Attracting top franchisees

The Australian franchising sector continues to go from strength to strength. Currently, the sector represents $128 billion in annual turnover (approximately 14 per cent of GDP).

For many, franchising is still a dirty word or associated only with hamburgers and fries. However, the growth of majors networks such as the Boost Juice franchise , Gloria Jean’s Coffees franchise , the Healthy Habits franchise , Harvey Norman, ANZ Mortgage Solutions and the recent entry of Escape Travel (to name a few) indicate the continuing diversity and success of franchising as a business model.

Franchisors can be categorised into two broad groups. Firstly, there are those that build long-term businesses by recognising the need for both the franchisor and the franchisee to succeed. Secondly, there are those that seek to make money from selling franchises (transactional franchising) and are more focused on franchisee turnover or greenfield site growth than the value proposition to the consumer.

This is an important point as it goes directly to the heart of business sustainability and, therefore, the business’s ability to attract quality franchisees. A franchisor tends to get the franchisees they deserve. Adopt a short-term approach to franchising, and you’ll inevitably attract a particular type of franchisee. Over the past few years, it’s become increasingly challenging to locate quality franchisees with the necessary combination of capital, commitment and attitude.

Undoubtedly, one factor contributing to this challenge is the increase in the number of franchise systems from which potential franchisees can choose. This increase has meant that supply (of opportunities) has outstripped demand (by potential franchisees). Oversupply always places increased pressure on suppliers to find buyers, and this is reflected in franchisors increasingly reporting difficulty in locating quality franchisees. On the other hand, the abundant supply of franchise opportunities also creates difficulty for potential franchisees as they sift through competing offers to find the best quality franchisors.

Buying a lemon?

When prospective franchisees make initial enquiries, they look for signs that tell them whether or not the franchisor is a quality operator. The astute franchisor will prepare a range of materials that clearly demonstrates the opportunity is genuine, of lasting value, and has been developed for success over the long run.

Consequently, franchisors should be prepared to demonstrate or provide background information that speaks directly to the issues of quality and substance. If you can’t provide the following information, you should expect that high quality franchisees will dismiss your opportunity and move onto something more attractive.

Buying a shining star

There’s no prescriptive list of attributes that automatically makes a franchise system a star. There are many franchise systems in Australia that have demonstrated a sustained performance over extended periods of time.

The recruitment process

It may seem obvious, but the recruitment process is the only time a franchisor has to select the type of franchisees they want.

The implication is that the process needs to be both rigorous (so that inappropriate applicants are weeded out quickly) and enticing (so that quality franchisees remain interested and progress through the process). Therefore, the process must be well thought out and strictly followed.

A winning combination

The best franchisors are focused on identifying prospective franchisees with the appropriate combination of capital, commitment, passion and attitude to operate within the network. However, it must be a win-win relationship, and there must be sincere interest by franchisors to ensure the franchisee is well suited to the franchise system.

There is little value ‘selling’ a franchise to a prospective franchisee to later find the individual is undercapitalised or does not have an interest in the business sector.

Franchisors and franchisees would do well to read the Franchise Council of Australia is a not for profit membership organisation that is the peak body representing the franchising sector in Australia.