July 16 2015

How to spot a franchise system that has “got it together”

If you are serious about buying a franchise you are in demand. With reportedly more than 1,110 franchise brands operating in Australia, nothing is more important to the ongoing success of a franchise business model than finding and keeping good franchisees.

If the old franchise adage “in business for yourself but not by yourself” rings true then your first step is to make sure you partner with a quality brand that has “got it together”.

There are many ingredients of a quality franchise and some are easier to spot than others. To start your search a few basic questions can be asked:

Is it a good franchise citizen?
Quality brands desire to be identified as a genuine and transparent brand. Franchise Council of Australia membership and registration with the Australian Franchise Registry are two excellent indicators that brands are serious about their reputation and that of the franchise sector; recognising the importance of a unified, representative voice and the role improved information plays in supporting that representation.

Is it lender friendly?
Smart brands recognise the importance of good relationships with lenders to help prospective franchisees buy a franchise. Accredited status is generally granted to brands that meet certain minimum requirements and have been through a comprehensive review process. These brands are allocated dedicated bank contacts and their franchisees generally enjoy more consistent and predictable treatment. Whilst only a minority of brands enjoy formal bank
accreditations, a growing number have taken additional steps to make themselves more “lender friendly” by creating tools that help their franchisees obtain finance.

Does it have Code compliant documentation?
The Australian franchise sector is arguably the most heavily regulated in the world. It operates under a Franchising Code of Conduct which is overseen by the Australian Competition and Consumer Commission (ACCC). This code has recently been updated and quality franchise brands will be pleased to demonstrate they have updated both their disclosure document and franchise agreement.

Is there comprehensive information available?
Quality franchise brands have nothing to hide and are generally willing to share detailed information to help prospective franchisees quickly determine if they are the “right fit” for the brand.

Does it have strong training and support programs?
Quality franchise brands provide strong initial training to ensure the success of new franchisees and effective ongoing support to keep them and the overall brand successful. It is worth asking them to outline exactly what they do and then validate that with some existing franchisees. Some of the most worthwhile initial training can come through “on the job” practical experience and training days. This is provided by many quality brands and is also used by them as a key tool in confirming the suitability of prospective franchisees.

Does it have good public hygiene?
We live in a world of abundant public information through social media and sophisticated internet search engines. Franchising certainly gets its share of exposure and some is adverse. It is worth checking brands you have an interest in to see if there are any issues you require the franchisor to provide satisfaction with. Google, Safari and other search engines are a good start but it is also worthwhile digging deeper on the ACCC’s website to identify any franchising investigations the brand may have been involved with.

Is it growing in a disciplined manner?
Whilst growth is the aspirational objective of nearly every franchise brand, and a good pointer to market acceptance of their concept, nothing sets a franchise brand up for failure like undisciplined growth. Sadly innocent franchisees can also be the subject of heavy collateral damage when the day of reckoning arrives for those brands that have grown too quickly and allowed items like excessive rents, weak franchisee recruitment and poor support to accelerate their demise. A much better percentage play is generally achieved through finding brands that are growing in a steady and sustainable manner.

How does it help underperforming franchisees?
Even the best systems have franchisees performing below expectations. The good ones have a plan to help and can often call out specific examples of what they have done. Look for a strong support program with an ability to name early warning signs.

What key relationships can benefit you?
Multiple units make franchise brands prime targets for many equipment and service providers. More importantly many quality franchise brands leverage their buying power to provide cost effective solutions for franchisees with items they most need to protect and grow their business. A good example is customised insurance policies to cover the key risks of their particular business.

If you, and your advisors, like the answers to these questions you may have found a brand that can claim that it has ‘got it together’.

(Source: http://www.franchisebusiness.com.au/expert-advice/how-spot-franchise-system-has-got-it-together)