You have had enough of your fixed-income job, and are tired of working while someone else reaps the benefit of your hard labour. You figure it might be good to finally work for yourself and control your own business success and earnings potential. You have heard that buying a franchise is less risky than starting a business from scratch. Now all you want to do is throw in your job and lay your hands on a franchise.
That was how I felt when I was first considering going it alone. However, as I discovered then, buying a franchise is a big decision and it should not be taken lightly. Being your own boss is a tempting proposition, but before you make the move, you need to do some homework. As I found when I was considering a franchise opportunity a few years ago with MBE Business Service Centres, good advice and careful research will help you make the most of the opportunity. And thanks to the groundwork I did then, I remain a committed MBE franchisee today.
The good news for aspiring franchisees is that it is currently a buyer’s market – so you are spoilt for choice. There are franchises for almost any product or service imaginable; almost as soon as a trend emerges in retail or services, at least one franchise chain emerges to take advantage of it, and soon it has outlets seemingly everywhere. Further, with unemployment at record lows and consumer spending strong, fast-growing chains are now aggressively competing for good franchisees.
Once you are sure that buying into a franchise rather than starting up your own business is your preferred option, think carefully about what kind of business is best suited to your personality, your values, your interests, your lifestyle and your business skills and abilities. In my case, I chose something that fitted my personality and my interests, which was providing office services to small and medium-sized businesses – and in my view, MBE Business Service Centres office service franchise was a perfect fit.
However, before committing, you need to step back a bit. Ask yourself how much control over your business you would like to have, and how much support from the franchisor you need. Do you want a business that is driven by systems and processes – a ‘formula’ to which you must strictly adhere – and which needs to be located in high-traffic areas? Or would you rather go with a franchise that relies more on your own ability to develop relationships with customers, and where you have a key role in personally marketing the business? The ideal combination is a franchise that can best harness your strengths but also compensate in part for your weaknesses.
Remember, although you are buying a business, you are also still doing a ‘job’. Like any job, it works best when you are stimulated on a day-to-day basis. Most importantly, you have to believe in the product or service the franchise is selling. Without this passion or belief, your ability to sustain commitment and involvement in the business may soon wane. I am passionate about providing services to growing businesses, and that is why I am passionate about the MBE proposition and am able to remain motivated about what I do.
I found that one way to find a suitable franchise was by attending franchise expos. Track down a few companies that have caught your attention and speak to their representatives on the stands. Gather as much information about the franchise as you can and ask probing questions about its business, corporate values and expectations of new franchisees.
Once you have narrowed down your choice to one or two franchises, you need to undertake thorough due diligence. Since 1998, a mandatory Code of Conduct has governed the franchise sector, and it requires that franchisors meet certain standards in disclosing information to prospective franchisees. It is a good idea to get independent legal and accounting advice before you sign a franchise agreement. Try to find professional advisers who are familiar with franchising, as it is a specialised area of business ownership. It is worthwhile contacting the Franchising Council of Australia, which offers a valuable service to people considering purchasing a franchise.
You should also speak to a number of actual franchisees already part of the franchise network you are interested in buying into. I did that with a number of MBE Business Service Centres in the city where I wanted to start my business. For instance, ask how they are performing and what they think of the franchise concept and the support they get from the franchisor’s corporate head office. Talk to them about the business model and what changes have been made to the business by the franchisor in the past few years, and whether the business has developed with changing consumer tastes and new technology.
In your financial analysis of the business, you should not only measure the potential return on investment but also calculate how much value you would reasonably be able to extract from the business within four or five years through wages, profit, superannuation and the use of company vehicles, after deducting the costs of marketing, equipment and technology upgrades.
Observe the behaviour of the franchisor. Good franchisors provide a helpful checklist for potential franchisees. They offer a high level of honesty and integrity, a culture of compliance with operating standards and presentation of the network, a strong brand, effective advertising campaigns and a structure that provides clear performance results for franchisees throughout the chain.
You should also consider whether the franchise encourages ‘multi-franchising’, which is the option to own more than one store. Increasingly, many of the fast-growing chains are offering high-performing franchisees the opportunity to buy another franchise, which in MBE’s case, has worked very well.
Other useful indicators of a franchisor’s support of the network include whether or not they offer regular conferences for franchisees, and that the level of training provided is comprehensive enough to get you started. If a franchisor appears not to have much money, it is unlikely that franchisees will receive much support.
You might also want to consider buying a ‘used’ franchise. Although buying early into an emerging chain is a way to secure the best sites relatively cheaply, another way of buying a franchise is to buy an under-performing outlet in a chain that has already proved itself. It is possible that the store is under-performing merely because it is being poorly managed and not according to the franchise ‘formula’, in which case a new owner may be able to reap handsome rewards relatively early simply by implementing the franchisor’s systems.
Now is a good time to get into franchising – the economy is still strong and consumers show few signs of letting up on their spending. If you had aspirations to own your own business, buying into a franchise can certainly be a less risky option than going it alone. However, like any important life decision, doing research on which franchise is right for you is key. Above all, you want to avoid a decision that leaves you wishing you had kept your day job after all.
MBE Business Services franchise provides small and medium-sized businesses with a range of business services such as mailboxes, couriers, printing and graphic design. Zanbuni was MBE’s Franchisee of the Year for two years running and is currently preparing to buy another MBE franchise in Melbourne.
11-Jan-2006