice on how to build the business and maintain quality standards. Training should be more than just at initial start-up, it will also include any managers and staff. There will be costs involved but this is well spent.
  3. Buying power and product discounts. As the franchise system grows, you should see benefits in buying power for services and product supply. Note that these services can only be recommended by the franchisor - the Australian Competition and Consumer Commission restricts the enforcement of third party purchases.
  4. Finance. Many banking systems today provide a franchising package. This will depend on the franchise system you choose. You will need to do your own investigation in this area.
  5. Food Safety/Occupational Health and Safety. All businesses need to provide an Occupational Health and Safety system, but if the franchise is a part of the food and beverage industry, then you will need to also follow food safety regulations.
  6. Value of the brand. Look for a franchise whose brand value is growing.
  7. Group support. In most franchises you have the opportunity to dialogue with other franchisees in the system.

Obstacles to watch out for

  1. A tired concept. Watch out for franchise systems that have been around for some time and do not show evidence of ongoing innovation.
  2. Franchisors who provide limited or no support to the franchisee. Be careful of franchisors who provide limited support to their franchisees. Talk to quite a few franchisees and you will soon get a true picture of the support given.
  3. Accountants and lawyers who can assist franchisees to lift their results. There are accountants and legal experts with extensive franchising expertise – choose one of these! Avoid those who are actually learning about franchising at the franchisee’s expense. Choose accountants and bookkeepers who understand the franchise and retail sector and will show how you are performing against set Key Performance Indicators. A good franchisor will have systems to measure sales, profit and loss, cost of goods, and so on.

Other pitfalls

  • Don’t expect the franchisor to run your business. You need to take responsibility for the success of your franchise business.
  • Be willing to commit 100%. As with any new business it will dominate your thinking and govern your life for a time.
  • Be financially aware. You need to be able to manage your Key Performance Indicators – don’t simply rely on accountants or bookkeepers, know how to interpret the information they provide.
  • Be willing to follow a system. You can’t just decide that you don’t want to be part of a particular marketing program or new product. If you want to do your own thing, then don’t get involved in franchising.

Finally

Do your research

  • The Franchise Council of Australia website: <www.franchise.org.au.>
  • Read relevant articles in the Franchising Magazine, available in newsagencies.
  • See also Chapter 20 of my book “Win in Business
  • Find accounting firms, legal firms and franchising consultants who have in-depth franchising expertise.
  • Do your own due diligence - thoroughly work through all your questions before proceeding.

Peter Irvine
www.peterirvine.com
Peter is Co-Founder of Gloria Jean’s Coffees, author of "Win In Business", speaker and business consultant.

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