Franchisee trends

By Sarah Stowe | 29 Oct 2015 View comments

There are more ways for franchisees to ensure the right fit with a franchise system than choosing a brand and industry they are passionate about. Will the training provided suit the franchisee’s business experience? When franchisors understand the level of small business experience prospective franchisees bring to the table it dictates how franchise opportunities are marketed and how initial and ongoing training is delivered.

So put on a franchisor's hat for a moment and consider the following…

The results from the DC Strategy Research 'Prospective Franchisee Surveys' over the past two years clearly show some important trends:

Prospects coming from a corporate background represent the group with the largest growth while those with moderate business experience have indicated their willingness to stay where they are. This could largely be attributed to the economic slowdown during 2009 which resulted in more unemployment in corporate Australia and forced small business owners to tighten their belts.

More than half of prospective franchisees have no experience running a small business and this proportion is growing. The continuing lack of small business experience reinforces the need for a renewed focus on initial and ongoing training. Our research has, in fact, shown that the existence and quality of ongoing training has a material impact when franchisees have little small business experience prior to establishing the business.

Training

The key areas for a prospective franchisee to focus on are the depth of initial and ongoing training resources being provided by a franchisor. Certain franchisees are attracted to emerging systems that by their nature have less formal systems and traditionally provide more hands-on training in the early years. As a system expands interstate or beyond 10 locations or operations there should be less and less reliance on a hands-on people approach and much more systemisation, manuals, external training programs and the use of online technology. The presence of systems goes to the very core of franchising as it is built on being able to reproduce a similar result time and time again by training new people to follow a formula.

Given the steady rise in systems that are not scaling beyond five or six operators it is even more important that prospective franchisees ask questions about training, speak to existing franchisees, research the franchise online, purchase an independent franchisor report such as at www.dcsreport.com and figure out if the group is increasing its resources in this area or not.

Any franchisor serious about national expansion has to select the appropriate time to increase the investment in the initial and ongoing training. It has been made easier of late with the level of federal funding that is available through registered training organisations but this alone is not the solution. There is never a perfect moment to invest in training as it requires someone to step back at their busiest time and actually document, detail or record how the very basics of the business are working. This is working on the business but history has shown the likes of McDonald's, Boost Juice, KFC and the Body Shop have turned systems into a science.

The final comment is a consideration of the issues and opportunities that exist when a prospective franchisee does have more than four years small business experience. This experience can be in the same industry, increasingly from other franchise systems or business in general.

There are two schools of thought: firstly it is easier to train someone without a prior history in a sector as you don't have to retrain the old habits first; secondly, the prior experience can be leveraged to grow the business more easily. There is of course merit in both. Generalisations are dangerous and innovation will occur from many sources but it is worth noting in most systems when franchisee performance begins to decline people deviating from a proven formula is often a major contributing factor.

Source: DC Strategy Prospective Franchisee Research Survey (2008, 2009) (c) All Rights Reserved 2010