What does a great franchise system look like?


Beauty, it is said, lies in the eye of the beholder. And that's of course a beautiful thing from which many of us take great comfort. As we become older, wiser and more mature beholders we learn that beauty is more than simply the physical manifestations of beauty - and that inner beauty is a necessary element of a meaningful relationship. So it is with franchising. To recognise a great franchise the prospective franchisee has to look at what lies beneath its public persona.

I have had a long involvement in judging the national franchising awards. I quickly learnt that the most compelling entries were those which offered both style and substance. An attractive, eye-catching and flashy submission has an immediate impact which will ultimately count for little if it is not supported by real substance. Similarly, a submission which has real substance that is presented casually and unprofessionally is unlikely to be successful. In awards, as in the quality of the system represented, it is the package of both style and substance which is important.

Franchising comprises front of house and back of house elements. Front of house elements include the brand, the concept it represents, the get-up, the trade dress; the things the public sees and on which they make their buying decision. But prospective franchisees also have to take account of the back of house features: the underlying systems, formats, arrangements, policies which make the system and its outlets work. Prospective franchisees who fall in love with the public persona while neglecting what lies beneath may ultimately be seriously disappointed.

Of course, it makes little sense to acquire a franchise which does not excite the prospective franchisee beholder and if there is no real passion for the concept, the brand or the public face of the system, then the search should continue. But if you like what you see the courtship is just beginning.

What does a great franchise system look like? In contrast with the context in which the beauty in the eye of the beholder maxim is usually applied, an established track record is a good start. Great franchise systems exploit a viable market niche with strong and distinct branding, supported by proven systems, management, training and support.

Potential franchisees that only consider the franchise's public persona can end up seriously disappointed. Image: obogoalkeeping.com

This column has always emphasised that while franchising as a business concept is a beautiful thing, it works in a particular case only because the franchisor has delivered on the factors which explain its remarkable success. The starting point is the Disclosure Document which documents the franchisor's track record and is a guide to whether the system's beauty is only skin deep. It doesn't resolve the question of whether or not the franchise is a great franchise, but it provides some of the information on which this assessment can be made. It provides the basis for due diligence; for talking with current and past franchisees, professional advisers, family and friends - from which an informed decision can be made.

What would I be looking for in a great franchise? An established track record and critical mass (unless you are financially and emotionally prepared to trade off the early mover disadvantages against the potential advantages); an acceptable explanation of why franchises have been terminated, not renewed or bought back; a comprehensive operations manual supported by adequate training and ongoing support; confidence that the arrangement is financially viable; a compelling business plan for the ongoing development of the system and the confidence that management can deliver on it; whether there is real and effective two-way communication.

Of course, there is more, much more, but the point is clear. In franchising as in all relationships you need to look behind the pretty pictures before consummating a significant and ongoing relationship. Breaking up is hard to do and is emotionally and financially costly.

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