“Instead of only considering single unit suitability in the initial franchisee recruitment process, franchisors should consider suitability for multiple unit ownership from the outset, and target their recruitment strategies accordingly,” Bennett says.
“Often, senior managers from a corporate background make ideal multi-unit franchisee candidates as they have the skills required for multi-unit franchise success as well as sufficient capital to establish multiple businesses.”
Bennett says franchising can provide an investment vehicle for growth and expansion, regardless of whether the franchisor has industry-specific experience or not.
He says while franchisors are beginning to focus more on multiple unit ownership for expansion, they are still taking a reactive approach.
“Most franchisors are looking within their franchise systems to offer multiple units to successful franchisees, due to a lack of suitable franchisee candidates, rather than targeting potential multiple unit owners,” Bennett says.
The risk factor
Phil Blain, principal of franchise systems at the Business Development Company, claims that buying a franchise is still 10 times less risky than starting your own business, despite the GFC dip and recruitment woes.
“Franchising is an excellent way to get into a small business because a lot of the risk of developing a business from scratch is eliminated,” Blain says.
“The key is to find the right system for you and [one] that is well set up to help its franchisees be as successful as they can be,” he says.
Blain says when deciding on a franchise, people need to ask themselves what they enjoy doing, and whether they are prepared to follow an existing system.
“We find that often people who have come from a more structured work environment, such as the armed forces or policing, do really well in franchising [because] they are used to following systems,” he says.
Blain says people should ensure they speak to as many franchisees as possible, and look at more than one franchise system.
“You should have unrestricted access to every single one of them; even speak to overseas franchisees,” he says.
“If 70% or more of the franchisees say they are reasonably happy and contented, you have probably found a very good franchise system.”
Assume nothing
McNamara believes some people enter into franchises undercapitalised, wrongfully assuming that the franchisor will pay their way.
“I think some franchisees may expect that they’re going to get their hand held a lot. My general philosophy is that it’s your business,” he says.
“I think some franchisees say, ‘I’ve got this problem – what are you going to do about it?’ And I say ‘What are you going to do about it?’”
“We’re very happy to be a sounding board and even give some guidance but at the end of the day, you’ve got to take ownership and responsibility for your own business.”
Gehrke says prospective franchisees should never rush into anything, regardless of how much or how little they are looking to invest.
“Too many times, I see people who get a rush of blood to the head and recklessly proceed without advice into a franchise and then come to me for help to sort out their problems, which almost always result from a failure to understand what they were getting themselves into,” he says.
“To overcome this, here is a simple formula: spend one hour on background research for each $1,000 to be invested in the business before committing to the investment.”
“Yes it might take some time, but it will be time well spent considering what could be lost if the business fails. Better to have a long engagement than a messy divorce.”
