No topic draws more interest in the franchise sector than the evergreen issue of recruitment. Finding the right franchisees is one of the most challenging and costly aspects of franchising. It is a topic that can engage franchisors of all different shapes and sizes, irrespective of business or industry, and provide a source of lively debate and exchange of ideas. Fundamental to the topic is the cultural approach to recruitment on the question: Are franchises sold or granted? The difference between selling and granting depends on who is asked the question, and in what context. There are...

In an economic environment where the news seems to go from bad to worse, franchising is well-positioned to weather the storm providing that franchisors and franchisees understand how the economy will impact their respective businesses. Franchisors need to review key elements of their business model to ensure these are able to withstand the onslaught of economic volatility. Changes to these elements may include: Review recruitment procedures As unemployment is expected to rise with corporate redundancies across a range of sectors, more people will be drawn to franchising as a means of...

The process of granting franchises (or selling franchises as some refer to it) is one that can take anywhere from three months to three years. An initial inquiry from a prospective franchisee may not ultimately convert to a signed franchise agreement until an extensive process of assessment and reassessment has been completed by both parties. Well that’s at least how it should work in theory. Sometimes the assessment stage is given scant attention by the franchisee who is carried away by the emotional idea of becoming their own boss, and doesn’t fully examine what they are...

Few topics provoke greater debate in the franchise sector than the issue of churning. It is a hugely controversial issue that has the capacity to draw strong responses from both franchisors and franchisees alike, though from entirely different perspectives ranging from denial to claims it is endemic in the franchise sector. But what is churning and why is it such an emotional issue? At its worst, churning is recognised as the deliberate setting-up of a franchisee to fail so that their business can be resumed and resold by the franchisor. The reasoning behind this view is that a...

For many prospective franchisees, buying a franchise is akin to buying themselves a job. The analogy is not without its flaws, but in the main, this is frequently the approach. So just like any job where an employee would expect to receive pay increases over time, as well as opportunities for promotion and career development, why shouldn’t franchising be any different? By treating franchising as a career path, successful franchisees may be able to increase their income and wealth, as well as enjoy a rewarding and fulfilling working life. Such franchisees are intrapreneurs, or...

 The collapse of Kleenmaid is much bigger news than its relatively small size as a franchise system would suggest. First and most significantly there is the impact on an estimated 6,000 customers around the country. Many of these have paid some or the full amount up front for their appliances, and are unlikely to ever receive the appliances, or their money back. Thousands more now have warranties that are worthless, and own equipment for which spare parts are no longer available. Those customers who have paid for appliances will have designed and built kitchens or laundries in new...

 “What am I getting for my royalties?” is a question no franchisor likes to hear, and one which is usually met with a response that involves referring to the franchise agreement. When established franchisees start to question what they are getting for the royalties they pay, it may indicate a source of potential future conflict with the franchisor based on two possible scenarios: 1. The franchisee is not making money and therefore becomes fixated on reducing expenses to create profit.
2. The franchisee is making money, but of all their expenses, sees...

Converting existing employees or businesses to become franchisees can accelerate a franchise network’s growth rate, but is fraught with traps for the unwary. A conversion franchising strategy can rapidly expand a network’s footprint, but at the same time deplete its resources to service and support the extra franchisees it creates. Additionally, conflict can more readily occur when the franchise fails to meet the expectations of the converted franchisee. Although conversion franchising is commonly viewed as the changeover of an existing outlet or business from an independent...

In observing franchising in Australia and after visiting the United States, I have noticed a difference in the approach to the franchise relationship taken by the franchisors of both countries. In the main, Australian franchisors are generally more concerned about the long-time viability of the relationship after the sale, whereas their American counterparts tend to be more focussed on selling franchises rather than the after-sale relationship. Of course there are exceptions on both sides, but I feel that this key difference in approach often causes problems for US systems entering...

A recent research report of existing franchisees found that 31% joined a franchise in order to have more flexibility and balance in their lives. This finding is consistent with research conducted by the Franchise Advisory Centre last year which looked into reasons why franchisees join and subsequently leave franchise systems. The 2007 research “Why do Franchisees Come and Go” by the Franchise Advisory Centre took the form of group interviews of master franchisees and managers of a well-known national franchise chain. Participants were asked to assess what factors their...