Avoiding a franchisee disaster is easier than you might think, writes Kerry Anne Nelson.
I don’t envy anyone in franchising right now. Franchisees are caught in the media headlights, facing intense scrutiny around wages, operations and compliance. And franchisors are finally being called to account. The spotlight’s on them to explain the systems that have dumped franchisees in a world of hurt financially and legally, not to mention the toll this predicament is taking on their personal health, families and well-being.
Out of this adversity comes a fantastic opportunity to clean up the industry. I’ve been a franchisee, and now I work with entrepreneurs preparing to duplicate their outlets through franchising. I know first-hand that there are key things you must establish from the outset. If the unhappy players had stopped to answer these five questions, their adventures in franchise land might have ended quite differently. Franchises can deliver the opportunities, profits and lifestyle that attracted business owners in the first place.
Franchising isn’t dead – far, far from it. But the answers to these essential questions can keep the franchising dream alive and well for business owners.
Will you get support to keep operations effective and compliant?
Processes and procedures. Am I losing you? It may not be sexy to you, but managing the moving parts in business really gets my blood pumping. You have to pay attention to this bit of the franchising conversation even if it isn’t as glamorous as raking in the cash for your next Tahiti holiday. If your essential systems don’t work, nothing will. What resources do you get to manage your daily processes? Open and close? Stock control? Performance management? Customer service? These operations will consume the bulk of your waking hours as a franchisee so make sure you know how they will actually work. And please! Investigate the compliance requirements of the industry, then make sure the training and support you need is guaranteed. Don’t find yourself in the same hot water as Caltex. In 2018 The Fair Work Ombudsman’s Compliance Activity Report found that 76% of their franchise sites were non-compliant. Your first responsibility is the safety of you, your staff, your customers and your suppliers.
What exactly is the supply arrangement?
It’s essential to know what the deal with supply is. Precisely. Can you source your own stock, or are suppliers fixed? Are you protected from unexpected prices rises? Do you have to order bulk quantities? What about order processing and lead times? It would be good to know if the franchisor gets a kick back on the stock you buy, or if you have a direct account with your suppliers. In any business, cash is king, but in a franchise you may have limited control of supply pricing and processes. If you’re not confident that your suppliers will work for you, your cash may well get locked away with suppliers, or worse still … your franchisor!
Which systems do you get?
Many franchises come with proprietary systems for key operational functions. Ask the pointy questions about what you get to keep your franchise humming along. Every day. Without interruption. How does point of sale actually work? What about wages and payroll? Sales and marketing? Staff training and onboarding? Inventory control and stock ordering? Make sure the training you get in these systems will set you up for success. Then confirm that upgrades will be communicated clearly. Be absolutely certain that ongoing training will be provided, and troubleshooting will come without delay or excess cost. The last thing you need is to be held to ransom by franchise systems that leave you high and dry. It’s your business! Ask whatever you need get super confident that things will always keep running.
Who looks after your customers?
How do you know the franchise will make your customers feel like the most important person in the world? Because when it comes to your cashflow, they are! Ask the franchisor what they will do to generate and nurture leads, and find out if they pass the buck (… I mean baton!) to you when it comes to handling new customer enquiries. What processes will be followed to turn those enquiries into sales? How will repeat sales and referrals be generated? You should know what the franchise will do for you to support your customers. Despite being one of many franchisees, you are the face of your business. Keeping your customers happy is the key to getting your business off the ground. Multiplying them is the formula for financial freedom!
Who looks after your staff?
If you’re like most franchisees, you’re keen to buy in because you want a cookie cutter system to accelerate your business freedom. If you invest wisely, the franchise you buy should generate strong revenue. But your staff will be your ticket to freedom. They’re the superheroes who’ll defend you against the evils of anxiety, burnout and breakdown. Hit the franchisor up early in the piece. What will they give you for staff recruitment? Onboarding? Training? Performance management? Why would your team stick around for the long haul? Does the franchise give them a chance to advance their career? And if you need to finish up with an underperformer, how well is the process for termination laid out and supported? Without a high performing team, the franchise you buy might become the worst of scenarios: a stressful job you own. Above all else, it is vital to understand that the franchisee is legally accountable for the actions and omissions of their staff.
By Kerry Anne Nelson from Operation Verve