Brumby’s and why a good franchisee is hard to find

Former Brumby’s franchise partner and later Brumby’s national operations and marketing manager, Greg Nathan is critical of some recruitment methods employed today. Now principal of Franchise Relationships Institute , Brisbane, he describes the franchisor/franchisee relationship as “fraught”.

“It is fragile…magic when it is working well and a nightmare when it is not. As a franchisee, when I was unhappy I was an absolute pain to deal with because of my emotional involvement in the business, the feeling that it was my own blood, sweat and tears in there. If the business is not going well then there’s not only the fear of losing security, but also pride and self-esteem,” Nathan said.

In the 1970s and 1980s he said some franchisors treated a franchise as another product to be sold: “They would sell to anyone who had the money, but we have come a long way since then”.

“Today, some franchisors are trying to apply a corporate recruitment mindset: personality profiles, psychological screening, reference checks…some even use corporate recruitment agencies. But that approach is flawed because it treats the potential franchisee like an employee. A lot of the attributes of a good employee or manager are not quite the same as for a franchisee,” Nathan says.

While the 1990s razor gang chainsawed their way through middle management, hurling experienced employees from corporate Australia into self-employment, a decade later prospective franchisees are harder to find.

Franchisors are competing against each other (and the economy) for quality franchisees in a period of relatively full employment, good wages and little need to replace a secure job with even a low-risk business.

Australia’s military, once a good source of cashed-up, disciplined self-starters in their late 30s and 40s, is less a franchise recruitment ground as an increasingly high-tech force motivates its best leaders to stay in uniform.

Corporate recruitment methods, it is said, do not necessarily deliver successful franchisees, so how do franchisors find the next generation to carry on the brand?

Dr Lorelle Frazer, Professor of Marketing at Griffith Business School has surveyed franchisors for a decade. She finds they use a variety of methods of recruiting or screening.

“Some of them have really good systems for recruiting that aren’t scientific but thorough. In some of the systems they use a trial work experience for potential franchisees, which gives both parties the opportunity to really assess their suitability,” she said.

In the University’s 2004 survey of more than 850 different franchise systems, it found one of the top barriers to a franchise expanding was a perceived shortage of suitable franchisees. It also found poor recruitment practices were a key reason for franchisee failure. The survey will be repeated this year.

With franchising growing at a reported 17 percent over the past four years, it is clearly a competitive environment for franchisors seeking new recruits to expand their brand. Professor Frazer found a number of franchisee recruits were previously customers of the business who decided to join up. Sometimes franchisors select franchisees from their staff, she says.

“At the moment with very low unemployment people are not needing to find a franchise as an alternative to employment. Redundancies were good for franchising.”

While some commentators liken the franchisor/franchisee relationship to a marriage, Professor Frazer sees it as “more like a parent/child relationship”.

“The franchisor parent helps the child become more independent, but if they are too independent too soon then perhaps they shouldn’t be a franchisee.”

The industry comprised approximately 55,000 franchised outlets in 2004 with up to 500,000 total employment, a figure that includes casuals. The typical franchisee was a male, or a husband and wife team. But Professor Frazer quickly adds: “females aged 30-50 were significantly underrepresented”.

“Franchisors need to be more flexible in recruiting younger people, particularly younger women.”

A personality test may be good at predicting how to best manage someone or how they are going to communicate, but Greg Nathan says a typical franchise system has all sorts of personality types who succeed. He has developed a recruitment competencies model from his years studying the franchise system, both inside and out. It is a combination of a specially–designed in-depth interview, then a behaviour-anchored rating scale that ranks a potential franchisee across 22 areas.

“The potential franchisee who baulks at being properly and thoroughly assessed for their suitability is probably not suitable,” he says.

He says 40 percent of the performance of the business is up to the franchisee and how hard they work, the other 60 percent is due to location, the system and the brand.

From his Brisbane office Nathan and a team of consultants conduct interviews for a range of current franchisors and run the franchisee profiling software over potential candidates. They also teach franchisors to run their own recruitment programs.

“Australia probably leads the world in franchise relationships. While the US tends to have purely legal relationships between franchisors and franchisees, with businesses largely sold by lawyers, autocratic processes, even a military or adversarial approach, we don’t have that culture here,” said Nathan, who was invited to address a US franchising event on this issue recently. The most successful franchisees, Nathan said, had a passion for the business and a pride in the brand they represented.

Kerry Alderuccio agrees passion is a key ingredient. As Business Development Manager for one of Australia’s longest-serving franchise consultancies, Franchise Developments , she says franchisees need to choose an area they are passionate about.

While Franchise Developments does not act as a recruitment agency, except for clients for whom they develop systems, she says they are approached every week by people looking for suitable franchising opportunities. She says sometimes they can play matchmaker with franchisor clients and prospects. Sometimes franchisors will be only competing within their own market segment, not the whole industry. She gave the example of popular coffee franchises.

“When we interview prospective franchisees on behalf of our franchisor client, Bean Palace, they might have also spoken to Gloria Jeans , the Coffee Club and Michel’s . But this is a specialist area and not everyone is suited to it or is felt by the franchisor to be a good fit. In my experience (she’s been in the industry 16 years) people need to choose an area they are passionate about – whether that’s coffee, beauty, mobile services, liquor or entertainment. Some people might like animals and there are opportunities in pet grooming and recently we established a mobile farm franchise.”

Sometimes, Alderuccio says, a franchise requires pre-qualified applicants, such as Helen O’Grady Children’s DramaAcademy , which her company helped to develop in Perth in the 1980s and which now operates successfully in 14 countries.

“This is a very successful franchise that’s only available to qualified school teachers. Another example we recently worked on was the development of a plastic surgery franchise, but obviously this too is a franchise with very specific entry qualifications.”

She said there were still plenty of new franchise concepts being developed - the industry’s 17 percent growth since 2001 attested to that – but the principal requirement was that franchisees were willing to be trained and would follow the system. It is not about reinventing the wheel or the system, although she says good franchisors should listen to their successful franchisees who see the business at its coal face.

“Good entrepreneurs tend to be franchisors, while good franchisees are people who want to build their personal wealth through their own effort in a proven business system,” Alderuccio said.

For franchisees wanting to leverage their time and talent, there were increasing opportunities for the most successful ones to become multiple site operators within their franchise, she said. But a successful track record operating one outlet was almost always a prerequisite, unlike the USA with its thousands of outlets within a single franchise and where multiple sites can be bought from day one.

Enthusiasm is the key for 2002 national franchisee of the year, Chris Bothams, one of Australia’s most successful booksellers. His Dymock’s outlet in a suburban Perth shopping mall has earned numerous State and Federal awards for the former teacher and educational administrator.

“You have got to be enthusiastic and highly motivated…certainly I am,” said Bothams, who is now interviewing other successful franchisees as part of an MBA at Curtin University.

“In many ways it is almost an obsession. I am only interested in talking to the highly successful franchisees across all systems and the stories are fantastic. The attributes of successful franchisees are almost scarily obvious: attitude and enthusiasm – they are highly motivated, enthusiastic people,” he said.

But Bothams also finds a dichotomy between the franchisee’s drive and their need for autonomy versus the demands from franchisors that they stick strictly to the system.

“I think franchisors now are smart enough to let highly successful people continue, but clearly there are great resources among franchisees that the other side needs to tap into.”

His early findings suggest franchisors do not need to look too far for franchisees – most franchisors were once franchisees themselves, but many of today’s new franchisees are customers, friends and associates of existing franchisees.