The four pillars of successful franchisesIf you are thinking of buying a franchise, there are loads of things to take into account. We have whittled them down to four key fundamentals – if these four aspects of the business can be met, then opportunity is knocking and it’s probably best you answer the door.
The brandEntrepreneur and author Seth Godin defines a brand as "the set of expectations, memories, stories and relationships that, taken together, account for a consumer’s decision to choose one product or service over another."
Brands come in all shapes and sizes – some reputable, some recognisable, some reliable, and some not so much. The brand is the holistic heart of a business and if you are going to invest in an existing successful franchise brand, you need to make sure it is strong and deserving.
Do your research. Here are some questions to ask:
- What are people saying about the brand?
- Where is it placed in the market?
- Who are its biggest competitors?
- What are the brand’s strengths and weaknesses?
- What does the brand stand for?
- How loyal are its customers?
Put yourself in the customers’ shoes; even be a customer if you can. Social media is a great place to start to understand how the brand is perceived.
The franchisor / franchisee relationshipA strong relationship between the franchisor and franchisee is crucial for franchise success. However, this relationship is complex. At the end of the day, it is a legal relationship, but it is also so much more than that – a successful relationship is founded on cooperation and interdependence.
The foundation of the relationship is the contract. Good legal advice will ensure your contract is sound, well-considered, addresses all the potential issues and provides the appropriate protection for all parties.
It is also important to establish upfront what level of support the franchisor is offering over the long term. Is training provided and what support is available if something goes wrong? Addressing these questions at the beginning will avoid frustration down the track, and, as with all relationships, communication is key.
The franchise systemThe franchise system is the business model under which the franchise operates. This includes the operational processes, the marketing, the structure of the business, how the products or services are sold, and the overall way of doing business.
One of the main reasons why the franchise model is so successful is because the franchise buyer gets the opportunity to invest in a system that is proven; however, this is does not always guarantee success. The best way to determine how sound the franchise system is, is to research the existing network – talk to other franchisees, review the history of the franchise, how it performs and consider its future.
The moneyAt the end of the day, both franchisors and franchisees are looking to profit financially from their financial investment, time and energy.
However, when it comes to financials, franchises differ from traditional business models. Franchises are typically lower-risk as their systems are usually well developed, documented, tried and proven. But like any business, it’s difficult for a franchisor to provide financial guarantees given how many factors are in play. They may be able to give an indication of the performance of other franchisees but ultimately, it is up to you to do your own comprehensive due diligence.
Buying a franchise can be a great way to get into business while enjoying some support, training and guidance without going through the process of starting up from scratch and forging your own path. For more information about buying a franchise, choosing the right franchise and the advantages of franchises, check out our collection of franchise resources.
Take your time to look at many, and identify a successful franchise opportunity before you make your move.
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