The Good and Bad of Franchising

The starting point, we believe, for anyone trying to get their head around how and why franchising works, is to read everything you can get your hands on before parting with your life savings! Do not believe what franchisor's advertisements say. Try to be as unemotional as possible as to what you really want from a franchise relationship. Like most things in life that look simple on the surface, franchising is a complex Pandora's Box, as often it is not the obvious stuff, you really need to understand.

Let's start with, why do businesses choose to franchise? The frank answer is they want your money as their franchisee to grow their sales/service distribution system. What type of business can be franchised? Just about anything. So what type of business makes the best franchise system? Well, that's not easy, but let's start with the reality that a franchisor is a self appointed leader, and they want you as a team player and dedicated follower to join their marketing system. Yes, you have to commit your hard earnt dollars to join that franchise system and hopefully in doing so you have bouht yourself a good insurance policy! As your start down the part as a small business person, which will not end up in disaster? Yes it is true, technically the franchisor has a strong vested interest in your long term success as one of their franchisees, so you will be safe?

Most people buying a franchise have not been in business before, however they have dreamt about doing so many times and are at a very personal crossroad in their lives, looking for a way to do so, that will minimise their risk. Let's look at this franchising decision from the franchisor's point of view, first up. You are the owner of a successful business that is sick of employing people, putting up with fickle interstate agents or perhaps given up trying to find good distributors or commissioned sales people. You are probably also frustrated by having limited capital to grow into more places across Australia, and you are sure type of business, given the opportunity to expand into these perceived new markets, would do very well.

That's when the idea of franchising enters the scene as maybe; just maybe it could provide the growth answers of both finding and then just as importantly keeping good people, who will invest their hard earned savings, up front to follow your proven marketing/sales way of doing things.

Your biggest problem as a potential franchisee, and frankly it is the same problem for a new franchisor, is making sure both parties understand exactly what this unique commercial relationship will be! We call franchising "The culture of caring". Why? Because the franchisor needs to care for the financial wellbeing of each and every franchisee they carefully select to be part of their franchise family.

So let us start the process of your understanding of franchising, at the bathroom mirror, for some serious navel gazing. If you are considering buying a franchise, here are some questions for you:

• Are you a team player?
  
• Are you passionate about the type of work you would like to do?
  
• Are you in a position emotionally and financially to make a decision within the next couple of months?
  
• How much do you expect to earn in the next year, the year after that etc?
  
• What type of things are you lousy at?
  
• What exactly do you expect the franchisor to do for you?
  
• On a scale of ten, how much of a risk taker are you?
  
• Which job from your past, did you like doing the most?
  
• Do you like the idea of selling?
  
• Where do you see yourself in 10 years time?

Garry Williamson is a popular author in franchise business. His articles appear in lots of local Australian magazines. Visit Online Trading Blog for more of his articles.