Three questions to ask before you buy a franchise
Buying a franchise takes a lot of the risk out of starting your own business, writes Patrick Weiner, a Bedshed franchisee at Nunawading. As franchisees, we not only have the benefit of a whole network of people to seek advice and assistance from, but we’re also rolling out a proven business model with a known brand.
In return, franchisees need to follow certain guidelines to maintain consistency with the broader business. But franchisees can get involved in decision making. There are more than 1,000 franchise models in Australia and they all give franchisees a different level of input into business decisions.
Here are the top three questions I recommend any prospective franchisee ask before they sign on the dotted line.
1. What decisions can franchisees make at a local level?
It sounds simple, but the first question to ask is what decisions can franchisees make on their own? Product ranges, marketing and administration decisions are usually made by head office, but do franchisees have some autonomy around decisions for their store or stores? For example, can the franchisee decide to run a spring sale in isolation to the rest of the network? Can they get involved with the community and sponsor local causes or run their own local social media accounts?
Always ask for examples so you are crystal clear on what decisions you would be able to make at a local level and how the policy works in practice.
2. Do franchisees have input into head office decisions?
The level of input franchisees have into head office decisions varies from franchise to franchise. Many franchises have some kind of advisory council made up of selected franchisees that is consulted in decision-making. At Bedshed, we have a Merchandise Advisory Council (MAC) in addition to our Franchise Advisory Council (FAC), which meets with suppliers overseas and plays an active role in product selection.
Whether or not you would want to have this level of involvement as a franchisee, it’s important to know it is or isn’t an option.
I would encourage anyone considering a particular franchise model to talk to both the franchisor and franchisees about the level of input they have, what kind of decisions they are involved in and how it works at a practical level.
3. Does the business have a plan for the future?
How involved are franchisees in this decision making process? Once you buy into a franchise, your future is tied to the future of the business. That’s why it’s vital you have a full picture of what the business will look like down the track – in one, two and five years’ time.
My advice to people thinking about buying a franchise is to ask lots of questions about the business’ future planning and how franchisees feed into this. In a retail franchise, franchisees are the ‘front line’ and have unique insights into shifting customer desires and changing market forces which is invaluable for business planning.