23/06/2015

By David Banfield, President of the Interface Financial Group


Buying a franchise is not like buying a wide screen T.V. or any other consumer item for that matter. Unfortunately many people still believe that they can literally buy a franchise ‘off of the shelf’.

What is a franchise? Basically it’s a business, usually packaged and ready to go - but that does not mean that just anyone can buy it and operate it. Most franchisors – the company selling the franchise - do not in fact sell a franchise, but rather award a franchise to a suitably well-qualified candidate.

Once you accept that there is an ‘award’ element built into the process you start to realize that not everyone is going to qualify. We look at just a few of the most common reasons why people don’t quite fit a franchisor’s requirements and, as such, don’t receive the franchise award.

Too Entrepreneurial

Franchisors like to deal with people that would describe themselves as ‘entrepreneurial’, and for good reason. The potential franchisee is going to be running their own business and, therefore, needs many of the qualities that are inherent in a true entrepreneur. There is a limit, however, as to just how entrepreneurial a person should be.

A franchise is a system - it has been written down and has proven itself as a solid concept, probably over many years. It may have already been replicated many, many times around the country - that may in fact be one of the reasons a person wishes to acquire such a franchise. Therefore, the potential franchisee needs to accept these circumstances as a given and work with them. A true entrepreneur is unlikely to be satisfied with a franchise environment. Entrepreneurs by nature are creative individuals that constantly want to re-invent the wheel and find a better way to do everything. This is not a set of circumstances that a franchisor wishes to encounter - they need someone who will accept their already proven system and work within that, notwithstanding the occasional suggestion for minor improvement. Therefore, they need to be sure that potential franchisees have an entrepreneurial outlook while at the same time have the ability to ‘follow the system’.

Undisciplined

In a typical franchise system the franchisor provides very extensive training for their franchisees. This may take place over several days or even weeks. However at some point in time the franchisee is ‘cut loose’ to go and get their new business up and running. At this point the franchisor needs to be very comfortable that that is exactly what will happen. Many new franchisees have a former life, and in many cases that life was in a corporate setting - often in a large company format. As such the individual is very much used to a structured environment with a defined hierarchy of who does what and who reports to whom. Much of this has been taken for granted by the individual.

Now as that person transitions into the life of the self-employed business owner/franchisee, that entire structure is gone. A franchisor, therefore, always carefully analyses a prospective franchisee’s outlook and personality to ensure that when they start out on their own they are suitably self-disciplined and to a great extent also self-reliant to make things happen in a positive manner and time frame.

Previous business owner

Another reason that a prospective franchisee may not be awarded a franchise is the fact that they are already engaged in a similar business. On the face of things this might be seen as an asset but, in reality, it rarely works well.

Many individuals have a side-line or hobby business. They may have full-time employment and run their ‘hobby business’ alongside their job. At some point in time the job is no longer viable and the individual decides to transform their hobby into a full-fledged business. However, recognizing that they may need some help in some areas, they turn to franchising and locate a franchise that is in the same business as their hobby. They, therefore, bring to the franchise a basic knowledge of how the business works.

As we say, on the face of it it’s a positive situation, but looking deeper we find that transitioning from a hobby into a franchise is not as simple as a re-branding exercise. Individuals who run their own business and have done so for many years often run it as it suits them. If they don’t want to make any sales calls this month, that’s Ok as they have other income to rely on. They know how to make the ‘widget’ as they have been doing it for years. Unfortunately that’s not how the franchisor makes it - so we can easily see the potential for a conflict situation. An individual thinking that their acquired knowledge of a specific product or service, acquired over many years, puts them in good standing for a franchise award are often disappointed.

If you are a serious franchise seeker, then embrace the award process that the franchisor outlines and work through it diligently, assessing not only the franchise material but also your own resources, talents and attributes. Always remember that the franchisor is assessing you as you assess them.