Franchise Advice
How to identify a good franchise business
Charlie Dickson of Ashtons Franchise Consulting looks at the basics of recognising an outstanding opportunity
H
aving made the decision that franchising is right for you, it is essential that you research
various franchise businesses and their models in the business sectors that are most appealing to you in terms of operations, service, investment and opportunity. It is also important you consider your own skills, qualities and aspirations and how these fit with a particular franchise. Investing in a franchise is not simply about buying into the product or service, you are also investing in the people behind the brand. Do they have the relevant expertise in their marketplace? Has the company been operating for a reasonable period of time prior to offering franchise opportunities? As a guide, the minimum is two years but can depend on the market opportunity and business strategy. When assessing franchisors, research
the company to ensure that you are comfortable with their business expertise, leadership and management experience, their capabilities and resources, and be satisfied that the product or service has proven consumer demand and a good reputation in the marketplace. When evaluating a franchise,
the franchisor should have invested time and money in researching and developing their operating systems and processes. These systems should be tried, tested, documented, proven and easily transferable to a growing franchise network.
Some important points to consider: • Trading performance of the corporate locations Does the franchisor operate corporate locations and are these outlets or offices trading successfully and profitably? Ask to see the financials and seek verification. Best practice will be for franchisors to be operating their own locations so that they continually develop, innovate and lead the market.
• Trading performance of the franchisees Visit and talk to a number of franchisees in different locations who have been operating for various time periods. Franchisees will be the first to tell you if they are trading profitably at or above business plan targets – or not trading in line with forecasts and expectations. What does the franchisor do well and what are the challenges in the business?
• Differentiation Does the business have unique selling points, clear differentiation and a competitive advantage?
• Customer and client feedback Research the business’s customer or client base feedback. Does the business have excellent – or poor – feedback for its products or services? In any business, feedback about the brand can be indicative of the business culture and its reputation in the market, and can obviously have a positive or negative effect on success. Check online reviews
and social media channels, and ask your family and friends if they have had any experiences with the brand.
• Support services Is the franchisor committed to providing and delivering initial training and ongoing support and marketing plans? Is the business innovative, is it developing and changing to meet market trends? Ask the franchisor to demonstrate these aspects of their business activities, as ongoing support and innovation are essential to any growing, successful and profitable business.
• Recruitment targets Is the franchisor recruiting new franchisees as per their business plan targets? Are they being overambitious with their targets? Does the franchisor have a detailed and robust franchisee recruitment process in place? Many franchisors hold regular discovery days, which are information sessions for potential franchisees. Attend one of these. Another indicator of success is the number of franchisees who operate multiple franchise locations or are planning to open more locations in the future. Do the franchise territories allow franchisees to maximise the local area sales potential?
• Franchise resales Investigate how many franchises have been sold as resales in the past two years and how many are currently up for
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