If you think you’d like to start a franchise unit, you’re probably focussing on the pros and cons of individual investment opportunities. But knowing how to evaluate a franchisor is just as important. We’ve listed the best franchisee tips for choosing a franchisor.
Signing up for a new franchise involves committing to a close relationship with a franchisor, so you need to be 100-percent sure you’re making the right decision. So, what makes a good franchisor? Here are the top franchisor traits you should be looking out for.
What to look for in a franchisor
1. Industry expertise
This is probably the top franchisor trait to search for. Investors usually buy into franchises because they offer a reputable brand name and lots of business support - and without industry expertise, franchisors probably won’t be able to provide either.
Setting up a franchise unit normally involves a steep learning curve for franchisees, and no investor should tackle their problems alone, especially if it’s their first time running a business. Whether you need support with your unit’s launch and development, or you want to gain a better understanding of your key demographics, an experienced franchisor should be able to help.
Ultimately, a good franchisor will not only share their expertise, but they'll also make sure their franchisees are continually learning and growing too.
As a franchisee, you should be able to trust your franchisor and work closely with them throughout your contract term.
A good way to judge their honesty in the early stages is to go through their financial projections for your unit with a fine-tooth comb. Check the data and talk to existing franchisees in the network to find out whether they were hit with unexpected costs or cash flow problems when they launched their businesses.
All good franchisors should be able to give you accurate financial figures, both for the initial investment and projected revenue. So, if they’re vague about how much you’ll need to invest, or refuse to reveal the full cost analysis, you should be wary of joining the business.
When it comes to discussing money with a franchisor, it's vital you feel you're getting the full picture.
The success of your business and your sense of job satisfaction relies on the professionalism of the franchisor and the way they conduct business. What’s more, your entire franchisor-franchisee relationship will be shaped by the extent to which you can work together.
Professionalism should run through the whole franchise network. Franchisors should be competent and polished when it comes to developing products and services, interacting with staff, customers and the media, and supporting franchisees.
If the franchisor prides themself on their professionalism, it’s likely they put a lot of effort into managing their business and providing a high-quality investment opportunity for franchisees.
Of course, sometimes it’s hard to uncover an unprofessional franchisor. A business owner might appear to be a franchising pro at first, so it’s important to be on the lookout for areas where they may have let standards slip.
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4. Willingness to offer exclusive contracts
New franchisees can expect their franchisor to grant them exclusivity in two key ways:
Firstly, a franchisor should provide exclusive rights to individual franchise territories - or have a good reason if they don’t offer this perk. They should clearly define each region and make sure it’s able to sustain a business and allow for growth. No franchisee should work hard to build up their unit only for the franchisor to open a new branch nearby and syphon off a significant percentage of their customers.
Secondly, if franchisors specify which suppliers franchisees can use, they should arrange exclusive preferential rates. Also, it’s not uncommon for franchisors to sell products and services to third parties outside of the franchise, as it allows for an additional revenue stream. But they shouldn’t be providing them for the same prices franchisees pay.
>> Read more:
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- Franchising 101: The Official Franchise Start Up Checklist (Part 2)
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5. Supportive attitude and working style
We’ve already spoken about the importance of looking out for industry expertise when choosing a franchisor, but franchise owners should also harness their experiences to provide valuable franchisee support.
A franchisor should always be contactable, ready to discuss issues and prepared to work hard to resolve them as quickly as possible. Franchisees can expect to get help with everything from finding a suitable location to launching marketing campaigns and hiring staff.
Great franchisors also make sure their investors have plenty of networking opportunities, and organise regular brand-wide events.
Franchisor support doesn’t always have to come directly from the brand owner; they might make arrangements through staff at the head office, a dedicated franchise manager or a legal representative.
This top franchisor trait won’t directly boost your success - but it should demonstrate the competency of the brand owner more generally. In other words, if the business’s existing franchisees and customers are complimentary about the franchisor, there’s a good chance they embody all the traits listed above.
Before you finish the process of choosing a franchisor, take the time to discuss the investment opportunity with other franchisees. The franchisor should be willing to put you in touch with people in the network, rather than trying to dodge the question or cherry-pick contacts for you.
Also, look at the brand’s customer reviews and testimonials. You’ll need to go further than the business’s website; browse Google and Trustpilot entries to find out whether the company has a good reputation.
Make the right decision when choosing a franchisor
The franchisor-franchisee relationship is one of the most important contributors to franchise success. Find the right franchisor and you give yourself the best possible chance of growing your business and generating a healthy profit. Choose the wrong franchisor, and you'll probably run into problems from day one.
Remember, the suitability of a franchisor comes down to more than just their expertise and dedication. You must make sure your personalities and work styles match, so you can collaborate together effectively.
For more guidance on choosing a franchisor, see our article, Franchising 101: How to Evaluate a Potential Franchisor Relationship.
Alice Tuffery, Point Franchise ©