Looking to invest in a franchise. Then our Buying a Franchise podcast is for you. Join us as we go through all of the franchise basics and help you on your journey to finding your dream franchise. Here at Inside Franchise Business, we acknowledge the traditional owners of country throughout Australia. We pay our respects to elders past and present.

Amie (00:30):

Welcome everyone to the very first episode of what I know is going to be the most informative podcast out there when it comes to everything you need to know about buying a franchise. My name is Amie Larter and I’m the CEO of business media outlet, Octomedia. Day-to-day our publications cover many facets of business from retail to FMCG and right through to franchising.

Um, upfront, in full transparency. I’m not a franchising expert; content strategy and audience engagement is my game, which is why I’m so excited to be joined by Sarah Stowe, longstanding editor of Inside Franchise Business for this series, Buying a Franchise. Sarah recently launched the Franchise Handbook, an essential guide for anyone thinking about purchasing a franchise, and she’s here so I can basically pick her brain on your behalf about everything you need to know about buying, uh, the buying process. Welcome Sarah.

Sarah (01:28):

Thanks Amie. It’s good to be here.

Amie (01:31):

<laugh> now you are usually on my side of the microphone. So sitting in the interviewer seat, how does that feel?

Sarah (01:38):

Uh, look, I’m really excited to be talking about franchising, which I’ve been working in for so long and, uh, just to be able to share some of the great things and some insights into how franchising works. So I’m excited.

Amie (01:51):

Me too. Now. I love it because for years, I’ve been trying to convince you and our marketing team to run an ‘Ask Sarah’ campaign just because I know how valuable it will be. Um, I haven’t convinced anyone yet, but we are here now. So let’s kick start because we’ve got this first episode to get through. Um, so I’m gonna put on my potential franchise buyer hat. Uh, let’s assume I’m thinking about going into business, but I don’t know whether a franchise or an independent is the best idea. Sarah, where do I start?

Sarah (02:25):

Well, this is a great position to be in what a great position, um, planning your future as a business owner. It’s a dream for so many Australians and franchising plays such an important role in helping people achieve their goals. I thought it would be best to start the conversation by talking about what franchising actually is and what it isn’t before we look at who makes great franchisee

Amie (02:46):

Sounds good.

Sarah (02:47):

So what it is is a business model that allows you as the franchisee to build a business based on an existing concept, that’s owned by someone else, the franchisor. McDonald’s is probably the most famous franchise; as the franchisor McDonald’s owns the brand and the systems and provides training, support and marketing. The franchisee is the individual owner of each restaurant who follows the rules and the systems to operate their own business.

Now, what a franchisee is not is something it might be compared to, a license or a distribution model. A franchise, uh, model is actually much more stringent than either of these two. So if you’re buying a franchise, you need to be prepared to follow rules. Some of which are brand specific, some of which are set by a Franchising Code of Conduct.

Now I’ll also say here that a franchise is not, um, a quick way to make money. It’s not a guarantee of profitability, nor is it a way to go into business without doing any hard work. Franchisees success is dependent on the time and effort that’s put into the business. It doesn’t come from relying on the franchise, franchisor to do all the work because well, they won’t anyway.

Amie (03:59):

Okay. So from what you’re saying, um, and please correct me if I’m wrong, it sounds like there’s been a few cases of expecting the franchise, franchisor to do all the work

Sarah (04:10):

Well, it’s inevitable. I think because people look at the support that’s available as, as a key part of a franchise and the fact that the brand is owned by the franchisor, um, and they can fall into the trap of thinking that everything has to be provided or initiated by the franchisor, but that isn’t true. It’s best to remember that as a franchisee, this is your business and you are responsible for it, but you have the backing and expertise to help you achieve your goals.

Amie (04:35):

Okay. So, um, you’ve said that we shouldn’t be expecting the franchisor to do all the work and that’s fair enough. So just to set my expectations and everyone else’s Sarah, what kind of expertise and support are you talking about?

Sarah (04:50):

Well, when you join a franchise, you immediately become parts of a wider community. You have a whole network of experienced professionals dedicated to helping make sure you succeed. So things that would ordinarily take up a lot of time for new business owners from, let’s think about it, from selecting your site, where you’re going to actually be operating new business, uh, and developing the business through to marketing and advertising strategies. These are largely taken care of by the franchise network. A franchise also provides an intensive training program from the outset and in many cases that will continue, um, with a, a training regime for existing franchisees. And then of course there’s, uh, things like collective buying power. So when you become part of a franchise network that grants you access to the franchisees, established relationships with suppliers and most franchise networks also have a vested interest in keeping you happy, which means helping you to maintain a healthy work life balance, something that you probably might struggle to do, um, independently.

And I think that perhaps the best example of the level of support that can you as a business owner has been Covid-19. I mean, it’s a time when business owners have often struggled to keep trading, as we know, and to stay up to date with new health related rules regulations, and to simply understand where they could get financial assistance. This was a time when independent business owners had to fight these battles themselves while in franchising, franchisors effectively took on these burdens and relaying important information to franchisees providing mental health programs and, and quickly providing new revenue streams.

Amie (06:29):

Right. And I mean, you pointed out some real advantages here to a franchise, which is fabulous. Can we look at how this compares say to an independent business?

Sarah (06:40):

Well, if you buy an independent business, you’re effectively flipping all the above points. Um, you can just go ahead and do your own thing. You can take total responsibility for your business,

Amie (06:49):

Which I’m sure would suit a lot of people.

Sarah (06:51):

Well, indeed. So the freedom to open and close your business when you like, to do your own marketing, you can change your business model. If, if what you’re doing, um, you think isn’t right, you need to change it, you can change it to suit yourself. You can introduce new ranges of products or services. It’s all up to you. Um, you don’t need to share your financial results with anybody. You don’t have to follow any rules, other of course, than health and safety and the industry standards, employment regulations, and so on which every business needs to comply with. You don’t have any fees to pay. And if you have a brilliant idea, you can absolutely go for it.

Amie (07:25):

Okay. So there’s really, uh, advantages to both models. Um, they both sound positive. It’s a great way, um, for someone with a lot of creativity and ambition to get ahead, I suppose, in what you’ve just described.

Sarah (07:37):

Well, it is, and I think the freedoms are fantastic for some people. There’s no doubt people will flourish, um, setting up or, um, buying their own business and, and working for themselves. So anyone who is keen to do things their own way, who has plenty of ideas and a really entrepreneurial spirit benefits from independent ownership, but it isn’t for everyone.

And a key component I think, um, to mention really is risk. Entrepreneurs are risk takers, and they’re happy to try, to fail and to try again. So what a franchise offers is mitigated risk. So all the things that appeal to an entrepreneur can be daunting for someone who is more risk averse, or who wants to back an existing business concept, that’s doing well.

Some people don’t see the need to reinvent the wheel when there’s a perfectly good system already operating. And they are just as fired up by the opportunities to build a great business under a franchisor’s banner as the entrepreneur is to make their own mark.

Amie (08:34):

Okay. That makes, that makes a whole heap of sense. Now, my next question for you is one that I think is going to be, uh, thrown your way quite, quite frequently. Um, what about all the costs involved? Um, isn’t franchise, is franchising an expensive option?

Sarah (08:51):

Well, there may be significant costs involved in buying a franchise. I mean, the costs of course depend on the scale and type of business, whether that’s a franchise or an independent, you, you’re going to have to pay some standard, um, fees and some standard costs. What’s different is a franchisee will be paying an upfront fee and ongoing fees to the franchisor for the rights to operate the business and to use the systems.

Now, how you feel about fees really comes down to your perspective. If you think these are a waste of your money, then don’t get involved in a franchise. But if you recognise the benefits that are in the expertise and support that’s on hand, as we’ve discussed, you’ll probably see the value.

Um, let, let me give you an example. If you’re an independent cafe owner, there’s no one and, and perhaps you haven’t owned a cafe before, there’s no one to show you how to work the coffee machine, how to close your business at the end of the day, there’s no one there to show you what the, the best admin processes are. Um, how would you market your new business? No one can help you. The best place to source your supplies – you’re on your own.

But all of those things, all of the help that can be provided is available to a franchisee.

So in most cases, franchisees are walking into a system that has set structures and processes, which have been refined over years of operation. Now, every franchise will have a different level of support, but it’s a real advantage to have a team behind you providing advice and expertise.

And there’s another bonus, of course, that most franchisors employ business development managers to help you run your business the best way.

Amie (10:21):

OK so that sounds appealing really. You’re moving away from having to be a Jack of all trades, so to speak, letting the experts provide, um, their expertise in every field. Would you say that if your, your risk averse, this is a good option?

Sarah (10:36):

Well, the franchise definitely has a real appeal for people who are cautious, but there are plenty of franchisees happy to accept high levels of risk. Um, they see the benefits of franchise ownership, outweighing what other, others perhaps regard as the disadvantages. Um, so for them, the branding, the business building support and processes in place, are time saving tools that will help them get to their goals more quickly. So, yes. Um, great for risk averse franchisees, but you don’t have to be risk averse to be a franchisee

Amie (11:07):

<laugh>. Okay. So with all of this in mind, um, you know, for the people out there that are considering buying a franchise, do you think that there are specific traits that make you sort of an ideal franchisee?

Sarah (11:22):

I do Amie actually. Um, talking to many, many franchisors and franchisees over the years, I’ve been involved in franchising. It’s really clear that no matter what your background or experience, it’s the personality traits and the attitude you have that are great indicators, or whether, of whether or not, um, being a franchisee is right for you.

We’ve touched on compliance, that’s hugely important. The rules are important for everyone to follow to ensure standards, quality and customer experience are upheld. So franchisees obviously need to be willing to comply with processes and regulations, even if they don’t agree with them.

Along with this goes team spirit, perhaps surprisingly, because people assume they will be running their own business, which is true. Remember, there’s an army of other franchisees out there wanting to achieve their goals and most franchisors encourage a culture of collaboration and a mutual support that lifts the whole network.

So while you might wanna be competitive and be the best in the group, which is fantastic, the franchisor will love you, you’ll be expected to share best practice, um, share your helpful tips and maybe even mentor other franchisees as all part of, of being, you know, one franchisee in the network of many.

Another thing that franchisees need to do is that they need to have a willingness to learn and develop their skills. You know, they must be able to, to listen. And something else that’s increasingly popular among franchise groups is supporting local communities. So that new franchisee, um, new franchise buyers need really to bring some community spirit and a willingness to network to get involved with other local businesses, with sporting groups and charities.

And I really can’t downplay, um, the importance of understanding just what’s involved in running a business and how much hard work goes into building it up. Even if you do have the support of a franchisor. At the end of the day, if you buy a franchise, it is your business and your responsibility. So I definitely put a good work ethic as an absolutely essential personality traits that any franchisee Amie.

Amie (13:29):

Agreed, probably any, any, um, any business owner. So, um, you’ve highlighted lots of pro, pros and cons here, Sarah. Uh, what do you suggest next for someone listening to this podcast?

Sarah (13:42):

Well, look, I think if you’re still, if you’re interested in franchising, um, and you’re considering it as a business option, I think take a long, hard look at your own motivations and your personality traits. Be really honest with yourself.

You know, if you’re considering starting a business and you’ve got a firm vision of how you want things to be, um, I’d suggest that franchising really isn’t for you. If disruption and rule breaking is second nature to you, go ahead, buy an independent or even better launch a startup. Perhaps though that seems daunting yet you’re not great at following processes. Maybe you want a good return on your investment without putting in too much work yourself. So it might be that you want the financial security that comes with being an employee or your family situation isn’t quite right at the moment, and that could be for personal, for health or economic issues.

And in any of these cases, I would say, just hold fire. Now buying a franchise is a commitment, and you need to be sure that you can handle the challenges and the obligations and know that you can give it your best shot. But if you think your mindset is right for franchising, but your situation isn’t quite right, then just wait, just hold fire. Wait till situation improves.

If doing a stocktake on your own skill set and preferences though, you think you’ll find the rules too restrictive, I would really suggest look for another way to bring in extra income, if that’s the, um, your guiding light at the moment, it could be an investment or a different kind of side hustle.

Because while franchisees are given the freedom to operate their own business with a high level of self-regulation, the reality is that you are buying into a set of ideals and processes that have been established to increase efficiency and financial return. That’s a huge advantage for many people. You just have to be sure that you can operate within the boundaries. If you can, buying a franchise is a fantastic way to start a whole new future. You might even get to build a mini-empire within the group. How cool would that be?

Amie (15:37):

It sounds fabulous. Okay. So I think you’ve given me a really good understanding of, you know, would franchising be right, um, right for me, or would franchising be right for those that are listening? Um, this is obviously the first episode, Sarah, and we’ve got so many different topics, um, to discuss what, what would be on the agenda next?

Sarah (16:00):

Um, well I think we need to, um, kind of really look at how you might go about doing the research into a franchise.

Amie (16:07):

Okay. Well, thank you, Sarah. You’ve given us so much, uh, knowledge and information about whether franchising could be right for, um, me or anyone listening. We will have the show notes available in the link at the bottom of wherever it is that you are listening to your podcasts. And if you’d like more in depth information, you can download the handbook, uh, that Sarah’s put together at franchisebusiness.com.au. It’s an incredibly valuable resource. So I encourage you to check that out.

Thank you, Sarah. And thank you to those that are listening. We’ll be back, no doubt with a topic that sounds like it’s gonna be how to do the research into, um, buying a franchise.

Sarah (16:51):

Thanks Amie

 

Amie (16:51):

Thank you.

(16:56):

Thanks again for listening to our Buying a Franchise podcast. Each episode, we uncover more tips and expert advice to streamline your franchise journey. So don’t forget to subscribe and as always visit franchisebusiness.com.au to download your free Franchise Handbook and access even more great franchising info.