JIM’S TIPS - on Buying a Franchise
This article appeared in Issue 3#4 (May/June 2009) of Business Franchise Australia & New Zealand
You’re reading a magazine with hundreds of different franchise opportunities, and more appearing every month. How do you decide which one will work best for you? Considering that tens if not hundreds of thousands of dollars are at stake, it’s amazing how many people fail to do the most basic research. Yet a few questions at this stage will give a better return than many more hours spent in the wrong business.
Should I be in business?
The first question to ask is whether you are suited to be in business. A good franchise system will provide training and support to make success a lot more likely, but it still remains a business and not a job. Successful franchisees tend to be disciplined, hard working, have good communications skills and are dedicated to customer service. Our Jim’s Group surveys across all Divisions reveal that most franchisees have had responsible positions and often earned above average income for their age.
When things go wrong, a good franchisee will tend to ask ‘what can I do better?’ before looking to any failings in the system. A poor one will always blame the system or their franchisor, and be resistant to advice on how to take action themselves. Are you a person who takes responsibility, or do you prefer to blame someone else?
What do I like doing?
People often ask my advice on which Division has the best earnings. My normal response is to ask them what they like doing. Someone who enjoys their job is far more likely to be successful and stick to it long-term. For example, I like being outside and love gardens, which is why I mowed lawns happily for many years before my business really took off. I also like the variety of different jobs at different times of the year. On the other hand, I’ve tried cleaning and carpet cleaning and hated both with a passion.
Yet my Jim’s Cleaning franchisees much prefer indoor work, and like the fact that their jobs are steady and predictable year round.
Before making any decision, ask to spend time on the road with successful franchisees actually doing the work. Try a few different franchises and see what you like. A couple of days unpaid work is far better than many unhappy years doing something you hate.
What is the franchisor after?
The approach of the franchisor in an interview will give a strong clue as to what the system is like. A good franchisor will be asking you a heap of questions: Why do you want to buy a franchise? Why this one? What were you doing before? What is your experience with customer service? Do you understand the problems and difficulties you will face?
You will be treated in many ways like a job applicant, to see whether you are good enough to be in their system. What this shows is a serious interest in your success. They are likely to provide better support, and the quality of your fellow franchisees will be higher.
If, on the other hand, the franchisor gives a slick sales pitch and has no interest in your skills or background, give them a miss. All they want is your money.
What do their franchisees think?
One truly good feature of the Franchising Code of Conduct is that franchisors are obliged to give you a complete list of current franchisees, with phone numbers.
Recently I was approached by a franchisor who offered to bring across his 35 franchisees into a new Jim’s Division. I asked for a list of franchisees, with contact numbers, to check him out. He hedged and evaded and eventually admitted that virtually all his franchisees were either inactive or unhappy. From that time the conversation was over. If a franchisor will not give you a complete list, or one with the office number as a contact (I’ve seen this!), that person is in breach of the Code and is not someone to deal with.
When you receive the list, telephone as many people as you can. If possible, call them all. Ask them about franchisor support and whether they would make the same decision again to purchase. Perhaps not all will be entirely positive, but a clear majority should be. As a point of comparison, we phone interview our Jim’s franchisees once a year and ask them whether they agree or disagree with two statements:
- The reality has lived up to the promise;
- I am positive about the future of my business.
For example, based on recent surveys 75-80% of Jim's franchisees agree with the above, while around 8% disagree.
To me, this is the single best way to judge any franchisor. It’s the only one that really matters - are their franchisees happy?
Next issue: contracts, lawyers, and what to expect from your franchisor.
Jim Penman founded the Australian iconic brand Jim’s Mowing in 1982. The Jim’s Group now has 25+ Divisions, 2800+ franchisees, and is the 2nd largest franchise group in Australia (after Australia Post). Jim’s also operates in NZ, Canada and the UK.