In the age of mobile food vans, home service products and an army of redundant employees looking to buy a job, Australia is going through a franchise boom.
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.
While the franchise market is flourishing, there are still plenty of disgruntled franchisees who have entered a legally binding franchise arrangement only to find that it didn’t work for them. The question then becomes, is it the system that didn’t work, or did the franchisee think the system would do ALL of the work and perhaps wasn’t cut out for business ownership in the first place?
An industry survey in 2015 suggested that the number of franchises who sell up because it’s not working out as they hoped is between 11 and 18 per cent.
Research also 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 such as the American based http://www.unhappyfranchisee.com/.
Whether they’re unhappy with the system simply because they want more freedom, or their business is suffering and they don’t know why, disgruntled franchisees aren’t good for the franchise. That’s why it’s important for any franchisor to check the integrity and character of a potential franchisee. This can be more revealing in terms of whether or not they’ll be successful than the skill set of the individual alone.
Who is Most Suited to be a Franchisee? Franchisors often believe that the more franchises they sell the better off they are. That kind of thinking can be short sighted and cause issues in the long run. Franchisors would be wise to take a more analytical approach and focus on the longevity of the enterprise rather than clocking up sales of another franchise. The way to do that is to ensure you only bring on individuals who are suited to the role.
The ideal franchisee is someone we would consider to be a cross between an intrapreneur and an entrepreneur. What that means is that they have similar characteristics to a traditional business owner, and a similar way of thinking about things, but are happy to do their work within a system, as opposed to creating their own system.
All too often people will buy into a franchise because they have concerns about starting their own business and think that the system of the franchise will make them successful. They’re looking at the system as a safety net and risk not taking as much responsibility for the results they do or don’t create; this is one thing that can create the disgruntled franchisee.
They’re blaming the system for not working; when the reality is they weren’t prepared to be a business owner. Successful franchisees are those who see the opportunity as a way of leveraging the established system of the franchise but will take full responsibility for growing their business.
RECRUITING ADVICE FOR FRANCHISORS
Anyone can display their best side during an interview, so I suggest you set up several hurdles for the potential franchisee to jump over. Specifically, get them to make commitments and then observe whether or not the person does what they say they are going to do. Are they honest? Ask questions to gain an understanding of their underlying attitudes; this is a valuable skill in interviewing that I recommend you practice and seek training to improve. It is very easy to make mistakes in communication, and a mistake in interviewing can allow real problem people to get in the door of your business.
In addition to a traditional style of interview, there are a number of tests and assessments you can use in order to increase the data you have to support your decision. These range from simple personality tests of 25 or 30 questions through to thorough behavioural assessments of 300 or more questions. Do a bit of research and find one that you believe to be thorough; some tests are better than others. The important thing is your understanding of what they tell you about the person.
INDICATORS TO SUGGEST SOMEONE MAY NOT MAKE A SUITABLE FRANCHISEE
During the selection process, agreements and commitments will be made by the potential franchisee. It could be to call at a specific time or attend a meeting or to review documents for a discussion.
If the potential franchisee shows up late or hasn’t done any research they said they would do, these are what I call ‘red flags’ for a potential franchisee. This person hasn’t done what they said they would do. This is an indicator that you ignore at your peril. It doesn’t tell you definitively that they are not suitable. It does show you that it’s worthwhile observing if this is a consistent behaviour. Maybe draw the process out a bit so you can see if it is normal for them. Then you can decide if that is ok with you.
Throughout the entire process, including during the interview, be an observer of the potential franchisee. Do their actions line up to the common goal which has been agreed upon within the franchise system? If not, then maybe this isn’t the right opportunity for them.
Remember an ideal franchisee will have good communication skills, be willing to reach out for help and cooperate with the main franchise organisation.
Mike Irving offers unique and practical insights into leadership, communication, HR and recruitment processes. For information on Mike Irving’s workshops covering these topics visit www.advancedbusinessabilities.com