5 ways your franchisor can support you

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Inside Franchise Business: 5 ways your franchisor can support youStarting a new business is one of the most stressful and daunting tasks any entrepreneur can undertake, but with the help of an experienced support team, the process can be simplified.

Entering into a proven franchise system provides set structures and streamlined processes that have been established through a detailed analysis of the current market.

If you have decided a franchise opportunity is your best bet, it’s time to look at the ways your franchisor can support you.

Here’s five things to ask your franchisor about.

Territory planning

When deciding on right location or territory for your business, you might be surprised to learn that bigger is not always better.

While having too small of a territory does restrict the business’ overall sales potential, having too large of a territory can prevent the business from reaching critical mass or achieving the desired results.

“Right sizing the territories is a must for both the franchisee and franchisor to gain the most from the brand,” Peter Buckingham, managing director of Spectrum Analysis Australia said.

Franchisors should develop territories based on data collected over an extended period, either through internal research or acquired by public access, such as the Census of Population results.

This data may help to provide information relating to demographics, affluence and consumer behaviour; bettering both the franchisor and franchisee’s understanding of the local area under consideration.

“Once the franchisor has some insight into the customers, the territories can be modified to balance the demand,” Buckingham said.

Access to finance

When entering into a franchise opportunity, having access to appropriate finances is critical to your success, and something the franchisor should have information on.

In many cases, a mature franchise brand will have a strong track-record of business success, however, that isn’t to count out new to market franchise systems.

Currently in Australia, around 100 franchise brands have some form of bank accreditation, meaning that the bank has engaged in a review of the model’s expected cash flows relative to the loan application, rather than relying solely on the borrower’s real estate security.

Jason Gerhke, director of the Franchise Advisory Council said bank accreditation allows for simplified channels of lending for potential franchisees.

“In other words, it should be easier to get a loan for a mature brand that has bank accreditation than for a new brand without accreditation,” Gerhke said.

“However, if the borrower has 100 per cent (or more) real estate security to back the loan, then the borrower may still be able to access funding even if no bank accreditation exists for the brand they are buying into.”

Brand equity

When comparing a franchise opportunity to an independent business in the same industry, a franchise will generally have a stronger equity value in the community, regardless of whether the brand is a household name or not.

Franchise brands can leverage combined network resources, such as online assets, branding, location and marketing to further generate equity.

While franchise fees and set-up costs can be expensive, relative to the business under consideration, the structure and support in key areas of operation, that often go untouched can provide the opportunity for greater return on investment.

Commitment to innovation

Franchise brands are often chosen due to their set structures and history of operational success, however that doesn’t negate the need for innovation.

Consumer taste is a consistently evolving premise and the ability to quickly respond to a change in demand can be the difference between prolonged success and a slide in sales, however the size of the business can directly influence this.

The larger the network of outlets under the franchise brand, the more time consuming it will be to incorporate widespread updates.

For example, bubble-tea franchise Chatime, which has a network of over 100 stores across Australia has invested heavily in new market innovation, identifying the need to adapt to change as core to its business structure.

“The challenge for us, whilst we are the size that we are, and we are still nimble an agile as a company is how can we remain relevant?” Chatime general manager, Carlos Antonius said.

“What we’re really focused on is how we continue to innovate, whether that be through product innovation, comms, or digital, we are continually looking to innovate our business.”

A commitment to regularly address market conditions and implement new strategies to accommodate is just one way your franchisor can support you throughout your franchise journey.

Marketing

Crucial for any business, effective marketing allows new business owners to establish a purpose, offering and cement a customer base.

In a franchise system, particularly one with a national network, marketing efforts are generally performed by head office staff, with localised marketing offered via consultation with a franchisee advisory council or representative.

Effective franchise models will also integrate technology to collect and analyse data relating to specific campaigns, strategies and demographics.

With a dedicated franchise marketing team on hand to provide support to the network, new franchisees can gain an upper hand in what is traditionally a complex and crucial element of business operation.

Franchising for the future

Regardless of the industry in which you operate, it is important to perform a detailed analysis of the franchise opportunity, including the support offered by the franchisor.

While some of the support structures listed are required by law, others, such as a commitment to innovation are gestures of goodwill by the franchisor to ensure the success of you and other franchisees within the network.

Make sure that your franchisor has you best interest in mind.

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