How to select the right franchise?
Too many novices approach their franchise investment decision in the same way nonprofessionals choose their share investments or Melbourne Cup bets - with too little research or concrete information and too much emotion and reliance on tips and hearsay. The key to a successful result is to match your skills and abilities with the best business opportunity available and undertake a carefully planned investigation before signing up.
So what are the critical steps in selecting a winner for yourself?
First, assess yourself
It is critical that you are clear on why you want to buy a franchise and that you have your family's support for this decision. You also must be realistic and honest about your skills and personality because these will Impact on the type of franchise that will suit you.
If you are introverted by nature, you should probably avoid franchises that rely on retailing, selling, marketing and a high level of people interaction.There are many franchised businesses that involve servicing clients in Industry or the domestic sector where the attributes for success are attention to detail, hard work and organisational skills.
No matter what field you're considering, you must be aware of the dedication, time commitment and uncertainty that will be Involved, particularly in the first few years of the business. It is vital that you will be able to enjoy the type of work and the environment.
Consider your financial position
Your available funding will also help decide the type of franchises available to you. The investment range for a franchise varies enormously, starting in the $20,000 to $40,000 range for a cleaning or pet care service business to over a $1 million for an established gymnasium. The majority of franchises are retail-based businesses costing around $400,000. Most major banks have a specialist franchise division that can guide you on your financial capacity. Your accountant will also be able to assist you.
Do not expect to borrow the full purchase price. A bank is unlikely to lend you the entire amount (and the business would be unlikely to sustain the repayments!). Most franchised businesses are financed through a combination of savings and borrowings, typically secured against the family home and the business.
Where to begin your search
Australia offers hundreds of franchise opportunities. You can begin your search with the businesses and Franchises For Sale sections of most major Saturday web searches starting with dedicated sites such as the www.youbetheboss.com.au, www.franchisebusiness.com.au and www. seekcommercial.com.au, the Franchise Council of Australia (FCA) site www.franchise.org.com, au, regular franchising and business expos conducted in capital cities and specialist franchising publications such as Business franchise. Using these resources, you should be able to draw up a short list of potential businesses matching your personal and financial profiles for further research and due diligence.
Does the franchise measure up?
It is common for first-time franchisee candidates to focus their due diligence on a financial assessment of the franchise. While this is certainly important, don't overlook the ‘human’ elements of the business. You should also be satisfied with the culture of the franchise. Is the franchisor selling the franchise rather than carefully selecting a franchisee? The quality and completeness of the franchise documentation is one important sign of the franchisor's commitment and professionalism.
In talking to the franchisor, you should be assessing its management and marketing abilities. How organised does the Head Office appear? How helpful and open are the franchise personnel and do you have a rapport with them? Your capacity to work with the franchisor's staff should be part of your assessment.
Talk to franchisees
In evaluating a franchise, speak to a number of franchisees, not just one or two. This is one of the best methods for learning about a franchise. Franchisees have previously been in your position and will usually be willing to talk about their experiences in starting up a franchise. You should ask about the hours of work, likely financial returns, their relationship with the franchisor, critical location factors and their overall experience. Are they satisfied with their overall relationship? Would they do it again?
Explore whether the franchisor is providing the franchisee support and resources it is promoting. The backup provided by most leading franchisors includes operations manuals, training programs, field support and marketing programs.
Location assessment
Your assessment of any proposed location unless you are looking at a mobile business, is as important as your assessment of the franchise. The subject deserves a discussion in its own right Critical location factors include site visibility, accessibility, parking, traffic flows and patterns, trading patterns and levels of neighbouring tenants, lease term and condition. Advice can be sought from retail site specialists and leasing lawyers.
Before the final decision
You might be satisfied with your groundwork and have narrowed your choices - but you are not ready to buy. Although you are enthusiastic and confident about your short list of franchises, you must now establish how the proposed business is likely to succeed. At this point you need to prepare a detailed business plan for your proposed venture to identify how it will work for you.
A business plan will provide clarity to yourself, the franchisor and your banker. This is where you will see how the venture is likely to stack up for you financially.
The topic of business plans is extensive (helpful guidance is available from the websites of most major banks and government small business offices, or the writer can be contacted for a guide) and will typically address your self-assessment, financial forecasts, funding plans, labour schedules, marketing initiatives and a location assessment unless you are looking at a mobile business.
Thorough homework is the key to selecting a winning franchise for yourself - and if you have some reservations, it is probably not for you. Success usually comes when preparation meets opportunity.
This article appears courtesy of Franchise Developments .
11.01.2008
FCA Member
PwC (PricewaterhouseCoopers) News
What is the best way to grow your business?
14/03/2012 - Growing your business is exciting, according to PwC (PricewaterhouseCoopers). ...
Franchising outperforming says latest industry report
16/09/2009 - According to the first PricewaterhouseCoopers Franchise Sector ...
Pros and Cons of greenfield opportunities
24/04/2009 - Developing a greenfield site or territory is an opportunity ...
How to play and win
7/02/2009 - A good franchisor and franchisee relationship is like a successful ...
WRAPPED TO BE IN BUSINESS
24/06/2008 - Young and enthusiastic Trios franchisee Taylan Kaman shares ...
Team development services from Franchise Developments Management Consulting
24/04/2008 - Franchise Developments Management Consulting is one of the leaders ...
Contact PwC (PricewaterhouseCoopers)
2 Southbank Boulevard
Southbank
VIC 3006
Tel: 1300 393 758
Fax: 03 8613 2133
