While more people are taking up franchising as a way to buy a job, a communications expert is warning franchisors to think carefully about who they sell a franchise to, rather than focussing on simply selling a licence to anyone keen to buy it.
Mike Irving of Advanced Business Abilities says some franchisees lack the right personality profile and disposition to make their franchise a success, which is why there is such a high churn rate in the industry.
It’s estimated the number of franchises who sell up because it’s not working out as they hoped is between 11 and 18 per cent according to an industry survey in 2015.
“Franchisors often have the mindset that they are in the business of selling franchises, thinking that the more they sell the better off they are. However, my observation and the statistics of what’s happening in that industry indicate to me that they would be wise to take a more analytical approach to who they’re selling to; focusing more on the longevity of the enterprise rather than simply the sale of another franchise,” said Mr Irving.
“A successful franchisee is someone who is trustworthy, has high integrity and is keen to support the franchisor – they are intrapreneurial rather than entrepreneurial,” he said.
“This means they are willing to do work within the system of the business to make it a success, rather than charging off in a new direction for their own gain, which often ends in failure.”
“Successful franchisees are those who see the opportunity as a way of leveraging the established system of the franchise but will ultimately take full responsibility for growing the business.”
“Unfortunately, some franchisees can be bullish but then blame the franchisor when things don’t go as planned.”
“A successful franchise has a track record of success due to the personality and skills of the franchisor, so it would be a mistake to think their success can be replicated by someone who lacks the right kind of personality and attitude.”
There are 79,000 franchise units in Australia and that figure is growing. Nearly half a million Australians are employed directly in franchising and the annual sales turnover for the country’s entire franchising sector is estimated at $144 billion.
“Buying a franchise can be a safe path to having your own business because it is a proven system but it’s up to the franchisee to build on sales, know their competition and build relationships with customers and staff.”
Mr Irving offers the following advice for those thinking about taking on a franchise and those wanting to sell the opportunity.
- Franchising is based on conformity and uniformity, not creating your own system. The whole idea of the franchise is that the system to follow is already in place, so you are not starting from scratch. It also means that in buying into a franchise, you’re saying yes to following that system.
- Ensure the personality suits the franchise. For example, a book keeping service is suited to someone who is analytical and organised. While for a service like mowing might be good for someone who is expressive and social and can deal with customer’s day to day.
- Be supportive of the brand itself and respectful of the overall image of that organisation.
- Remember you are in business for yourself, not by yourself. A franchisee will have good communications skills; they’ll be willing to reach out for help or with questions, and to collaborate and cooperate with the main franchise organisation.
Mr Irving said success was largely attributed to the personality type of the franchisee rather than any business acumen.
“While the founders of Boost Juice and Star Car Wash may be amongst the richest in Australia, there are plenty of franchisees who go bankrupt or become involved in a legal battle to extract themselves from a franchisor.”
Research shows that half of franchisees go into a business based on their ‘gut feeling’ without seeking any legal advice. Franchises can fail more often than independent small businesses and that’s why website based support groups have been set up for angry and frustrated franchisees.
Mike Irving is a trainer, business owner and leadership performance coach and has been helping local businesses grow through soft skill development and emotional intelligence.
Mike offers unique and practical insights into communication, HR and recruitment processes. For information on Mike Irving’s workshops covering these topics visit www.advancedbusinessabilities.com