4 Steps To Work Out If Becoming a Franchisee Is For You
4 Steps To Work Out If Becoming a Franchisee Is For You
Buying into a franchise is an undeniably big step. For those who are new to the world of entrepreneurialism it can be a great first taste of running your own business – but many would argue that it isn’t always the best option. So how do you determine whether franchising is going to be a good fit for you?
Building a business from the ground up can be an incredibly hard slog, especially if you lack the skills and know-how needed to ensure your succuss. Conversely, most major franchises offer business models that have been tried, tested and tweaked to perfection. This means that most of the guesswork has already been done for you so that you can instead focus your energy on getting your business up and running.
As CEO of Stockdale & Leggo, Australia’s first real estate franchise, I oversee 62 franchise offices across Australia – a number that is continually growing. Throughout my career, I’ve worked closely with a number of ambitious real estate professionals looking to take the next step and in this time I’ve learned a lot about what it takes to be a truly successful franchisee. In my view, a big part of the reason why Stockdale & Leggo has experienced such strong levels of growth is because of our commitment to ensuring that each of our franchisees are a good fit for our group. The reality is that franchising simply isn’t for everyone – and when you engage in a poorly matched partnership, both parties risk losing a lot of time and money.
If you have been gearing up to embark on a new business venture, follow my four foolproof steps to help you work out whether becoming a franchisee is going to be a good fit for you.
1. Consider your motives
Before you begin your research on the many different franchise opportunities available, it’s important that you first do some self-reflection and consider your own personal motives for wanting to buy into a franchise business in the first place. Like all businesses, running a successful franchise business requires dedication and hard work. While it can be assumed that the bulk of the initial planning and preparation will be taken care of by the franchisor, don’t be fooled into thinking running a franchise will be easier than any other business. In the past, I’ve encountered inexperienced investors with the belief that franchise businesses are money making machines that require minimal effort, something that quite frankly couldn’t be further from the truth.
While you may have a head start over some of your competitors, it’s important that you hold on to that momentum and give your business the attention it needs to thrive. Furthermore, if your reason for wanting to go into business for yourself is so that you can become your own boss, you might soon find that buying into a particular franchise doesn’t offer the same freedom as you had hoped.
While many franchises offer their business leaders a great deal of flexibility and choice, most come with a fairly stringent set of requirements that must be followed to preserve the brand identity throughout the wider community.
Essentially, while you can enjoy the perks of becoming part of a well-established brand with a strong reputation, you will also be tasked with the duty to uphold that reputation.
2. Work out whether you’re willing to collaborate
Following on from my last point, a key aspect of buying into a franchise business that I have found to be often overlooked is the fact you may be required to collaborate with other business leaders on a regular basis. For this reason, it’s important that you are able to work as part of a team.
Within my own business, I encourage communication and collaboration across all offices and my franchisees are heavily involved in a variety of decision making and planning events. In fact, many of our latest developments and innovative new offerings have been a result of these meetings and consultations.
While our business leaders don’t all necessarily see eye to eye on every matter, a huge part of working in a successful franchise business is understanding that each and every one of us must put the good of the group before the good of one individual office. If you want to become a franchisee, you need to be able to recognise that when one office does well, we all do well – regardless of whether or not it appears to directly affect your bottom line. Word of mouth travels quickly, and a win for our network is something we will all benefit from.
3. Take a look at your finances
While buying into a franchise business will usually require an initial investment as well as ongoing royalties, this figure can be considerably less than if you were starting from scratch or taking over an already established independent business and is certainly worth considering if coming up with capital to launch a new start-up is proving to be a challenge. In addition to franchising being a more cost- effective solution in the early days, a well-structured franchise system will be able to give you a clear indication of any future expenditure that may be required to ensure there are no surprises down the track. This allows you to prepare for what’s to come and make sure you have the funds squared away to cover any upcoming costs without interruption to service. A good franchisor may also provide useful accounting systems to help you keep on track of your finances and manage your cash flow – something that many new businesses struggle with more than any other area.
What’s more is that banks tend to be far less stringent in regards to business loans when you can prove that the loan is to be used towards a franchise buy-in. Generally speaking, this is because they have extra assurance that all measures have been taken to ensure the business is financially viable and the franchisor can usually provide evidence of other successful franchisees.
4. Decide what you want for your future
Finally, before making any commitments I encourage you to take some time to work out what you want from the future and start thinking about putting in place a solid plan as to how you’re going to get there. When going out on your own, the future can be uncertain and it is unlikely that you will have any real guidance on how to grow your business unless you seek additional assistance from an experienced consultant or coach. However, part of the beauty of the franchise model is that it offers a clearly defined route for business development as well as ongoing mentoring and support from the franchisor as well as your fellow franchisees.
While there is an endless number of pros and cons to both options, franchising offers the added advantage of having a whole network of people rooting for your success – something I think you’d be hard- pressed to find elsewhere. Before jumping into the deep end, make sure to consider all of your options to work out what’s best for your own situation and what you ultimately want to achieve by becoming a business owner. Whether it’s through a franchise or as a stand-alone startup, it truly is a wonderful journey.
Peter Thomas is the Chief Executive Officer of national real estate network Stockdale & Leggo and industry pioneer, credited with introducing the franchising model to the Australian real estate industry in 1981, becoming the group’s first franchisee before acquiring the business in 1986 and growing it to seventy franchises across Victoria, New South Wales, Queensland and the Northern Territory. Under his leadership, the group’s extraordinary success has been recognised within industry and business circles as winners of the Gold Stevie and People’s Choice Awards in the real estate category of the 2017 International Business Awards and as a finalist in both the 2017 REIV Innovation Award and 2017 REB Innovator of the Year Awards.