What does a potential franchisee look for?
In this article Ian Krawitz highlights seven key business categories and some franchise systems performing well in these particular areas.
The perfect balance of these elements creates a franchise system that is buoyed by a network of satisfied franchises willing to renew and recommend the business to others, he says.
Questions your franchise buyers will ask:
1. SUPPORT: What structure is in place to ensure I receive the support I need to succeed?
Ferguson Plarre Bakehouse is a prime example of a business providing a well-structured, fully supported pathway to success.
In the topfranchise.com.au study the company scored highly in the support category largely due to the implementation of a 10 star excellence program providing the steps necessary for franchisees to extract maximum value from the business.
Covering 10 key aspects of business management from product selection to marketing and human resources, the program provides franchisees with clear indicators of best practice and provides them with a tangible way to assess their success at every level of operation. It was implemented to make running the business simpler and is monitored by business coaches who work directly with franchisees to achieve each of the steps.
Every company will have a different system it applies but support is an important aspect of success for any franchise; a franchisor needs to be able to show a prospective franchisee how that will be provided throughout the journey at a local and national level. Other key indicators of a well-supported franchise include a structured process for business planning and monitoring of success and regular reviews with the franchisor or state manager.
2. MARKET: What assistance is provided to market the business?
Marketing in any business is necessary for growth but it is also one of the elements of running a franchise that most people are the least confident about and find most difficult to execute.
Mister Minit performed well above industry standard in this segment of the topfranchise.com.au research. It provides a well-resourced and hands on local area marketing campaign and training package to franchisees to maximise uptake and execution. It provides tools to allow franchisees to establish partnerships with others retailers, exploit in-centre advertising opportunities, as well as targeted national promotions and innovative product that focus directly on its customers.
Research shows a franchise needs to ensure its brand message is marketed in a clear and consistent manner to engender franchisee satisfaction and that it empowers and trains franchisees to maximise marketing tools provided.
3. PASSION: Can I be passionate about this business?
There are a lot of hours and hard work put into business and the topfranchise.com.au survey revealed a clear link between strong family belief in the type of business and its values and a franchisees motivation to succeed. In other words a person’s passion for their business is correlated to their family’s passion and support for the business.
Mrs Fields ranked highly in this category with a brand redevelopment at the centre of rekindling franchisees passion for their business. The overhaul of the brand including new store designs helped franchisees to reconnect to their business by making the proposition for customers clearer. The exercise clarified what the brand stood for rekindling the passion and providing a clear framework for what the business is about.
The overall effect was that a greater number of franchisees endeavoured to achieve more in their businesses once again because their pride and belief in the brand was ignited and aligned. This in turn lifted financial success and resulted in a better work life balance, fuelling the perception of success with family and friends which according to the research is tightly linked to a franchisee’s overall satisfaction in a business.
4. LIFESTYLE: What type of lifestyle balance is possible?
There is no denying owning a business is hard work but a good work life balance is important for any satisfied franchisee. Key things they will want to enquire about include the average working hours of the most successful franchisees, flexibility of the model in regards to management hours, whether the model lends itself to hiring managers and staff to allow greater freedom of hours for the owner.
Of course the best way for a franchise buyer to glimpse a typical lifestyle is to speak with other franchisees, and, depending on the stage of research, spend at least a day with one of them.
5. BRAND: How is the brand promoted?
How the brand is promoted is at the core of this satisfaction for a franchisee and key things they will want to investigate include how the brand is promoted throughout the year: what regular advertising is undertaken, consider the quality of the website and content provided, is there public relations to help enhance credibility, does the brand story excite, how many of their friends have heard of it, what does an internet search on the founder and brand reveal, does it have a strong presence on social media?
Many companies will conduct brand research to determine the awareness and popularity of their brand against competitors so asking to see this can give a prospective franchisee a good idea of public perception.
Snooze for example, has strong TV and digital advertising throughout the year and prove and track brand recognition both on and offline via regular research.
6. EXPANSION: What are the opportunities for expansion?
The potential growth of a business is closely aligned to earnings potential so franchise buyers will want to know if a franchise has a predetermined path for expansion.
Depending on the model the options will be different but questions they may ask include: are there different levels within the business that make it easy for me to grow and gain confidence, is it easy to expand to multiple sites, what range of products are available, are there expansion opportunities for additional franchises, how many multi-site operators are within the network?
The number of locations or territories available and the potential of the market are also important factors to reveal. Some franchises will have a competitive market synopsis they can share. It’s all about the franchise buyer working out the scope of the business and how that aligns with their business goals – and how big they want to dream.
Encouraging them to speak with a multi-unit owner will help to reveal the path to growth and possible expected timings.
7. FINANCIAL: Will the monetary rewards meet my expectations?
A person’s satisfaction in what they earn is very individual but those in the topfranchise research based their answers on whether they drew a larger salary than they could receive elsewhere and the balance of what they earn versus what they think they could be earning.
Smartline Personal Mortgage Advisers, who ranked the highest in this category, achieved this by ensuring consistent income and multiple levels of income generation through new products ensuring further avenues for income generation regardless of market conditions.
While earnings are a direct correlation to the amount of input, key considerations for prospective franchisees are what are the pretax net profits of existing operations, what are typical sales patterns, what are typical high and low sales periods, how long will it take to draw the target salary and what is the expected return on investment?
Ian Krawitz is the founder of 10 THOUSAND FEET the research company behind the topfranchise.com.au Awards and industry report.