Amie Larter
Hello and welcome. My name is Amie Larter and this is 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 the one and only Sarah Stowe, editor of Franchise Business and Franchise Executives. And today we’ll be looking at the question anyone considering buying a franchise wants to know. What’s the best franchise to buy?

So can you help them out, Sarah, and give us an answer to this million dollar question?

Sarah Stowe
Amie, hi, you’re right, it’s such a common question. Understandably, potential franchisees want to find the best franchise they can. However, I can’t point at any one brand or business and say, that’s the one, that’s the best franchise, snap it up now. And to be clear, that’s not because there aren’t plenty of excellent franchise brands that can deliver lifestyle, profitability, and business building opportunities. There are many.

It’s really because there are so many elements to take into account and every person has a different expectation, a skill set and personality. So what I can do is share some key factors that every franchise buyer should be considering to find the brand and the particular opportunity that is going to best suit their circumstances.

Amie
Yeah, that makes sense Sarah. And I imagine even with specific categories like food or fitness, there’s lots of sort of variables that will affect how appropriate a franchise brand is for a particular buyer. I know we’ve got the find, I can’t remember what it’s called, but the find the right franchise for you quiz. So aside from taking the quiz on franchise business, what would be your starting point in the search for the best franchise?

Sarah
Well, I’m going to assume that our franchise buyer is in the very early stages of discovering what’s available. They’re just looking at franchising and what the options are. So I would first recommend having a really good look around at as many diverse businesses as you can. Consider what’s happening in the Australian market right now, which industries are thriving, which are facing perhaps ongoing challenges.

Some business models do consider themselves recession proof. Think of at home care or perhaps pool cleaning. And these have a lower risk attached than some of the trending concepts which may run out of steam or be outperformed by competitors. So you need to think now also about whether the business is vulnerable to AI or automation which could make it redundant? Or does it require a human touch that can’t be replaced? It’s really crucial to find an industry with momentum and longevity. You’re going into a business for a term of probably three to five years, maybe longer.

So you want that longevity, you want to know that there’s opportunities there. There’s been a resurgence of interest in home services, partly for the attractive investment levels, and also because of the ongoing demand of the businesses, which often bring in repeat customers.

Amie
And so if I’ve done my research, I’ve really done my homework, I’ve potentially taken the quiz and I found a couple of industries that I think are suitable that have these elements, what’s the next step? What’s the next things to consider?

Sarah
Well, obviously budget is important, but even before looking at budget, I would actually say pinpoint the way that you want to spend your time. So if you like dealing with customers, are you a fast food aficionado? Do you want to have your weekends free? Fast food, free weekends don’t necessarily go together. So the right franchise for you must align with both your financial goals and your personal lifestyle, and of course your ambitions.

So whether your ambition is to remain a solo operator or to scale significantly into a multi-unit or multi-territory enterprise. Success depends on choosing a structure that matches how much time you want to spend in the business. Your desire for team collaboration, will you be leading, will you be part of the team, will you be hands-on every day and your long-term vision for work-life balance.

Because with any sector there are going to be brand options that offer different working experiences and services or products and of course they will appeal to different budgets but you need to think first about what will your day look like, what’s the business that you want to be in.

Amie
I’m sure it’s quite hard to hone it down to you know two or three but if I do have a short list and I’ve got to that point what lens should I be looking at these options through to determine what’s the best option for me?

Sarah
Now I am going to talk budget Amy, so there are quite a other points I will come to but financial boundaries are really important. So the starting point here is to pitch your search at brands that you know you can afford. That’s before you dig down into the details of whether the financials of a particular brand opportunity will work for you. So if we’re talking about what can you afford, there’s obviously an upfront franchise fee. There will be other costs involved.

There may be extra training, may be uniforms, there might be a vehicle lease, there might be, there’s probably, there’s almost definitely going to be either a vehicle lease or a premises lease. There are going to be costs around that, there’s going to be fit out of a van or fit out of the premises, there are going to be legal costs, will be business administration and registration costs. So there are a lot of incidentals on the business side that come into the initial cost of a franchise.

And you have to remember too that you’ll need a working capital because for the first few months, typically, you’ll be scratching around if it’s a new business to make sure that you’ve got enough cash flow kind of coming in. And not having cash flow can really undo an otherwise successful business. So you need to have some money or access to money that is going to tide you over for the early weeks or months of your new business.

Amie Larter
Once you’ve decided and worked out what you can afford, it’s important then to assess how long it might take for a particular business to break even, how long the return on investment could take, and whether the possible returns match your needs. Everyone’s got a different expectation of return on investment.

So you think about the Best Priced franchise, it’s one that you can afford. It has a reliable revenue stream, or even better, multiple revenue streams. It has reasonable outgoings, and it offers you the possibility of a good return on investment. It’s the one that has transparent unit economics, and where the franchisor is focused on unit profitability.

Amie
Okay. Okay. And so aside from finding out from the franchise or directly, is there any other way to go about finding out how transparent a business actually is?

Sarah
That’s a really good point, Amie. So you can actually use as a franchise buyer, you can use the Australian Franchise Rating Scale’s graduated star rating to find out more about a brand’s performance and transparency. This is something that banks use to help them assess a brand that’s looking for funding either for themselves or for franchisees.

objectively looks at a number of categories across the business to see whether it’s performing at a good level in terms of things like the transparency of finance and the processes and the support for franchisees. So it’s a really good tool to be able to access. So I would point our audience to the Franchise Rating Scale.

And I think that also then leads me to think about reputation actually because I think trust and reputation.

I think the trust and respect that a franchise brand garners as a business opportunity is often aligned to the financial results of franchisees. So when we think of a trusted brand, we think of the reliability of the product or the service. We consider the product or service good value. We think of the good experience that we or friends have had as customers. And that’s a really great starting point. If you buy into a trusted brand, you’ve already got a head start because that reputation travels with you.

But there are signs there are other signs of how much franchisees trust their brand, know, the behind the scenes aspect. For example, multi-unit ownership typically would show that franchisees are prepared to reinvest in the brand. If you get a lot of multi-unit franchisees in one system, that tends to reflect that they’re happy with how things are going, they’re making money. Another…way to look at is to see is there a low level of disputes between the franchisor and the franchisees. Typically, know, franchisees get upset when they’re not making money. There might be other things that annoy them, but it’s the money. If they’re not making money, that’s when everything else becomes a big issue. So a low level of disputes is always something to look for. So trust is important and that’s extended to faith in the franchisor’s strategy and leadership.

You know, as a franchise buyer, you need to find a brand that gives you confidence in the future because a good franchisor is one who is investing time and money into streamlining processes, who is adopting AI to improve systems and customer experiences and boost the customer base. Someone, a business that invests in research and development and who has an agile approach to business, something you really need these days.

Amie
Indeed, and one element we haven’t touched on Sarah and I know how important this is from when we were doing our research into the UX for the franchise business website. We know that franchisees always absolutely want to promote and franchise buyers are looking for the all important training and ongoing support. So where does this fit into the search and how do we go about finding out about this?

Sarah
That’s a great point because as you say, these are essential. And there are two levels to consider. The first is really a question of skills because many franchisees buy into industries, they have no experience in them that’s the beauty of getting into a franchise. In these instances, the technical training and support available for novice franchisees is absolutely crucial. So a first-class franchisor will be ensuring that franchisees have a grasp of the business basics through their training.

If there are gaps in your skill set you want to be confident there is support whether that’s marketing or staff management for instance to upskill you in these areas. A top-tier franchise should have a business in a box training program and that training shouldn’t stop after week one or week two. Look for franchises that offer leadership training and update modules as the market changes which then leads to ongoing support. What does this look like. Field support is valuable, it’s a valuable asset. So how frequently do franchisees get field visits? What’s the nature of the visit? A premium franchise will be offering support and business building guidance. You know, they’re not just checking that franchisees are compliant. So for training, you need to have technical and business training, and you need to have that kind of that ongoing support and feel that the franchisor is on your side and working with you to help you build your business.

Amie
They’ve probably got a proven track record of providing that, right?

Sarah
They would have and speaking to franchisees is a particularly good way of finding that out. Asking them, whether current and former franchisees, did they feel confident in the training? it allow them to enable them to set up their business? Was there ongoing support? Does the franchisor in effect provide what they say they’re going to do?

Amie
Excellent, all right, that’s given us a few key pointers, Sarah. What would be your final tip for potential franchise buyers?

Sarah
I think two things to remember. Can I have two? First one is this is your journey and the best franchise for you might not be the one that your best friend has succeeded in. It’s great to be inspired by friends or family but you may end up with a franchise that’s completely different to them and do incredibly well.

And the other point is that someone wanting a lifestyle business has different goals and expectations to someone wanting a multi-territory, multi-site mini empire. So it’s important that you are clear about your own goals. So to sum up, the best franchise for you is the one where the market demand aligns with your lifestyle goals, the support system fills out your skills gap, and where it’s possible to get a return on investment, that suits you, one that makes the venture worthwhile for you.

Amie
Thanks Sarah. In the show notes below 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 got practical tips that can help you navigate the journey smoothly. Visit www.franchisebusiness.com.au for more information. We hope you can join us on another Buying a Franchise podcast. Thank you for listening.