How do you know if the franchise brand you like has what it takes to help you succeed?

We asked lawyer Robert Toth for some insights on how to tell if your prospective franchisor is a strong performer.

It helps to meet the founder or a director of a business so you know who you are going to be working with, he says.

Does the franchisor give you confidence?

When you do meet, think about some fundamental issues. Do their cultural views align with yours? What is the franchisor’s growth and business plan, and do these match your expectations?

“Just as franchisors do their due diligence on franchisees, franchisees should and generally will do their due diligence on the franchisor and the people behind the system,” says Robert.

Consider whether your franchise recruiter has a welcoming and encouraging attitude.

“Franchisees will want to get a sense of whether the franchisor and their management team and staff are passionate about their brand and future, and have a positive mindset.”

A good franchisor will provide the right tools and systems

A franchisor needs proper customer management systems and accounting systems and to be social media savvy.

Digital tools are crucial in today’s business climate, making life easy for both customers and franchisees. Is the franchisor on top of systems and tech tools?

How easy is the model to operate?

Is the franchise model easy to follow and implement? Does it offer a service or product that has longevity? 

Robert points out the need for a reasonable split of the revenue or some other appropriate arrangement for online sales.

“Is the franchisor seeking revenue from a number of sources over and above the royalties, to the point where there is very little left for the franchisee to even take a minimal salary?” he asks.

“Responsible franchisors will ensure at the outset that their model works for them and also their franchisee.”

Franchisees need to consider compliance within the group, if there are strategic supplier partnerships , and good internal communications.

Is there a good training program?

Franchisors need to provide more than just support in the first few months of the business. They need to provide a meaningful training program and be interested in the franchisee’s financial performance. 

Training is not just up-front but involves ongoing training and improvement in areas such as sales support and finance. Training should not be a once-a-year event but continuous improvement for everyone in the system.

Does the franchisor deliver business support?

A franchisor needs to be able to provide financial support and identify areas that may not align with brand expectations. Common issues that need attention include high wage costs due to poor rostering, excessive wastage, higher than usual COGs.

Robert says a system that can provide proper targets, benchmarking and financial reporting will help all franchisees. 

“Sharing, for example, store-by-store profit and loss helps to create competition within the organisation and educates franchisees on data analysis and their performance.

“Franchisors should focus on their franchisees’ profit, not their own,” he says.