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August 2011 global update

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Getting started in franchisingFranchising is a family affair

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franchiseFRANCHISE RECRUITMENT

Is Franchising Right For You?

Steven Frost, Franchise Consultant at Smith & Henderson, explains how to become a successful franchise owner. The first step is evaluating if franchising is right for you.

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There are many reasons why talented people are attracted to franchising. Some have always wanted to run their own business but don’t have their own original idea, while

others feel more comfortable investing in a proven system. Whatever your motivation though, franchising is not suitable for everyone. Investing in a franchise is often the biggest financial and emotional investment you’ll ever make, second only to marriage. And what can be a vehicle for helping one person to realise their dreams can result in years of regret for another.

So before you begin researching the plethora of different franchise opportunities available it pays to seriously consider if franchising is right for you. By answering some key questions you can quickly establish whether or not you’re cut out for business ownership. If you think you are, the next step is to determine if franchising, rather than independent business ownership, is the best vehicle for realising your goals.

Do You Have What it Takes to Be The Boss?Let’s not underestimate it; running your own business is tough. Those people coming out of the corporate world are often a little spoiled: when they needed to recruit a new employee they called Human Resources to provide suitable CVs; when their computer crashed, the IT department fixed it; and when they received an invoice they passed it to Accounts to handle. In contrast, as a small business owner you have to become an expert generalist – someone who can be the Marketing Director one minute and the Financial Director the next. Otherwise you won’t recruit that great employee, your computer won’t get fixed and your suppliers won’t get paid.

Do You Thrive On Achieving Results?When you run your own enterprise, there aren’t any buffers between you and the harsh realities of business: if you aren’t selling enough you soon won’t have a business, let alone a decent personal income.

Think back: do you have a strong record of actively setting, working towards and hitting your goals?

When you experience setbacks do you readily give up or do they galvanise you to work even harder and overcome the challenges, whatever it takes?

Are You Decisive? Being the CEO of your own business sounds glamorous, but brings many pressures with it, too. As the leader of your business the buck stops with you and you’ll often need to make important decisions.

Reflecting on your experience, do you have a strong track record of making the right decisions? Consider the processes you went through to make important decisions, how you communicated them to your colleagues and what the results were.

Do You Have A High Level of Self Confidence?Most of your success will depend on your ability to sell not only your business, but also yourself. Do you have a strong self-image, one that exudes confidence and will persuade others to invest their time and money with you?

Are You in Good Health?Running a business is not a 9am to 5pm job. As well as the hard work and potentially long hours, you will sacrifice job security, too. Will you be able to cope with the pressures and that lack of security?

Do You Have the Support of Your Family?The decision to start your own business and the sacrifices you’ll have to make will affect your family as you divert time and attention to your business. With every business there will be challenging times during which you’ll need their full support. Can you count on this?

Do You Have What It Takes To Be A Successful Franchisee?So you’ve established whether or not you have what it takes to run your own business. The next stage is to determine if franchising, rather than setting up an independent business, is the best vehicle for achieving the success you deserve.

FRANCHISE RECRUITMENT

As the leader of your business the buck stops with you and you’ll often need to make important decisions" "


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What Are Your Goals? Goal setting is a powerful exercise for thinking about your ideal future, and for motivating yourself to realise this vision. Where do you see yourself in five years time? What are you willing to sacrifice for turning this vision into reality?

Franchising is a vehicle for financial independence and some franchisors claim a third of their franchisees are classed as millionaires. However, will this level of success be enough for you? If your entrepreneurial hunger will only be satisfied when you create the next Google, expanding into international markets and acquiring other businesses, franchising is probably not for you.

Are You Committed to a Long Term Partnership?Franchising is often described as a business marriage because of the long term, interdependent nature of the relationship. Just as you would think carefully about your long term future with your spouse before tying the knot, investing in a franchise requires the same thought process. Are you ready to commit to signing a ten year Franchise Agreement? Unless you’re looking for a long term commitment, franchising is not for you.

Are You Capable and Willing to Make a Financial Investment in Your Future? According to the 2010 NatWest / British Franchise Association Survey, the average initial investment for setting up a franchise in the UK is £63,900. So while cheaper franchises are available, for many, becoming a franchisee requires the investment of life savings; for others, High Street banks view franchising as a comparatively low risk enterprise and are willing to lend up to 70% of the total investment. Either way, the decision to invest requires serious consideration. Are you able and willing to back yourself financially?

Are You Service Oriented?As a franchisee, you and/or your teams will be the face of the brand and set the tone for the customer experience. Successful franchisees put the customer at the heart of their business and have an unwavering commitment to exceeding their expectations each and every time.

Take a look at your past experiences. What actions did you take to put your customers first? How did you coach others to deliver an exceptional service on time and with a great attitude?

Are You Willing to Follow A System?Many people choose to invest in a franchise because there is a proven system which if followed will ensure they are successful. While the system is a major attraction for many, this can leave others feeling stifled and even suffocated. If you choose to invest in a franchise, there’s very little you can change: so if you have a burning entrepreneurial spirit and

are constantly looking to put your own mark on things you will probably be much happier and more successful on your own.

Are you capable of and willing to follow someone else’s system? Would you be comfortable relinquishing control over the products you sell, the branding and working procedures?

Are You Coachable?As a franchisee, you’ll benefit from the continued support and training of your franchisor. Will you make the most of this or will you dismiss advice and direction from the franchisor’s field staff? Is ongoing support and training something you’d welcome?

Think back to the last time you received feedback. How did you take this on board and act differently? What happened to your performance?

Your Next StepMost people do not have what it takes to be a successful business owner, and fewer still are suited to franchising. Wherever you decide to go to from here, then, whether it be to carry on your corporate career, start an independent business or invest in a franchise, let your decision be a fully informed one.

In next edition we’ll focus on choosing the best match franchise for you.

FRANCHISE RECRUITMENT


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International

Franchise Directory2011

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franchiseFRANCHISING IN AUSTRALIA


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Franchising as a concept was introduced to Australia in the early 1970s. Over the last decade, it has grown to the point where it now accounts for approximately 10% of

Australia's national Gross Domestic Product. In a country with a population of 20 million people, the sector comprises in excess of 850 different franchise systems, an estimated 64,600 franchised businesses and employs 600,000 people.

Much of this growth can be attributed to the regulation and professionalism of the franchising sector.

Regulation Virtually from the start, there was considerable debate about the need for franchising to be governed by a regulatory regime that was separate and distinct from the general regulatory environment created by the Federal Government’s Trade Practices and the State-based Fair Trading Acts.

In 1986, the Franchise Agreements Bill was introduced with a view to regulating the terms of franchise agreements. It was subsequently withdrawn after concerted pressure from both franchisors and franchisees who argued that significant protection from unfair practices was already afforded under the abovementioned legislation.

Seven years later, a voluntary Franchising Code of Practice was introduced with an initial two year trial period. Finally, in 1998, the Federal Government introduced a mandatory Franchising Code of Conduct known as the Trade Practices (Industry Codes - Franchising) Regulations 1998.

The Code deals with issues of disclosure requirements, compulsory advice, auditing of marketing funds, compulsory cooling-off periods, dispute resolution procedures, termination, transfer and releases. There is no doubt that confidence in the franchising relationship has been strengthened as a result of the Code providing certainty about what terms a franchise agreement must address and what must be disclosed.

ProfessionalismThe mandatory nature of the Code has necessitated an increased demand for lawyers, accountants and financiers who understand and specialise in franchising. Experience has shown that franchise systems which use the expertise of such specialists to ensure they remain Code-compliant significantly increase the strength and longevity of their businesses.

In striving to strengthen the reputation and success of franchising in Australia, many franchisors, franchisees and specialist service providers have become members of the Franchise Council of Australia (FCA) which was originally established in 1983 as non-profit trade association. Today, the FCA is a member of the Asia Pacific Franchise Confederation and the World Franchise

Council and represents its voluntary members which include over 600 franchise companies and professional service providers to the franchise industry.

Although not a statutory authority, the FCA provides a forum for its members to discuss emerging trends and problems in the franchise sector and gives them access to specialist legal advisors who can assist both with legislative progressions in the industry and ensuring continual compliance with the Code.

Current Trends – the future in Australia In the past year, there have been clear indications as to the future of franchising, at least in the short term. In particular, the sector has seen an increase in:

• mergers between competing franchise networks

• overseas interest in Australian franchise systems

• occupancy costs, and

• floating of franchise systems on the Australian Stock Exchange (ASX).

The costs of leasing, particularly in shopping centres, have increased dramatically in line with the robust Australian economy. Many franchisors are concerned about what effect this is having on the bottom lines of their franchisees. Now, more than ever, it is critical that franchisees and franchisors obtain specialised property advice before they begin negotiating shopping centre leases. The short term trend appears to suggest increased demand for ‘street strip’ locations in the expectation that reducing demand for shopping centre locations will drive landlords' rents down.

Despite this current concern with shopping centre leasing, the franchising sector in Australia is strong and vibrant. Furthermore, the recent trend for franchise systems to float as publicly listed companies on the ASX has helped promote and market franchising as an effective distribution model.

Domino’s Pizza floated on the ASX in late 2005 and subsequently become the fastest growing pizza franchise in Australia. Given the increasing costs of running a franchise network, a public float presents a very attractive avenue of fund raising.

Like any other publicly listed companies, franchise systems which want to succeed and thrive in the stock market need to give investors absolute confidence in the branding of their systems and their operational models. System controls are therefore critical. Reputation and market demand for a particular product or service will succeed or fail based on these factors.

Another trend we are seeing is that many franchisors are targeting younger prospective franchisees. Historically, franchisees were typically recruited from the ranks

FRANCHISING IN AUSTRALIA

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