The franchising industry has been getting some good press recently as it’s been holding up relatively well in the current climate. It’s fair to say that franchising can be a safer business option when times are tough, but success is never guaranteed, and prospective franchisees shouldn’t expect to pick a system off the shelf and put their feet up while the cash rolls in. Before jumping in, you need to consider whether franchising is the right investment for you.
Thankfully, most prospective franchisees put in some serious research hours before making the leap into franchising. Our data shows that the average franchisee spends up to 12 months researching their options before choosing a system, so by the time they sign on the dotted line they have a good idea of what to expect from the business. However, on the flip side, it’s surprising how many franchisees forget to turn that level of scrutiny on themselves before deciding that franchising is the right investment.
Good franchisers will make sure prospective franchisees tick all the right boxes in terms of skill set for their business, but spending a bit of time on an honest appraisal of your own skills and working mindset can make franchise selection easier, and prevent those that are new to franchising from butting heads with their system further down the track.
Know your working mindset
When it comes to business, there are two types of people in this world – those with salaried employee mindsets and those with the mind of an entrepreneur. Salaried employees tend to enjoy playing an executional role in business, so they suit a system with strong structures and processes, and regular close contact with their franchiser. Entrepreneurs on the other hand, prefer to be in control of their own destiny, so will get frustrated in a tight system that doesn’t offer much flexibility. Think long and hard about which of these mindsets you fit into and use that to direct your choice of system.
Risk or reward?
People with a salaried mindset generally have a lower appetite for risk. They like the comfort of a regular income – and why not. Before getting caught up in the romance of being your own boss, consider how comfortable you would be with a fluctuating income. If the answer is ‘not very’, look for a system which excels in providing a solid reward and expert guidance on the financial side of the business. Being able to run the financial side of your business can be the difference between make or break, so if this isn’t your key strength look for a system that offers stronger support.
Keep it simple
Let’s say you can live with the thought of a sporadic income. You may be happy to take a few risks, but that doesn’t mean you should risk running with a system that you don’t understand. The fact is that entrepreneurs are most likely to flourish within a simple business model. The simpler the business model, the easier it is to understand cost inputs and revenue streams, which frees you up to apply entrepreneurial skills to building your business.
Be realistic about your skills
Regardless of your background, the levels of support offered by the franchiser across all parts of the business should be a key consideration. Most people entering franchising for the first time come from a corporate environment, so it’s important for new franchisees to realise that they will go from being very experienced at managing some parts of a business, to executing or managing all parts of a business. The first 12 months are crucial, and this is the time when you will need a lot of assistance to get your skills and knowledge up to speed. Some systems offer stronger support than others, and focus their support on different areas, so spend time researching the offering and making sure it compliments your skills.
The bottom line is that it’s just as important to understand your own mindset and skills as it is to understand the offering of a franchiser. Remember that franchising is not a fail-safe industry and ultimately, it’s up to you to make your business a success.
Ian Krawitz is Head of Intelligence at 10 THOUSAND FEET and topfranchise.com.au