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The problem with franchising

 

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According to the Franchise Council of Australia (FCA), the franchise sector in Australia is worth an impressive $144 billion per year and employs more than 460,000 people.

It’s easy to see why many decide to get into franchising. With buy in costing as little as $6,000 and the appeal of quitting a fulltime job to work for yourself, running a franchise can seem very tempting.

However Tracy Eaton, CEO of Remarkable Franchises, says that people who go into franchising with the expectation that it will be easy are likely to fail and add to the ‘churn rate’.

“The churn rate is the number of franchisees who sell up because it’s not working out as they’d hoped,” she says. “The churn rate in 2015 was between 11 and 18 per cent, depending on the industry.

“The people who fail in franchising are the ones who go in with the wrong expectations believing it won’t be hard work because they’ve bought on the premise of it being a lifestyle change and a business in a box, with ready revenue.

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“Some people think they’ll be out on the golf course more or lunching with friends regularly, which can happen but not right at the start.”

Get help

Eaton says it is important for franchisees to seek support with things they are unsure about, particularly during their first year in business.

“The first 12 months of running a franchise is hard work—learning the ropes, following the systems in place and seeking support with roles in the business that owners are not good at like administration or customer service,” she says.

“When the wheels are starting to fall off franchise owners will often try and ride it out, which can be the worst thing they can do, especially if they are among the one in six who take out a loan to buy the franchise.

“It’s the people who think they know better or don’t ask for help that end up juggling everything which often leads to their demise.”

Could you do it?

Although Eaton says franchises are a better buy than standalone businesses because there is a safety net in place, franchising is not for everyone.

“People need to find out if they are cut out for a lifestyle change and this means knowing their own strengths and weaknesses as well as having realistic expectations,” she explains.

“There are 79,000 franchise units in Australia and that figure is growing with low cost entry appealing to many people looking for a career change.

Here are the five qualities you will need to succeed:

1. Adaptable: Different franchises offer different levels of support and systems. The key to success in any franchise is your ability to be flexible and your willingness to adapt. What’s needed changes in different situations and over time. Understand your strengths and weaknesses and pinpoint where you may need help.

2. Teachable: As the saying goes, you can’t teach an old dog new tricks. You need to be able and willing to learn and grow. This includes learning strategies to work with areas you’re not strong in and better leverage your natural strengths.

3. Objective: Set realistic expectations and if you don’t know what they are talk to other franchise owners and advisors to get perspective and clarity. Don’t make emotional decisions. Base your views and decisions on sound research, facts, data and independent views.

4. Collaborative: Franchises are built on interdependent relationships and collaboration is essential. Through this there can be a greater impact and outcome for all. Success is shared.

5. Resilient: Be in it for the long haul, be prepared to work hard initially, know that it’s a journey and there will be obstacles and changes and it’s how you bounce back that counts.

Interested in franchising? Click here to register to attend the free national Franchising Unplugged seminar this November.

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