How to choose a franchise

The decision to “enter the affiliation” is a choice with consequences that will condition the life of the affiliate-candidate for years and commit him financially and personally.

The creation of an independent Company determines a situation which if not definitive is certainly difficult to modify. It is a very different situation from a dependent job; also in case of economic crisis it is less difficult to abandon an employer than closing down a business in which one has invested one’s own time and money.
It is therefore opportune to take the necessary deliberation time , asking Consultants their different opinions.
It will also be opportune to understand the logic of the Franchisor, at the same time “opening up”, providing all information and characteristics about one’s self. Since Franchising is an absorbing relationship it would be amiss not to tell the truth. This would come out in any case, deteriorating the trust that must be at the basis of this contract.

Asking the Franchisor a lot of preliminary information

About the training system, the training of the affiliate and his collaborators, preliminary training at the beginning of the business activity, permanent training, plans and modalities, object, place and duration, distribution of costs. This is a crucial argument: the good Franchisor does good training (and vice versa) but good training makes a good franchisee.

About marketing programs. To increase the preventive knowledge of commercial policy of the network, plans connected with assortment, and price strategies. To know publicity and promotion programs, both network and local. If the contract requires a contribution for publicity from the Franchisees, the survey will be more exhaustive, also to find out if and how the affiliates participate in decisions on programs and budget management.

About the policy of purchasing materials, from furnishings to computers, from signs to uniforms, from consumable stores to stationery. Mass purchasing obviously produces scale economies. It has to be seen who benefits from this, the Franchisor, who registers a further active item on the balance sheet or the Franchisees who "will pay less" in comparison to a direct purchase.

About the Franchisor’s organizational structure. It is important to understand who you are dealing with, both in structural terms and personal terms. It is important to know who the habitual interlocutor will be, his origins and requirements. With Franchising a full-blown, very close almost-personal relationship begins and it will be useless to try and situate the interlocutors, their hierarchy and their functions as well as their personality and experiences.

About support material. The “operative manual” will be essential , which sum up in a simple way the passage of know-how from the Franchisor to the Franchisee. It will contain all the instructions on the network relating to every phase of activity. Maybe the Franchisor will choose to postpone the physical delivery of the “Holy Book” to a successive moment, after the contract has been formalized. Certainly, from the beginning the index must be obtained in order to understand “what” the Franchisor has predisposed and to be certain that the essential document exists.

Listening and meeting affiliates of the chain

It is very useful to know the opinions of those who already have this experience.
It will be useful to contact more than one and commercial areas not too dissimilar from one’s own. It will be possible to collect opinions, even contrasting ones, better if numerous, that will help to formulate one’s own judgement.
During the conversation it will be worth treating the “business profit” topic, a delicate subject but essential also to elaborate one’s economic account, mediating between data supplied by the Franchisor and those gathered by the Franchisees, who are almost colleagues.

Analyzing or having the contract analyzed by a lawyer

Better to invest (less) in a lawyer BEFORE rather than spend a lot more AFTERWARDS. And that is even more true the less capacity of autonomous evaluation one has.
And the precaution is even more necessary when the Franchisor has only just started his business or is not very well known. Whether he is talked about or judged unfavorably by his own Franchisees. In Italy the status of A.I.F. Member represents a minimum guarantee because it means passing rather severe preventive evaluation.

Elaborating a serious previsional economic and financial account

The affiliate candidate must be aware that he has to invest money and work, but also of the remuneration that he can expect. He must also estimate the financial resources necessary for the Company and relate them to his availability. The lack of means, the need for external financing and consequent financial costs can undermine effectiveness and thwart good results.
Previsional economic accounts must be based on reasonable hypotheses and real data both as regards the part supplied by the Franchisor on the stock of average results already acquired on the network and for the expense items of more direct knowledge and responsibility of the candidate/affiliate.
A proper professional Franchisor will help the candidate to formulate concrete and realistic hypotheses but the candidate/Franchisee must use the same realism, professionalism and caution.

Doing one’s own market study and office location search

By attributing the Franchisor professionalism and good faith you can take advantage of his information on the market, advice on localization and so on but the final evaluation and decision lies with the affiliate.
Because his is the unity in evaluation, his the investment and risk and the candidate will perhaps know the market better, the value of the localization and the characteristics of the potential clientele. Nobody more than the protagonist can have the right perception of the localization and market values in which he has probably been operating for years.

Careful about enthusiasm and novelty

Nothing would be done without courage and enthusiasm but rationality and realism serve to assess the risks that can (and must) be run, but being aware of them.
Therefore, knowing, assessing, facing and then deciding. Trying to read behind a smile, a face or a captivating speech or an attractive project. The (difficult) problem is assessing the basics, the real potential for development and profitability, so much more difficult to estimate as more recent and innovative the project.

Do not believe blindly in reputation

Networks, Companies have life cycles like products and people: development, maturity and then decline. The “older“ brands, well-known and consolidated, could be difficult to adapt to changes. And if it is true that large, consolidated chains give greater guarantees, it will never be an absolute guarantee. And in any case all this could have an excessive and extreme cost.

Behind the chain

From the moment he signs the contract, the affiliate must be aware that he is becoming part of a group, a more or less homogenous organization, a specific structure with its own entrepreneurial culture. Before the binding signature of the contract the Franchisee candidate must have realized he is made for a group life in general and that group in particular.
Once the contract has been signed it must be closely respected and adaptation made to the bonds imposed not only as regards the Franchisor but also the affiliated colleagues of the same network and naturally of the final consumers. It will not be necessary to think only and always of the contractual “documents” but devote oneself especially to understanding and experiencing the “group philosophy”. The dominant way of thinking, the objective of every day must be the development of one’s Company, “taking advantage of” the advice and using the assistance of the Franchisor and the reputation of the network.
In the dual position of independent entrepreneur, but also as part of a group, the affiliate must accept the assistance of the Franchisor and the information of Franchisee colleagues and in exchange pass on to the network reflections, his own experiences and innovations experimented by him. Remember that an idea developed by only one person has less impact and less “return” than the same idea, improved on, and furthermore, developed by the entire network!

Faux pas and stumbling blocks

The affiliate has two conflicting interests; the management of the direct relationship with the ”soft” Franchisor and a “strict” one with unprofessional Franchisee colleagues. Cohesion and coherence are the maximum strong points of a network, and that derives from the cooperation between Franchisor and each affiliate, and amongst all the affiliates. Continuous recriminations or excessive aggressiveness will lead to a separation which is harmful and prejudicial both for affiliates and Franchisors. Every attempt must be made to smooth out contrasts and should they turn out to be insurmountable a form of friendly separation must be sought.
All this is true for real networks. If you come across an unprofessional, dishonest franchiser or a badly conceived or badly run system it is necessary to give up as soon as possible because the damage that would be done in the future from the continuation of the relationship would be even greater. In this situation a legal Franchising expert is indispensable, even when trying to find a friendly solution or the least traumatic possible.

 

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