Advisory Mar, 10 2011

Franchisee: Analyse Franchise for Success

Zeroing in on a perfect franchise concept is a not an easy task. No doubt, franchising has emerged as the best medium for aspirants to step into the entrepreneurial world but even it cannot guarantee a sure success. An adequate research needs to be carrie

By Abha Garyali
Sub Editor
Franchisee: Analyse Franchise for Success

Franchising as a business concept has really grown over the years. Contrary to only few business opportunities during the past few years, the present entrepreneurial world catering to franchise businesses engulf a wide range of opportunities. From selling jewellery to grooming dogs, the franchise arena deals in numerous lucrative business proposals. With such a wide range of opportunities it is difficult to select the right opportunity. Therefore before jumping into the franchise arena, it is of utmost importance for aspirants to do their research work properly. Zeroing on a franchise in which the entrepreneur has less interest or knowledge may ruin their business carrier before it has actually started.

Evaluating the franchise concept

There is no dearth of franchisors and franchise opportunities but opting for the right franchise is very important. Aspiring entrepreneurs can be easily dazzled with glossy franchise brochures, slick presentations and beautiful interiors. Aspirant should rather go beyond outer picture to know the real truth behind the concept and its’ success ratio. Let us have a look at what a franchisee should know and ask before taking a franchise.

Understanding the franchisor and the franchise

India may have no franchise laws but there are many franchise regulations that govern the franchisor franchisee relationship. Moreover, a franchise agreement has to be read carefully and also have to be checked by a franchise attorney of the franchisee.

Ask the Franchisor

There are four important questions that an aspiring franchisee needs to ask the franchisor. These are:

What is the focus of franchisor: A successful franchisor will always say that his focus is on his franchisees and their success. A good franchisor knows his success depends on his franchisees rather than his selling.

Why some franchisees have failed: Mostly all franchise companies may have few franchisees that are not so successful. Franchisors may say that they did not follow the system or they were not hardworking etc. However, knowing the exact reason for the failure of the franchisees will surely help new franchisees in climbing up the success ladder.

How franchise conflicts are settled: Franchise conflicts are a part and parcel of any franchise business. These cannot be avoided even if adequate steps are taken. An honest franchisor will surely brief you about the recent conflicts and would easily disclose the reasons for their occurrence and how these are resolved.

Expectations from the franchisee: Prospects should ask the franchisor the kind of skills required by their franchisees. It would always be better to know about the required skills in advance.

These four questions and their answers will definitely help in understanding the franchise concept and the franchisor in a better manner.

Ask the Franchisee

Querying from the franchisors is not just enough, as it is the hard-earned money that investors may be putting in to take up a franchise business. The next step is to get in touch with existing franchisees. Franchisors may not lie but meeting the franchisees will give you a better understanding of the company and its working. There are a few questions that you as an aspirant should ask other franchisees:

Initial challenges in starting the business: Prospective franchisee can ask the exiting franchisee about their initial challenges and experiences in setting up the franchise and kind of support and training provided by the franchisor.

Franchisor’s marketing programs impact: Franchisors always talk about their marketing and advertising campaigns at the local level to benefit their franchisees. Therefore a prospective franchisee, can ask existing franchisees if the marketing programme has really helped in increasing the customer traffic.

Finding out the financial reality: Franchisors may try to attract the investor by keeping certain expenses hidden while singing the franchise. Nail down as many financial details as possible.   Also enquire about the cost to start a unit, achieving break even, profit margin etc.

Word of caution

Beware of over enthusiastic franchisor

It is always better to steer away from franchisors that are overly enthusiastic about signing investors without hearing much about their qualifications or abilities. Good franchisors are always selective, searching for the best-qualified candidates who possess the skills and capital needed to succeed.

Beware of unprofessional franchisees

Whenever digging information from existing franchisees try to speak to successful franchisees as well as franchisees that are not doing well. Try to find out the exact reasons for these franchisees being not performing. The franchisee does not always fail because of franchisor’s ignorance. Sometimes franchisee himself is not very serious about his business.

To conclude it can be said that taking a franchise is a very delicate decision which needs to be taken only after analysing one’s own attributes, franchisor’s background as well as existing franchisee’s experiences.

Related: Unmask the hidden costs

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