Franchise Advice
opportunity you are investigating costs signiticantly more than similar franchise concepts, investigate further. Serious price discrepancies should be explained by markedly better off erings, training, and support. If the premium isn’t justifi ed, the high entry fee may just be the beginning.
Knowledge transfer Your knowledge of a particular franchisor’s business and industry is likely to be limited. The franchise should provide guidance, not only to introduce you to the business, but to also help you develop the skills and understanding you need. The franchisor should have a plan to help you duplicate their business and instruct you in its operation that inspires confi dence.
The opportunity
A knowledgeable franchisor recognises that its long-term success depends on the success of its franchisees. It wants franchisees to make money, and for its fees and levies to not prevent them from doing so. The franchise opportunity should provide a good return on investment (ROI), and reward hard work with healthy profi ts. Talk to a number of franchisees who have been in business for a year, two years, three years, and fi ve (if possible). Are they making money? Are they struggling under the weight of their fees? Have they recouped the price of their investment? If so, how long did it take?
Support
Ongoing support is an important benefi t of franchise ownership. When it is absent or unreliable, the limitations can chafe. Franchisors should have franchise support
staff that are consistently reachable during regular working hours (at the very least). There should be a dedicated support number and an email address to which queries can be sent. Response times should be short, and the support staff should be helpful. Existing franchisees can attest to the truth of a franchisor’s assertions on this topic. The best franchisors off er coaching as well as troubleshooting.
Management The franchisor controls the brand under which you will operate, but who controls the franchisor? Be extremely wary of a one-person show. Established franchisors should have a management team that consists of no less than a managing director, a marketing expert, a sales expert, a fi nance expert, a franchise support expert, ideally a multimedia/web expert, and a research and development expert. The brand may be out of your control, but you are the winner when it is under expert stewardship.
Marketing
Most franchisors levy a marketing fee, which is sometimes called a marketing fund ‘contribution’. A good franchisor uses the money to actively and eff ectively promote the brand. Examine the quality of the franchisor’s website and inquire about its current promotional activities. If it is not marketing itself in the face of mounting competition, you have the right to ask why.
Fair dealing The franchise agreement both defi nes and enshrines the relationship between franchisor and franchisee. Before signing on the dotted line, have the contract reviewed by an independent lawyer who has experience drafting franchise agreements (litigation lawyers rarely have the experience required). The contract should reasonably balance the interests of both parties. If it doesn’t, don’t sign it.
These seven criteria are a starting point to determine whether you are dealing with a good franchisor and a potentially successful franchise system. If the franchisor is a full or associate member of the British Franchise Association (bfa), your task has been greatly simplifi ed. The bfa works to uphold the reputation of the franchise industry by allowing only
reputable and responsible franchisors to join its ranks. In so doing, it helps potential franchisees – in the association’s words – “recognise the good, the bad, and the ugly for what they are.” To become an associate or full member of the bfa, a franchisor must demonstrate (1) that its product(s) or service(s) are “not only saleable, but saleable at a profi t that will support a franchised
network”; (2) that it “has the means to transfer its know-how to a new operator at arm’s length”; (3) that it is committed to respecting a code of ethics governing its advertising, recruitment and contractual practices; and (4) that it will, “in advance of any lasting contractual agreement, disclose without ambiguity to prospective franchisees the information on their business which is material to the franchise agreement.”
Full members have gone further, demonstrating a proven trading and franchising record. The bfa’s stringent requirements for viability, franchiseability, ethical practice and disclosure provide potential franchisees with an exceptional form of quality control.
If you have picked up this magazine,
you are aware of the benefi ts of franchising and are looking for the right opportunity – the perfect fi t. Use the guidelines outlined above or simply look for the bfa seal to ensure that the franchise you choose wears well, and doesn’t pinch.
Tony Urwin
A franchise specialist, Tony has been a bfa affi liate franchise consultant since 2000 and has been responsible for the development of business format franchising in most fi elds of business around the world. For more information, email
enquiry@ashtonsfranchise.com
October 2016 |
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