The Do’s and Don’ts Of Buying A Franchise

Buying a franchise business is a very serious step, but it never ceases to amaze me how few people considering taking this step seek out specialist franchise advice before they invest what is probably the best part of their hard earned savings. Market research has shown the majority of people who do buy a franchise have never been in their own business before.

So sadly when it comes to having the franchise offering documentation checked out, they just don’t know were to go for that advice. I know you probably don’t believe me, but if I had a dollar for every time an unhappy franchisee who has since found us, has said “God I wish I had heard of your services before I bought my franchise”, I would be a multimillionaire!!

So, congratulations on trying to do your franchise homework by reading this article but please don’t stop here, and when you have found a franchise system that gets you excited, I hope you are smart enough to pay for the best advice you can get!

So let’s start with the burning question…Why should you buy a franchise?

1. Most people, who decide to go into business for themselves, do sadly end up going broke.
I know that’s not a very pleasant thing to tell you but it’s only too true! Experts of small business failures around the world all agree 85% of small businesses are very lucky to survive their first 5 years and most of them fail because they are either undercapitalised or just mismanaged or maybe the proprietor’s personality was simply not cut out for the rough and tumble of small business.

2. However those same business analysts and experts of small business trends will also tell you more and more of us are sick or working for someone else, tired of the commuter rat race of driving backwards and forwards on congested and busy roads to our job, which we love less and less, and as we get older and hopefully wiser we desperately want a better quality of life.

3. Franchising offers you the best of both worlds. You can be your own boss running your own small business and you also get to be part of a proven business system that means you are part of a group of like minded small business people all benefiting from collective buying power under the leadership of the franchisor management team. They can help you avoid those nasty start up mistakes and keep your business healthy. As most franchisors charge you a small fixed percentage of your sales, both of you have a strong vested interest in your long terms sales and profit growth.

4. So why is franchising misunderstood marketing tool?
Greed and ego seem to be the biggest problem. That goes for the franchisor that is keen to make a franchise sale as quickly as possible and the stupidity or perhaps naivety of a lot of potential franchisees who are far too eager to jump in and believe without checking what they have been told by unprofessional franchisors.

5. What makes franchising work?
The franchisor wants you as their hand picked franchisee to be successful, to not only earn their management fee on your rising sales but also have you as a glowing testimonial to other potential franchisees. As they say one happy franchisee will get the ball rolling and if the franchisor understands and accepts their role as your self appointed mentor, they will focus all their energies on keeping you as a key customer. You therefore will be more than happy to stay in the franchise system, and continue to pay your ongoing franchise fee.

6. Meetings. This lateral sharing when you get to meet regularly with all the other franchisees in your group to openly share key and confidential operating information with them is a very important benefit. Anyone in an independent small business will if they are honest admit it’s pretty lonely and they wish they had a mentor or someone they could open up to about their business problems and they would love to be able to compare operating costs and profit results

7. So I can tell you, buying a franchise rather than striking out on your own make all sorts of sense if you pick the right one!!!.
You will get an instant understanding and intense training of how to set up your business in the best area, as the franchisor will have either found or agreed a particular site will work for you, they will arrange and supervise a shop fit out that will not send you broke, or a van or service kit that really works.

You should be getting a great deal on all the things like cars, insurance, loans, shop equipment, stock etc which you will need to get started. After all the franchisor is negotiating all these things with their key suppliers all the time and should be getting pretty good at finding the best suppliers and best deals for you to benefit from
If you could do all this at better prices than the franchisor, the system you have picked is in big trouble already!

8. A franchisor should be able to prove to you, that you will immediately be saving money by being part of the franchise even if the franchisor is still only relatively small. They are still commercially well ahead of you as you are only at the starting blocks

9. We are great believers in the fundamentals of franchising which if done well by the franchisor from the beginning can offer you a far more secure way of you going into business and its interesting to note from detailed studies done on franchising growth in the United States over the last thirty years, that most people who do decide to buy a franchise have NOT been in their own business before, and therefore are keen to buy into a security blanket.

10. Your biggest problem, which unfortunately continues to confuse and frustrate ALL potential franchisees, is that no one in Australia knows who is franchising!
Yes I know you thought there must be some government department somewhere registering franchisors but no, there is not. It’s very much a case of “buyer beware!”

11. So how do you find out the type of franchise systems that you might be interested in?
A good place to start is read your local, regional or metro paper and read all the small business magazines, look at the net, or gee you could even call us as over the last 30 years we have accumulated over 1700 franchisors details on our database.

12. No, we don’t sell franchises; and we don’t sell lists of them either. But we do use this valuable information to give you the best possible advice on the types of franchised businesses that may suit you, without having any tied interests in giving you that guidance.

13. We will also for a modest fee tell you the franchise facts of life and try very hard to stop you giving any franchisor a blank cheque!

14. As franchise specialists we are your one stop shop. We have read and critiqued literally thousands of franchise agreements, and sadly have also read so much’ pr rubbish’, its makes me wonder how many of those franchisors we do know about can live with themselves! Yes we have saved a lot of potential franchisees from jumping into a franchise offer which they did not really understand from the outset, or what questions to ask and what was “Normal” in a franchise deal.

15. My book, ”Franchising in Australia, is there for everyone in all good book shops, or you can buy it directly from us, and it is full of practical and factual franchise information. The best possible advice I can give you is don’t fall in love with any particular franchise system without first seeking out an objective specialist third party who can give you an unbiased assessment. .

16. Did you know right now in the United States franchising accounts for over 40% of all businesses operating in that country? Big league stuff huh! In Australia we believe it about 3% so just imagine the new franchise systems which will keep coming onto the marketplace here!

17. We would love to guide you through the franchising learning curve and even if for whatever reason, that’s not your cup of tea, do some else a good turn if you hear they are looking at buying a franchise and tell them to call us.

18. Generalist Accountants and Solicitors can’t help you dig behind the gloss. It’s not the wording of the franchise contract that you have to worry about, it’s more a case of determining the franchisors understanding of what we have termed ‘the culture of caring’ and having someone look at the whole offer with experienced and very objective eyes.

Franchising will grow in Australia and will become accepted by more and more different types of industries and you should not be afraid of it as it can be a great way of getting what you want. Better buying prices, being part of a proven business system and joining a happy team of like-minded small businesses who have willingly chosen to work together and want the mutually rewarding benefits of openly sharing business operating info. The franchisor is going to be both your life and business coach!

Garry Williamson
Managing Director
The Franchise Centre
02-9844-5428
Email contact@franchisecentre.com.au
Website www.franchisecentre.com.au