Amie:
Hello and welcome. My name is Amie Larter and this is the Buying a Franchise podcast, vital listening for anyone interested in buying or that’s in the process of buying a franchise. Today I’m joined by none other than Sarah Stowe, editor of Inside Franchise Business to discuss expectations in franchising. I’m keen to find out what exactly is involved in this conversation because on the surface, Sarah, I’m not gonna lie, it seems simple, but I can imagine it could also prove to be quite, how would we put it, wide ranging.

Sarah:
Yeah, I think you’re right, Amy. It’s great to chat about this topic because it really is something that’s vital. And because franchising is a two-way agreement, there are expectations and responsibilities on both sides. And I think misunderstanding what’s involved is a common cause for dissatisfaction, again, on both sides, but particularly with franchisees. So fundamentally, what we’re going to talk about are the expectations of what is provided in the business deal. But because this is about a relationship between the franchisor and the franchisee, of course there is more involved. So we’ll dip into that as well.

Amie:
Hmm, okay, so I mean it sounds like many relationships, expectations and setting the expectations are key. So let’s get straight into it from a franchising perspective. I’m gonna start by asking if there are any standards that I or someone that’s looking to buy a franchise should be looking for when we start to research a business, what expectations should I have as a franchise buyer?

Sarah:
Well, certainly, I think everyone will have different expectations. I think as you’re right to point out, they kind of probably are some standards. I think it’s important to point out from the beginning that what is said and done and what is not said and done during a recruitment process can actually be really useful at providing some insights into how the business operates because it’s essentially like getting a snapshot of the company’s standards and culture. So good franchisors will always be looking for people who fit the company culture. and the stage of development that the company is at, whether it’s just beginning or whether it’s a mature business.

So if you’re a startup business, your expectations of suitable franchisees are really much more likely to be on people who are happy to accept a high level of risk and have an entrepreneurial streak, people who are happy to grow with the business. And of course, in return, if you’re buying into that, if you’re buying into a fledgling business. you need to be aware that the systems aren’t likely to be fully developed and streamlined. The business will change as it grows.

So as a would-be franchisee, you should expect the franchisor to have a clear idea of who is the right kind of person for the business. That’s the starting point. And that they take the time to ensure that you’re the right fit. It may sound a little odd, but it really isn’t that promising if the process to sign up to a franchise is really too easy.

Amie:
I can imagine, it’s a serious decision. And so you want the process to be structured, I suppose. What would you expect that process to look like?

Sarah:
Every process will be slightly different, but there will be some key elements that you can expect to find across the networks. So you would expect to fill an application form. Obviously, you would expect to do your own research. You’ll need to develop a business plan, spend time meeting the franchisor team. Lots of franchisors run what they call Discovery Days, which are a great way to get a feel for the business because you go and you visit. head office, you’ll meet the team, you’ll meet other prospective franchisees and it’s an opportunity to ask some questions and kind of get a sense of the culture of the business on its home turf.

Amie:
And I know from some of our past podcasts that there are legal requirements around documentation in the researching process, but rather than go into that, we’ll leave the notes to those in the show notes for this. For now, I want to focus on the next step. I’ve bought a franchise. So what can I now expect?

Sarah:
Well, this is one of the main reasons that anyone buys into a franchise is because you want to leverage what the franchise provides. So you have the right to use the fully protected franchise branding and intellectual property, such as the logo and the trademarks. That’s the nitty gritty of the deal. You can expect to have a suitable territory with no other competition from franchisees in the same system. And to know that the franchise all won’t set up a company-owned store. or sell another franchise within certain boundaries if you don’t have a specified territory.

You can expect to receive appropriate support and training, that’s really important, because that’s impossible to quantify here because there is such a diversity in the types of franchise service and the product, the size of business, the technical training and so on. But remember that as a franchisee, you should be in a position to open your own business armed with enough knowledge to start trading. So… when you’re buying the business, that’s what you need to be looking for.

You need to look to ensure that the training is going to give you the familiarity with operations procedures, that you’ll know how to handle customers, how to process financial transactions. And it’s very common these days for franchisees to provide more business training than they used to alongside the technical training. And so once you’ve bought your franchise, you’ll be in that training process. And that’s when you need to be confident that that your expectations are going to be met. It’s an important element of doing the research to make sure that the training will suit you and your needs.

Amie:
I can imagine and so that’s good to know that attention is being paid to the actual business side of the franchise Particularly if you buy a franchise and don’t have any experience I suppose

Sarah:
Well, yeah, you’re right. I mean, I think the franchisees expectations have increased over the last four or five years. And that’s really meant that franchisees have stepped up to help their franchisees be better placed to handle the business side. And you find now that franchisees will provide sound leadership in business functions such as product management, national marketing campaigns and analysis of market trends.

One thing that has been part of the typical franchise agreement is a marketing strategy. and relevant promotional materials. And you can add to that, of course, a reliable supply of approved stock or products so franchisees can actually trade. And those are all the elements that you would expect in a franchise no matter what type of franchise you’re purchasing. And I’ll just maybe mention here too, that apart from the initial training and support that’s provided, and that’s when you open the business, quite often there’ll be at least one support team member on hand. to ensure the first few days go smoothly, there should be ongoing training and support, including mentoring and advice from other franchisees.

Amie:
That’s good. So training is obviously hugely important for new franchisees. How would you find out what’s actually on offer and what that schedule or program looks like in terms of the ongoing support and training?

Sarah:
Well, these are the things that you find in the legal documents. You know, you’re going to be looking at a franchise agreement. You’ve got a sign, you’re going to look at the disclosure document that outlines what’s actually going to be in the business. And that’s part of the purchasing process. But it’s important as well to actually talk to the franchise or about the details. And I would recommend talking to other franchisees who’ve recently gone through the system recently joined the franchise to find out what they thought of the training system and whether that is as effective as a franchisor believes it to be and whether it is going to continue once you’re working in the business. I think it’s important to draw that information from other sources, not just the franchisor.

Amie:
Now, you’ve mentioned ongoing training and support, and we’ve spoken a little bit about initial training and what that looks like. When you talk about support, what do you mean by that exactly?

Sarah:
Ah, that’s a good question. I mean, we in the franchise world, we use the term support quite a lot. But there is no finite definition and what you would think would be a level of support that you would want. It may be different to what I would expect. And I think it’s probably best to think of it as having your own expert team behind you who you can turn to if you do need help. And typically that would cover things like it, other technical problems, stock and deliveries, the marketing department, we’ve touched on there in terms of marketing campaigns and strategies, social media queries, and general problem solving, just being able to kind of ring up head office and say, I have this problem, how do I fix that? Or talk to a fellow franchisee and find out how you can solve the problem. I mean, that’s the kind of level that we’re talking about in terms of support, but every franchise will have different expectations of what they will provide. and it’s important to understand what that would be.

Amie:
Okay, and does that include a business development manager?

Sarah:
Typically it does. And now business development managers may be called area managers, field managers. There are lots of different names for effectively the same role. And they will have a number of franchisees under their wing. One thing that might be worth mentioning is to find out the ratio of the area manager to the franchisees. So then you get a sense of the franchisor’s priorities and resources. And you can find out how often you can expect to get a visit from a business development manager, a BDM.

So I think one of the things that’s really important to consider about the level of support is your own strengths and weaknesses. You know, where will you need most help? Is that likely to be provided? I mean, if you’re if you’re entrepreneurial and you’re considering an emerging brand, which has got lots of potential to build up to a developing system, a regular but infrequent visit from a development manager could suit you. But if you’re more comfortable with a fully tested and well established system, some security, you probably want more frequent contact and a more collaborative approach to support.

It’s really important to be clear with the franchisor before you sign up that what you think you are getting is what you will be getting. Assumptions really can cause damage because if it’s a franchisee, I think support includes 24-7 access to the franchisor, but the franchisor believes that he or she is only going to respond in the office hours. and doesn’t get back to me until maybe midday the next day, well, I’m going to be dissatisfied. So it’s very important to have a very clear understanding of what the boundaries are in terms of expectations and responsibilities.

Amie:
I think you make a great point, Sarah, about assumptions. And I mean, I’m assuming it can work both ways, and franchisors can assume things about the franchisee as well.

Sarah:
No, absolutely. And I think probably that’s most obvious in the rules that franchisees need to adhere to in compliance is at the heart of the franchise system because it delivers consistency but it’s important to know where the boundaries lie with compliance. And I think franchisees themselves can be guilty of… expecting everyone to understand what they mean by something and what their boundaries are, but it has to be very clearly laid out.

Amie:
And what does compliance look like in a franchise?

Sarah:
Well, fundamentally, it’s adherence to the rules that govern the operation of the business. And the documents that you receive before you sign up to a franchise actually outline everything the franchisor expects from franchisees, including the products and the services that you’re allowed to provide, the fees, the other costs that you may have to pay. And where you have the freedom to make your own decisions and where you need the franchisor’s written consent. So there might be issues. There may be, for instance, it may be that you have to use certain items through a supplier, but there are other elements that you don’t need to kind of get, that are not controlled by the franchise or that are, you’re free to kind of make your own decisions and everything will be different according to the different systems.

So every franchise or we’ll provide an operations manual and that sets out the standards and procedures you’ll be expected to follow. So, how you’re expected to operate in areas like customer service, how you deal with custom complaints, ordering from approved suppliers, marketing the brand, all of those things will be outlined in the manual. And the franchisor will expect the franchisee to comply with certain laws such as workplace health and safety, licensing and privacy rules. So the franchisor can expect that you will comply with how your business looks. So everything from the decor and the lighting to what you and your staff wear, and that customers will receive the same high level of service from your well-trained, efficient and helpful staff as they would at any other outlet or office within the brand.

Amie:
Yes, so it feels a little bit like franchising is about replication consistency. Does that make sense?

Sarah:
Absolutely. That’s the key to it. And there’s more at stake than just your own business when you’re a franchisee. If you don’t comply, there’s a whole network of franchisees who are business owners just like you. And they have the expectation that you will do the right thing and follow the rules. So if your actions or lack of action damage the brand, that’s their brand as well. So every franchisee’s success is really built on consistency across the brand.

Amie:
And I think it sounds like those expectations just highlight how interconnected the franchise relationship really is. What about expectations about business performance?

Sarah:
Ah, well, that’s a little trickier. Every business is different. I mean, I keep saying that, but it’s so true because we’re talking about different industries, we’re talking about different business models. There are different locations with their own challenges and competitors, and there are franchises who have diverse experiences and skills. So an established business will be able to show its trading history. And of course, that’s not possible with a brand new business. But with guidance and compliance, even with guidance and compliance, sorry, there are just too many variables to assess how a business will perform in the future. So no franchisor will ever or is very unlikely to ever give you a guaranteed return on investment. There are just, as I’ve said, too many variables on that.

But just to muddy the waters a bit…there is an income guarantee that’s available sometimes for a set period in some franchises. And there are some joint venture models where franchisees may receive a set income. So there are business models that can provide an element of income security or defined income. But that is still in the minority and there are still lots of variables around that. Again, the details need to be. kind of clearly review so that franchisee expectations are realistic about the performance of what their business could do.

Amie:
Yeah, I think it seems as though having realistic expectations is the key and I mean it makes sense because it’s the topic for today. Have you got any examples of where you’ve seen unrealistic expectations?

Sarah:
Well, sometimes people do come into a franchise with expectations that the franchisor will have a hands-on role in their business. But the reality, of course, is the franchisor is there and can and should provide support and advice. They’re just not responsible for an individual’s business. I think sometimes there are blurred lines around the responsibilities of the franchisee and the franchisor.

And I’ve said before, and I’ll repeat it here, it’s always good to find out. the boundaries. So a franchisee may think that they can change things in the business that don’t suit them, but those may be fundamental to the system in the franchisors’ eyes, and that’s not going to be a possibility. You know, if you’re going into a business and thinking that you can change things that don’t suit you, it’s probably better to buy into a brand where it’s an early stage where you can maybe help shape. that brand and shape the progression of business. If you’re buying into a business so that you can tap into the branding, use the experience that’s on hand, use the systems, don’t try and change them. That’s why you’re buying into a franchise.

I think it’s very clear to understand what your expectations are of the business as well as so that you can match it to what the franchise model actually provides. And it’s really important to have a clear understanding of what’s involved in operating the business. That’s, you know, day in and day out. So Greg Nathan, I’ll just mention this, who runs a business called the Franchise Relationships Institute, has been a franchisee himself, and he is really very well versed in where the cracks can lie in a franchise relationship.

Amie:
Mm-hmm.

Sarah:
And they obviously can be cracks. And he said that franchisors can downplay the stresses and strains of running a business. So that’s where talking to other franchisees is crucial, to get a sense of what it’s really like. And Greg is also an advocate of fostering a good relationship with the franchisor and other franchisees. And that makes sense. This is an interdependent relationship, and everyone benefits from a good relationship.

Amie:
They do. Okay, so I think at the beginning, Sarah, we said this is going to be wide ranging discussion. I feel like it has proven to be just that and we’ve touched on so many different elements of the franchise buying journey where we need to set levels of expectation. Do you have anything else to add on the topic?

Sarah:
I think really just want to kind of echo some of those kind of key points that the franchisor and the franchisee are each responsible for certain aspects of the business. And it’s so important to have clarity on what exactly these responsibilities are, what the boundaries are, what the franchise or expects from you. Don’t rely on your own assumptions. And I think we do it. The franchisor does it. We all do it. We read something, we hear something, and we interpret it in our mind in our own way.

And I think with boundaries and kind of guidelines, it’s important to just clarify what exactly do you mean by this level of support? What exactly do you mean by I need to provide, you know, business figures? What are the things that I have to do? So be as be as conscientious as possible about finding out the detail behind the words. in the documents and what the franchisor will say in meetings so it’s very, very clear how both sides are going to be viewing that relationship.

And then you should be on your way to a great relationship with your franchisor and then ready to build that successful business, leveraging all the help that’s available.

Amie:
Excellent. Well, thank you, Sarah. This has been an excellent insight into franchise expectations. In the show notes, we’ve got links and references if you want to follow this further and get more in-depth information before you continue your journey to buy a franchise. If you’re some way into your franchise search, you might be ready to check out the franchise handbook that’s available on our website. It’s practical tips that can help you navigate the journey smoothly. Visit franchisebusiness.com.au for more information. We hope you can join us on another Buying a Franchise podcast.

And if you’d like to hear from some of the voices in the industry, why not listen into one of our Spill the Biz interviews hosted by none other than you, Sarah. Fantastic. Thanks for listening.