What should you expect from your franchisor?
The key to answering this question is to do your own homework on exactly what to expect and base your decisions on that information, not the glossy sanitised version.
When you have your expectations based on an unreal vision, then there are bound to be complications. Once you know just what to expect in your prospective franchise system, then you are less likely to be disappointed by your decision or your franchisor.
Making sure you do your homework thoroughly is the number one message from the Asia-Pacific Centre for Franchising Excellence for anyone looking to buy a franchise.
This homework, often more formally referred to in the sector as ‘due diligence’, needs to focus not only on the type of franchise you will buy, but also what you will then receive from that franchise system as a new franchisee.
Extensive research and knowledge will help set solid foundations for success for any franchisee, and will ensure you are as fully prepared as you can possibly be and know exactly what you are getting into. Griffith University’s Asia-Pacific Centre for Franchising Excellence is an invaluable resource for anyone starting their journey in the world of franchising.
While the Centre is a great place for franchising information, the Centre’s Director Professor Lorelle Frazer cannot stress enough that “it really does pay for new franchisees to do their due diligence and not rely just on what they are told by the franchisor.” This goes beyond just the legals and leasing. It means asking lots of questions about the system that you are buying and the ongoing support and ability for the system to be dynamic and not outdated.
The Centre is completely independent and impartial, there are no vested interests or selling of franchise systems, with a focus on education and professional development, including pre-entry education for new entrants to the sector.
Professor Lorelle Frazer is the Director of the Centre and has been undertaking extensive research into the area of due diligence in franchising, in conjunction with Associate Professor Jenny Buchan of the University of New South Wales.
They say research has revealed that potential franchisees are often complacent about conducting proper due diligence. Many do not devote enough time or are unwilling to pay for expert advice. Their emotional attachment to the brand often overrides objective information. To undertake effective due diligence, a prospective franchisee needs to keep an open mind and to seek out and dispassionately question all information.
Below is a description of many a naïve first-time investor into the franchise sector:
“We love the brand and we are willing to invest our life savings in it. After all, this is a well-known franchise with hundreds of stores so it must be good. The franchisor says it is offering a proven business. It has given us a disclosure document containing many pages of information and we have tried to read the franchise agreement. There is also a lease. To be honest, we can’t really understand all the legal jargon. We just want to get started on running the business. Besides, won’t the Franchising Code of Conduct protect us?”
As Professor Frazer and Associate Professor Buchan explain it, you wouldn’t buy a car before taking it for a test drive, having it checked by a mechanic and making sure there was no money owing on it, so why wouldn’t you apply the same rigor to investing your hard earned savings and potentially tying yourself into a business for at least five years. Buying a franchise is a big step. When you are considering such an expensive commitment, it is a sound first step to visit a lawyer and an accountant who really understand franchising, from the franchisee’s perspective, for their advice.
Prospective franchisees are encouraged to do as much homework as they can, including online by searching the brand and the industry in which it operates. They should also check out the website of the franchise sector regulator, the Australian Competition and Consumer Commission, which investigates breaches of the Franchising Code of Conduct. Franchisees can also educate themselves on the ACCC site, which has funded an online pre-entry franchise education program run by the Asia-Pacific Centre for Franchising Excellence.
The best advice for deciding on which franchise in which to invest, is to not totally rely on one single source of information. Remember, there is always going to be another franchise opportunity so if you are not completely happy; do not rush into buying.
WHAT THE FRANCHISE SYSTEM OFFERS
Once you decide on your franchise, you have to keep on doing your homework to maximise what is provided by that franchise system.
Elizabeth Gillam, the founder and CEO of Franchisee Success and a very successful multi-site franchisee, says it is crucial that new franchisees make the most of the systems and support of their franchisor.
The first step is in knowing exactly what is in that franchise system. “It is very overwhelming when you buy into a franchise system,” Elizabeth says. “You have to learn a lot of things very quickly and on top of that you have to start operating your business. The first six months or so are chaotic. But it can become less chaotic when you go looking into the manuals that came with the system. Be sure that you are familiar with all that they contain because chances are there are many tools in these manuals that can help you. Sometimes you have to run the business for a while and actually encounter a problem before you go looking for a solution.”
It is also very important for franchisees to implement the franchise system that they have purchased. “One of the most common mistakes I see franchisees make is they are too busy being busy and they forget to implement the system they bought,” Elizabeth says.
“They know all the systems, processes and forms are there, but they are just too busy to get to it. Trust me, take the time. I know from firsthand experience that you can get caught up in jumping from one crisis to another, but most times if you take the time to implement the process, then the crisis may never have happened.
“Implement the system as it is detailed in the manuals. Give the franchisor the benefit of the doubt that the system is workable. After all, they have been running the process for some time before they decided to franchise. Don’t try to change it. Implement it, work with it then refine it if you need to.”
Another valuable piece of advice for new franchisees is to nurture the relationship with your Operations Business Consultant.
“Remember the old saying that you win more friends with honey than you do with vinegar,” Elizabeth says. “Well it is never truer than when dealing with your operations business consultant. Firstly, you are both there to help each other, so nurture the relationship. Take the time to get to know him/her. See how they operate their day. Do they read their emails early in the day or late? When is the best time to call them? How do they prefer to communicate? I know it is hard when everything is going wrong, but yelling at your Ops consultant won’t fix the problem, nor will it help you to find an answer. You are not the only person they look after - you are one of many so find out how to work best with him or her.”
And finally, don’t be afraid to ask for help when you need it. “This is a big one and one that I probably didn’t do enough,” Elizabeth says. “No-one knows what is actually going on at your store. The franchisor is not there so he doesn’t know. But for you the problem is very real and unless you ask the questions, no-one will be able to help you solve it. Quite often other franchisees are having similar problems and there is always someone who has been quite ingenious in solving it. Make the most of being in a franchise system. Take part in the communication panels. Attend the franchisee meetings - your business will always benefit.”
The Asia-Pacific Centre for Franchising Excellence was launched by Griffith University in March 2008, formalising the University’s commitment to franchising research and education. Its aim is to help advance franchise sector best practice through independent research, education and the dissemination of information via the Centre’s website.
Led by one of the world’s leading and most highly respected franchise researchers Professor Lorelle Frazer, the Centre works to transform research findings into practical outcomes for business. Centre members actively engage with key government bodies and franchise associations across the Asia-Pacific, as well as with other franchise academics across the globe.
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