Getting the best out of being a Franchisee

Joining a franchised network is a business decision. The required investment should generate appropriate returns but with one very important proviso. A franchise is not a passive investment. The onus is on the franchisee to maximise the ROI. This article shows how this can be achieved.

Investigate before investing

Before you invest in a franchise, you need to do your homework. Investigate the following key points:

1. Your suitability for the role of franchisee. Find out all you can about franchising before you move into this field because not everyone likes to work within a relatively rigid system.
2. Your personal interests and your ability to fund the business. The franchisor will train you but unless you have passion for the sector, your success chances will be mediocre at best. And a shortage of capital can derail any new business.
3. The business sector’s current status and future outlook. It is generally not a good idea to enter a sector that is in decline, or where price cutting is rife.
4. The stability of the franchisor and the standing of the brand in the marketplace.
5. The prevailing vibe within the network – lack of enthusiasm for the brand and what it stands for can erode its success chances.

Obtaining honest answers to these questions is far too important to rely on the network’s disclosure document or a franchisor representative’s statements alone. Undertake your own investigation. Once satisfied that everything is as it should be, you should ask recognised professionals to double-check your findings.

Be prepared to immerse yourself

Upon joining the network of your choice, you need to adopt its culture as your own. You also need to pay attention during initial training and accept the support team’s advice in all facets of setting up the business and getting it ready to trade.

Be a hands-on operator

Once the business is up and running, you need to focus on making it the best of its kind in the territory. The first few years in every new business’s life are the most critical and a franchise is no exception. Leaving its management to a salaried manager would be unwise because no matter what incentive scheme you put in place, an employee’s commitment is unlikely to match yours. Should the going get tough, an employee can move on. You don’t have this option because you have “skin in the game”.

This is probably the main reason why your franchisor has decided to expand through franchising in the first place. If the success record of salaried managers were the same as that of owner operators then there would be no incentive for franchisors to assign the business’s profits to franchisees in exchange for relatively modest fees.

Participate in the network’s activities

Trust your franchisor. You are in it together; no franchised network can hope to succeed unless the majority of its franchisees are successful. So don’t waste your time bemoaning the fact that you have to pay franchise fees. Rather, make sure that you get your money’s worth in return. Some tips follow.

Your Field Service Consultant is an expert in all aspects of the business and can really assist you. For example, he/she has access to performance figures achieved by other franchisees and can help you pinpoint problem areas. It makes sense to treat him/her as an ally.

Participate enthusiastically in national marketing drives and don’t be shy to ask for assistance with your local marketing.

Insist on receiving ongoing training for yourself and your staff.

Attend all regional and national events arranged by the franchisor. Use them to share experiences, make suggestions and build relationships with fellow franchisees. You will soon realise that together, you really can achieve more.

What’s in it for me?

Assuming that you follow these pointers, what can you reasonably expect to receive in terms of ROI? Fair question! The short answer is, “A return that will outperform any ordinary investment by a considerable margin!”

Let us explain: Because you work in the business, and subject only to cash flow constraints (which, up to a point, you control), you are entitled to pay yourself a market related salary. And because you have invested your own money into the business, the profits it generates are yours to keep. Lastly, your business is a valuable asset which you can sell at some point in the future. Not too shabby, is it now?

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