Becoming a success in the franchising industry with Bill Lockett

Bill Lockett from Franchise Systems Group talks to Franchise Business and shares his insights in the franchising industry and how to become a successful franchisee.

Tell us about Franchise Systems Group
Franchise System is a business that helps businesses to franchise their business. We get people who come in who don’t know a lot about franchising but know very well how they run their particular business – fencing, home improvements or retail store – but they just don’t know where to start with franchising.

Our job is to take them ‘from go to whoa’ basically so they’re ready to start franchising and come to exhibitions, like Sydney Franchising & Business Expo, and sell their wares to the general public and grow their franchise system.

We helped as well to develop their marketing plan for recruiting franchisees, and assist them, as well as doing the recruitment process. Once we’ve got applicants for the franchise, we can profile them and make sure they are a good fit for that particular franchise system. So it’s really a start to finish exercise.

Franchise Systems Group are very focused in looking after the franchisees from start to finish and throughout the process
From the franchisee yes, because to an extent if we’re acting on behalf of the franchisor in the recruitment process, we have a ‘responsibility’ to make sure the franchisee doesn’t go in over their head.

So if they prepare a financial business plan based on the modelling that we’ve done in the first place then we can see whether they’re likely to succeed or not whether they understand it. We can also have a look at what their current assets and liabilities are and see if they can actually service any loans that are necessary to take up the franchise.

What would make a franchisee successful?
We got to have somebody that matches the profile of the ideal franchise for the organisation. We take a little care before we start recruiting to find out what that ideal profile is. We actually use some online profiling systems to enable us to do that.

Of course, if people don’t match the profile we point it out to them "you’re not going to be able to succeed in this business because these areas are not good for you". For instance, the likely people who, when they’re questioned on the profiling system, will answer questions would lead us to believe that their behavioural style is that they’re an independent entrepreneur whose got lots of good ideas and wants to do their own thing.

We know from the profile of that particular franchise system would look for somebody that follows the team, that follows the system, that is part of a team. So from that point of view, we know they’re not going to succeed that franchise, and we have a responsibility for recruiting those people to tell the franchisor "this person will not work within your system and you shouldn’t make them an offer".

We say to the franchisee "we know you will not likely succeed in the business we believe it’s in your best interest not to pursue the application because we don’t think it’s going to work for you". They’re actually grateful for us when we get to that stage and tell them that.

Do you have any further advice for prospective franchisees?
For franchisees is do your homework, find a business that you like but take professional advice. We do a lot of work for people who got a franchise opportunity and they bring us the numbers, they bring us the documents and we actually do a mini financial model for them as well and think about all the things they haven’t thought about – the costs of borrowing, what working capital you’re going to need. From that point of view we can actually say to them “don’t buy this business”.

I have an example, at one stage somebody wanted to spend millions of dollars on an existing franchise. I looked at the trend of sales, which was downward, I looked at the trend at the cost of goods, which was upward, I looked at the labour costs, which had been upward and there was no way I could see it resurrecting.

I did a projecting return on the investment for him, which meant over five years on average he would have had earned about 5 percent. I said to him he would be better off to put that money into a bank and get a 6 percent interest rate and he could relax and watch the footy instead of working seven days a week.

What advice would you give to franchisors?
Get an expert to help you to set it up because you don’t know what you don’t know and there are a lot of pitfalls if you try to do it yourself. Now there is a lot of information on the net and there is a lot of information around that you can download and can read and can get good advice from people like the ACCC, Franchise Council of Australia and so on.

At the end of the day, you got to have someone holding your hand through the process because what we find as advisors that people are still very much involved in running their business on a day-to-day basis. If I’m having a meeting with the franchisor and we’re talking about things – the phone always going off – “I want to order this fence”, “I want to buy this franchise” or “Manager of the store’s got a problem”, so they still can’t get themselves out of running the business on a day-to-day basis.

So we’re really standing in being their franchise manager in terms of the development process and often extend our work after we done the development process and be a quasi-franchise manager until such time that they’ve grown to the extent that they can afford to employ their own.

For more franchise advice or to contact Bill Locket, visit the Franchise Systems Group website or send Bill a question.