How to know if a franchise is right for you... by franchise buyer

EXPERT INSIGHTS

How to know if a franchise is right for you...

PRESENTED BY

BUSINESS & FRANCHISE BUYER

Featuring... 1

What's your motivation to buy a franchise? By Adam Gibson p 1-3

Mirror, mirror on the wall, which is the best franchise business of them all? By Glenn Walford p 4 - 9

Is the business lifestyle compatible with your future? By Len Ferguson p 10 - 12

Living the dream and the point most business owners miss. By Jason Cunningham p 13 - 15

Important Do's and Don'ts when buying a franchise By Greg Nathan p 16 - 18

5 things to know before you buy a franchise By Kate Groom and Peter Knight p 19 - 20

WHAT’S YOUR MOTIVATION TO BUY A FRANCHISE?

BY ADAM GIBSON

WHAT’S YOUR MOTIVATION TO BUY A FRANCHISE? NOW IS THE TIME TO MAKE SURE YOUR REASONS FOR BUYING A BUSINESS WILL STACK UP WHEN THE GOING GETS TOUGH…

major motivation being to replace your salary and “escape the boss.” And yes, I know when you are seemingly stuck in a job you don’t enjoy, working for an employer you don’t really respect, it can feel like all your problems would go away if you were making similar money by working for yourself instead of someone else. But this is not necessarily the case, and before you go ahead and make a major life decision such as buying a business, here are two important things to consider.

The most fundamental and costly mistake prospective franchisees make when shopping for a franchise is also the most common.

ONE: DO YOU TRUST THE BOSS?

It’s one that can lead to yearsof frustration and, or at worst, a business failure if left unexamined. The good news is however, there is something you can do about it.

That person you felt shackled to and somehow diminished by every week? On a deeper level, the things that irked you about him or her are to be a reflection of traits and flaws that you don’t want to recognise in yourself.

The mistake is to invest in a franchise with the

You know that boss you thought was lacking leadership, foresight and people skills?

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WHAT’S YOUR MOTIVATION TO BUY A FRANCHISE? And guess what?

when the time comes, then it can be argued that you are planning to leave your job and buy Once you start your own business, YOU are now a franchise simply to replace one form of in charge – and there is no escaping you. This servitude for another. means you are now responsible for handling the stresses, challenges and problems that sit The key here is to consider a new franchise or side by side with the rewards of leadership. business opportunity through the filter of your own value system – preferably before you make Your mindset, your fears, your belief systems a buying decision. Someone once said that the and perceived shortcomings in your personality unexamined life is not worth living, so take a – these all now have a platform to be put on moment to consider what your highest values public display, open to scrutiny and criticism by really are. your employees, your customers and yourself. MAKE IT COUNT There is opportunity for either great denial or great expansion in this – but not both. A good way to do this is to imagine that your next five to ten years of life were to be your last. Are you ready to admit you don’t have all the No second chances, no trial runs – now this the answers? Are you open, humble and willing to only time you have to make things count. grow and change with the lessons life and business throw at you? Assuming you would still have to earn a living, what’s important to you in this scenario? The alternative is to stay stuck in denial and Is it all about making money? How much do slowly and unwittingly morph into a you really need to live your ideal life vs. how bastardised version of that which you were much you could make if you were to sacrifice escaping in the first place, whereas the former other things? option creates our new franchise journey as the ultimate personal development tool, leading us Do you really need that new 4WD in the to greater levels of self worth, emotional driveway, or would you rather have the time awareness, fulfilment and happiness. Which is and freedom to take your family overseas not a feature a franchisor will advertise, but is together every year? Whilst there is no arguably the most valuable. underestimating the need for some degree of financial stability, a sense of true financial freedom can often arrive by relentlessly TWO: “ARE WE HAVING FUN YET?” stripping away all the trinkets and assumptions Once you have spent a couple of years in a new that wouldn’t really serve us if we were playing franchise, the excitement and newness of it has for keeps. worn off, and you are “neck deep” in serving customers, juggling stock, acquiring By making your franchise purchase decision new clients etc, it is natural to stop and ask based on your true financial needs and goals as yourself, “Am I enjoying this?” If your answer to opposed to your assumed ones, you are much this question isn’t likely to be a resounding yes more likely to create genuine satisfaction and happiness for yourself. Page 2

WHAT’S YOUR MOTIVATION TO BUY A FRANCHISE? How much time off from work do you need? Do you have a young family who need you as much as your business does? Or are you an empty nester who now needs something to fill in some spaces? What hobbies, interests and passions do you have outside of work that are important to you not to give up? Whilst every new business requires a certain level of commitment to get off the ground, in the end if you are living life out of balance then you are headed for stress, anxiety and eventual breakdown. Honour the fact that what is important to you keeps you feeling whole, and therefore contributes to the ultimate success of any enterprise you are involved in.

overcome obstacles and sticking points.

Will the business “feel right” for you? Everyone has a zone of genius and a set of skills that they are well suited for, and working against this dynamic rather than with it creates almost instant dissatisfaction in your day to day life. What will you be physically doing most of your working day, and does this type of work feel like “flow” to you? Whether you will come home exhausted and drained, or enlivened and happy from doing work you love every day will largely depend on the awareness you bring to this question.

The final consideration is one that you won’t often read in business books or see advertised by franchisors – and that is the idea that its important for you to feel like you are having FUN most days at work.

Does the business contribute to the greater good? Is it congruent with your concept of what you would like the world to be like? For example, a working day spent serving junk food if you are yourself a health and wellness proponent is likely to eventually result in deep levels of stress and tension.

And if you can do this whilst making money along the way in your new franchise, you may just find your new boss turns out to be the best employer you have ever had.

And in contrast, running a business that you feel has a higher purpose beyond simply making money can often provide you the resilience, purpose and energy you need to

This is about you being able to express your creative energy whilst doing something that is intrinsically satisfying to you, makes some sort of positive mark on the world, and allows you to have a laugh and a smile with your colleagues and customers on a regular basis.

ABOUT THE AUTHOR

ADAM GIBSON

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Adam Gibson is a Performance Coach for Entrepreneurs, and host of the Entrepreneurs Men’s Shed podcast on iTunes. You can find out more about working one on one with Adam here: www.emshed.com/coachingwithadam/

MIRROR, MIRROR, ON THE WALL WHICH IS THE BEST FRANCHISE OF THEM ALL?

OK, the answer to the eternal question is going to come at you early – there is no one BEST franchise! That’s right, no trophy, no badge, no top of the ladder, and no medal for the #1 franchise. At least, not the ‘best’ award you were hoping for.

This article is dedicated to helping you find the franchise(s) that absolutely fits and suits you and your dreams, rather than ‘settling’ for a business that merely meets a few more of your criteria compared to other options you’ve come across.

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MIRROR, MIRROR, ON THE WALL WHICH IS THE BEST FRANCHISE OF THEM ALL? Finding the right business can be really hard. I’m not even certain if it’s easier or harder depending on your experience level. Sometimes the unknown can allow you to do things you wouldn’t have thought possible. But there is also a considerable benefit to being informed. There are five key areas you absolutely must understand from the outset in order to have a sufficient level of information to find a franchise that fits you best, and allow you to progress through the ‘franchise for sale’ world. A world that if entered in without purpose can leave you feeling uncertain, frustrated and disillusioned, and ultimately stop you from becoming the owner of your own business.

At the very least it is helpful to decide up-front; What you don’t want to do (for work) What gets you out of bed? (excites / inspires you?) Are you a hands on, get hands dirty type of person? Do you prefer to direct rather than do? How much money do you need to live comfortably? How much money do you want? How much are you prepared and capable to invest? These questions may appear basic and straight forward, but we’ve found it’s very common for people to not give much thought to these types of questions.

This is why it’s important we discuss these areas today.

You will be overwhelmed with options Be ready, because Australia has 1,200+ franchise companies, and within these companies there are thousands of franchise opportunities for sale.

Your best approach is to identify which opportunities don’t interest you so you can easily chop out a large amount of options and reduce your search. This helps you from becoming overwhelmed. Do this before going to a franchise expo, so that you can focus your time and attention on those franchises that are of interest to you.

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MIRROR, MIRROR, ON THE WALL WHICH IS THE BEST FRANCHISE OF THEM ALL?

Leverage your experience & passion Upon understanding what broad swathes of franchise options interest you, we’d then encourage you to focus on your experience, skill sets and passions.

What jobs, and tasks within the jobs you have had, did you really enjoy, and were really good at? To highlight this point, I’ll use a personal experience from back in my Army days (which feels like a millennium ago). Whilst studying for my MBA, I did the subject of marketing and after a single lecture I realised I loved it. The concepts immediately ‘clicked’ in my mind, and out of nowhere, I found a passion for a discipline that has sent me on my related journey. Find that thing for you. Don’t be afraid or hesitant to flesh that out and zero in on it. Imagine having a business that dials in on your passion, and is underpinned by your experience and skills sets. The franchise business model is built to make that possible.

Re-sale or Greenfield business? Have you heard this term yet? If you’ve been speaking to franchises about a business, and haven’t actually heard it said yet, I can guarantee it’s top of mind for many franchises.

The distinction between the two is at the heart of the franchise business model.

A Greenfield franchise is one that is brand new, as the franchise has never operated in that location. As an example, even in the case of a franchise brand that has 300+ store locations, if they have secured a store premises in a new shopping centre that is listed as an opportunity available sale – it is often referred to as a ‘Greenfield’ site. For a buyer of a business, it’s generally considered higher risk as its brand new with no previous sales figures. Although, you do have the benefit of the brand’s broad historical performance data to determine if the concept ‘works’. A Re-sale franchise is one that has already been operating and the existing franchise owner is wanting to sell it. In some cases, the existing franchise owner can be the franchisor

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MIRROR, MIRROR, ON THE WALL WHICH IS THE BEST FRANCHISE OF THEM ALL? who has been running it as a company owned location with staff.

It can also go the other way as well, where poor sales and other circumstance could make the re-sale price less than the cost of entry into the At Franchise Buyer we have found, from our first- franchise as a Greenfield. The franchisors hand experience presenting at dozens of dilemma is sometimes that they have both refranchise expos for buyers and sellers, that the sale and Greenfield opportunities within an franchise re-sale market surprises many. It area at the same time. seems people often do not realise there is another option apart from Greenfield locations A franchisor obviously wants to grow their for sale. network and increase their own revenue in fees, consumables and so on, by adding on a new / In other words, depending on your criteria, you extra franchisee by selling a Greenfield location. don’t have to only buy a brand new, unproven Selling a re-sale for the most part does little to location (albeit with a ‘proven’ brand). You can add to the franchisors business growth other potentially buy one with existing sales than having a person depart who wanted to go, performance figures for that specific location. and a fresh, new franchisee come in. Why does knowing the difference matter and why is it important? It matters because it has a dramatic effect on the whole process and transaction for you and the franchisor. Yes, a Greenfield site is often considered higher risk (most notably by lenders depending on the brand). But, in a well proven system, that risk may be considered minimal by you. With higher risk, Greenfield can potentially be a higher reward as well. Imagine this ex: where it costs $300,000 to buy a café franchise (Greenfield) which includes fit-out, equipment, license fee, training costs, and so on. The new franchisee opens it and works hard to establish and grow that business from scratch over the first three years to show strong sales and profit. It performs so well that at the end of that first three years, the owner sells the business for $600,000 (re-sale) – double the original investment. The re-sale buyer of the franchise paid more than if it was as a Greenfield because the business now has a proven, consistent revenue stream amongst other things.

Understanding Business Finance

Business finance is completely different to your standard home loan finance. It’s common for people to be quite unprepared and unaware of what is required and what options are available to them in franchise finance.

What you need to understand, is a franchise system’s proven history of sales & performance can be of significant benefit to you in obtaining your finance. A number of lenders undertake an ‘Accreditation’ process to establish benchmarks in what % they will lend in the purchase of a number of franchise brands. For example, in a $300,000 purchase scenario, a lender may have a 50% of purchase price secured on the basis of the historical performance of the franchise brand.

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MIRROR, MIRROR, ON THE WALL WHICH IS THE BEST FRANCHISE OF THEM ALL?

This means you need to come up with$150,000 in property security or cash, as opposed to the full $300,000 as is common for the equivalent small business loan outside of franchising. Discussing this directly with varying lenders is the best approach to ensure you match the information to your own circumstances. The availability of capital across varying finance products is currently good.

Franchisors are very aware that bringing a poor operator who is a bad fit into their network, is much a threat to their business. Supporting under performing and challenging franchisee’s is an enormous resource burden for franchisors, so they work hard to choose the right people.

Franchisor & The Buyer (Franchisee) – Who makes who?

But don’t think this means if you want it, you will necessarily get it. It is commonly believed that it’s just as important who you say no to when selling a franchise, as to who you say yes to.

This is almost a case of what comes first, the chicken or the egg? The truth is, both rely equally on each other. Franchisors are very focused on growing their network by selling more

While the lure of having a ‘cashed up’ buyer, ready to go can be appealing, there are many factors beyond this that determine suitability for entry into a franchise.

franchises.

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MIRROR, MIRROR, ON THE WALL WHICH IS THE BEST... But, your search for the best franchise is really about searching for what is important to you in your life, and the way you want to live it now and into the future. More so than it is about what other people say is good for you based on any subjective measure. This should be a relief to hear, and hopefully, you don’t feel let down as a result of the hype and spin around the business model of thinking that success is 100% assured – in business it never is. The business model of franchising itself is damn good when in a well-run system. In franchising, you take an idea, develop it, enhance it, market it, and prove it makes money. Then find others The Worry of Missed Opportunity (business buyers) and sell them the vision and At Franchise Buyer we worry opportunities dream, the access to intellectual property (IP), are being missed, and good people aren’t training, support and resources, and together achieving their dream of business ownership make a profit. This great business model means and wealth creation. Primarily due to the people who may not have been able, or didn’t sheer volume and inundation of franchise want to create their own business concept from business opportunities that assault you as scratch, can buy into someone else’s. soon as you engage in a business search. If you don’t have an approach in place to In doing so, they can reduce the time and manage this, you may not get the result you experience needed to run a business in a niche wished for. that they may have had no competence at all only As the driver of the Australian economy, small business needs good people who are well-equipped, well-prepared, and especially in the case of franchising, well-matched. So wouldn’t it be much easier for you to find the franchise for you if you could confidently ask and demand to know the ‘best’ on the market? Ironically, you’d think every franchise sales person would suggest theirs IS the best on the market, as it’d be a tough sell for them if they thought otherwise! Yes, I know I’m stretching the fairy tale analogy a bit here in order to make point.

weeks prior. Even better, you can also select from a ‘buffet’ of businesses, enabling you to be very choosy on the type of things you wish to do. This is why franchising works for so many. We’re not here to hope it works for you too, we’re here to help it work for you.

ABOUT THE AUTHOR

Glenn is the Founder of Business & Franchise Buyer.

GLENN WALFORD

www.franchisebuyer.com.au

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IS THE BUSINESS LIFESTYLE COMPATIBLE WITH YOUR FUTURE? what goals the owner – when they were a buyer of that business – wanted to achieve from the very start. Managing your own expectation in anything, let alone the purchase of a business, is so crucial. What do you want? As a potential business buyer, it is important to sit back and think about what you want to achieve from buying a business. I’d like to give you some examples to illustrate this point:

BY LEN FERGUSON

Childless Couple

WITH SO MANY BUSINESSES OUT THERE CLAIMING TO BE ‘LIFESTYLE

A childless couple is currently FRIENDLY’ , WHAT DOES THAT MEAN, AND HOW DO YOU FIND THE ONE looking to purchase a business and like the idea of a café. The café THAT BEST FITS YOUR OWN IDEA OF ‘LIFESTYLE’ ? opens long hours, late nights and In my experience – after working closely with weekends. hundreds of business owners over the years in exiting their businesses– it is not uncommon for a business and its They plan to start a family over the owner to drift apart after several years. next few years and, settle into the community with the kids going to a By ‘drift apart’, I mean the business can start to feel further good school close by. So, their and further away from where the owner would ideally like considerations should be about the their role in it to be and, the role the business plays in their businesses suitability at that stage of life. It essentially becomes incompatible with their lifestyle. their life. It is interfering with family events, lifestyle goals and the owner’s overall happiness with the business become strained. Aspects like: the opening hours are not family friendly for what their family now needs; the profit level is not suitable for their lifestyle requirements; and they just don’t like what they are doing any more. The sad part is most of these problems can be avoided with a little more focus on Page 10

IS THE BUSINESS LIFESTYLE COMPATIBLE WITH YOUR FUTURE? business, so long as they have a plan for when the time comes to extend their family. This may be along the line of having welltrained management and other staff in place to ensure they achieve their lifestyle goals. Family with teenage children

A family with teenage children is looking at a business that will require the owners to travel extensively – meaning many nights away from home. What will their lifestyle be like when they have a newborn or toddlers? Will the business still be suitable, or, will it be detrimental to their lifestyle goals? In this case, the couple should think about their family goals and find a business that is suitable for what their life will look like in 3-4 years’ time, as opposed to focusing on the ‘right now’ scenario. In this case, they could still buy the café

Generally, their family and children will need a lot of time and attention as they progress though school, sport commitments etc. Owning a business that will see you away from home a lot, could have other ramifications on your family that may not be clear when in the moment of looking at a business to buy. Emotion

Emotion is one of the main challenges we see and deal with in transacting businesses.

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IS THE BUSINESS LIFESTYLE COMPATIBLE WITH YOUR FUTURE?

Taking time to discuss and plan for a business Buyers often don’t take enough time purchase and how this will affect your lifestyle considering the business and all that it entails, and I’m referring to how the business will affect going forward, is time well spent. This way you will be far better off and more likely to purchase their lifestyle in the future. They like the a business best suited to your needs now and, business and 'move’ now, and a sense of urgency (or rushing) kicks in. In some cases, this in the future. may be true for some businesses, but this is not Some good questions to ask are: the norm. Where do you see yourselves as a family in 5 years? It is important to remember that there are What is important to each other, and what literally thousands of businesses for sale within would like to see happen and not happen Australia at any time, so there will always be if a business is purchased? others to consider. What kind of money does the business need to make, and It is good to be emotional about buying a What kind of physical (time) commitment business, after all, you want to be passionate will everyone be happy with? about it if you are going to be operating it every Len Ferguson is the co-founder ABOUT THE day for the next 10 or so years. Just make sure of The Finn Group. Having AUTHOR originally established itself you are emotional about the right business that as the leading and by far the will suit you and your needs for the entire time LEN largest franchise brokerage that you own it. My strong suggestion would be FERGUSON firm in the country, The Finn to take some time and think about what your Group is continuing to expand rapidly across the marketplace. lifestyle and commitments will be in the next www.thefinngroup.com.au 5-8 years. Page 12

LIVING THE DREAM, AND THE POINT MOST BUSINESS OWNERS KEEP MISSING.

BY JASON CUNNINGHAM

LIVING THE DREAM, AND THE POINT MOST BUSINESS OWNERS KEEP MISSING. “BY BUILDING A BUSINESS THAT OTHERS WANT TO BUY, YOU’LL BY DEFAULT BUILD AN AWESOME BUSINESS YOU’LL WANT TO HANG ONTO. ” A friend and client of mine (let’s call him Macca) lives one of the greatest lives of anyone I know: skiing in France, running with the bulls, festivals, you name it. He owns a hospitality business, makes extremely good money, and works just six hours a week. The rest of the time he’s getting massages, going to the movies, or planning his next overseas trip. This guy is literally living the business owner dream. I meet Macca and a few other friends for breakfast every Friday. As I get up to leave, Macca always asks the same questions: Why do you need to go to work? Aren’t you the boss? Just take the day off!’ I tell him that I have to go. They need me. The business couldn’t possibly function as well without me. This is the trap that many owners can fall into. If we think that we’re indispensable to our business – because we’re the most knowledgeable, the most skillful, and care the most – then we’ll probably end up a slave to it. Page 13

Too many franchisees I see end up buying themselves a job, rather than a true business, because they don’t fully leverage other people’s time. To me, Macca has the perfect business. He’s not pulling beers or watching the till. His business works (extremely well) without him. People are clamouring to buy it from him, but he’s happy with his return, and his lifestyle. It’s a true business: 1) profitable, and 2) sellable because it doesn’t rely on him. Macca’s situation defines what I believe is ‘business success’: a wildly profitable entity that can operate just fine without the owner, and that others are clamouring to buy. What’s your business dream?

Most owners go into business for similar reasons: To be the boss and not answer to anyone; make more money; do what I’m great at; choose my hours. Basically, a more flexible and rewarding lifestyle, and the freedom to live life on our terms.

LIVING THE DREAM, AND THE POINT MOST BUSINESS OWNERS KEEP MISSING.

THE KEY TO BUSINESS SUCCESS

So... how’s that working out for you? The reality for most business owners I meet is polar opposite to Macca. Most don’t get the full financial and lifestyle rewards they deserve from their business. They’re working longer hours, often for less reward (and definitely for a lot more risk and stress), than when they had a nice cushy job.

Some make perfectly healthy profits, but are slaves to their business. Others have great lifestyles, but no cash to enjoy it. And the hidden killer: most businesses have their potential sale price reduced simply because the business relies too heavily on them, so it’s less attractive to a buyer.

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LIVING THE DREAM, AND THE POINT MOST BUSINESS OWNERS KEEP MISSING. If there’s one thing I’ve learned over my 20–year “Get sacked!” – Why your business is better off with you not there career of helping business owners build awesome businesses (and growing my own), it’s As the owner, you’re the single biggest critical that the key to success is building a business that others want to buy - even if you don’t plan success factor for your business. But you’re also on selling any time soon. holding it back from giving you the financial and lifestyle rewards you went into business for in the first place. Picture a business that others want to buy: it has strong cash flow, outstanding profitability, loyal customers who are fantastic to work with, Too often our business relies on us. There’s only and a team of inspired, energised and wellone reason for that: us. We think the business trained people who follow clearly defined needs us to survive; that things couldn’t processes, and a well-oiled ship that doesn’t possibly run better without us there. It’s this rely on the owner(s) to operate effectively. thinking that traps you in the business. These are also the attributes of a business that you won’t be in a hurry to sell (until you get an offer that’s too good to refuse). I say you can have it all: enjoy a dream business that’s a delight to own, and build a highly valuable business asset you can one day sell for top dollar. This is what it means to have your cake and sell it too.

But if we heed Stephen Covey’s advice in The 7 Habits of Highly Effective People, and start with the end in mind – the day we sell our business for a truckload of money – we start thinking a lot more strategically about our business. A business which doesn’t rely on the owner is a lot more attractive – and valuable – to a potential buyer. So you should aim to remove yourself from the day-to-day operations of the business; to ‘sack yourself ’.

“But I don’t want to sell my business!” I hear you cry. “I bought it to escape the rat race, not go This will create room for others to step up and back to it!” Building a valuable business is not handle most of the ‘stuff ’ that takes up so actually about the sell. much of your time. It will also free you up to focus on what you’re best at (and what is most It’s about a sell mindset; taking action now to valuable to the business). build a business that others will want to buy in the distant future (and will pay top dollar for). This will give you the choice to one day sell the business for a truckload of money… or keep doing what you’re doing, but with more profits, less stress, and lifestyle freedom.

ABOUT THE AUTHOR

JASON CUNNINGHAM

Those choices sound pretty good to me. Page 15

Jason Cunningham’s latest book, ‘Have your cake and sell it too: the 7 key ingredients of business success’ is a must for any business owner looking to get full reward for all your hard work. www.jasoncunningham.com.au

14 IMPORTANT DO’S & DON’TS WHEN BUYING A FRANCHISE BY GREG NATHAN

14 IMPORTANT DO’S & DON’TS WHEN BUYING A FRANCHISE IF YOU ARE IN THE MARKET FOR A FRANCHISE YOU WILL FIND FRANCHISORS TEND TO TAKE A VARIETY OF APPROACHES TO THE RECRUITMENT PROCESS.

A company with a popular brand, a profitable business model and happy franchisees will have a steady stream of people wanting to buy a franchise. For this reason they can afford to be choosy. Other franchise companies with less wellknown brands or new concepts will naturally attract fewer enquiries. This does not necessarily mean that their franchise offer is any less valuable. All successful franchise networks started as small, unknown entities. And getting in early can mean less competition and better returns. However there will be greater risks when dealing with a less well-established franchise concept.

tactics such as “if you don’t sign up now you are going to miss out”. Some franchisors are undercapitalised and fund their expansion through the sale of franchises. This is a dangerous and misguided approach that inevitably leads to a lowering of recruitment standards, which is not in your interests.

Once you have short-listed a franchise system of interest to you, find out the franchisor’s recruitment process. Most reputable franchisors will have a structured process and will be Franchisors that are growing rapidly will be keen to attract good quality franchisees quickly. pleased to explain the steps involved. This is However they should still be fussy about whom where you and the franchisor “suss” each other out to see if there is a good fit between your they choose. Be wary if the person you are needs and expectations and their requirements talking to seems overly desperate or tries to for a franchisee. Ideally there should be mutual manipulate you through high pressure sales enthusiasm for each other. Page 16

14 IMPORTANT DO’S & DON’TS WHEN BUYING A FRANCHISE Here’s some tips to help you through the recruitment process. DO give an accurate estimation of your financial position so the franchisor can help assess whether this is a realistic investment for you. DO NOT exaggerate how much money you have. Being short of funds is a sure way to go broke in the early stages of the business. DO give direct, factual and open answers to questions. Be yourself and say it like it is. If you are confused by a question or want to know its relevance ask for clarification. DO NOT be vague or skirt issues. The franchisor will be asking specific questions for a reason. DO complete application forms thoroughly. You will initially be judged on how thoroughly you respond. Remember also the franchisor will be keeping this form on your file if you proceed. DO NOT leave sections blank or exaggerate. What you put in the form may come back to haunt you if it is not true. DO ask how meetings or interviews will be structured. Also if you should bring anyone or anything, and who from the franchisor will be in attendance. Be prepared. DO NOT assume that you know what a meeting is going to be about or the issues that will be covered. If you are caught by surprise you may come across as clumsy or incompetent. Page 17

DO come dressed in neat casual clothes and ensure you are well groomed. Treat the meeting as an informal business meeting. The franchisor will be looking at you as a possible representative of their brand so ensure you fit the image. DO NOT come dressed like you are on holidays or overly formal. Franchisors may either think you are not taking the business opportunity seriously or that you don’t understand their brand. DO cooperate with any assessment procedures such as structured interviews, panels, profiling questionnaires or reference checks. These will help the franchisor to determine your strengths and weaknesses so they can more effectively train you if you proceed. DO NOT try to fake profiling questionnaires, hold back on giving referee information or try to make yourself out to be something you are not.

14 IMPORTANT DO’S & DON’TS WHEN BUYING A FRANCHISE

DO maintain a professional relationship with the franchisor representative (not too friendly) and tell them to back off if you feel they are pressuring you to make a decision before you have the answers to specific questions or concerns. Allow yourself time to adequately research the company and its existing franchisees. DO NOT make decisions out of a sense of obligation, fear or excitement from something you have just seen or heard. Remember this is a long-term commitment that you will have to live with long after your emotions have settled down. And the person that sells you the franchise may not be around in the future.

A reputable franchisor, regardless of size, will always be looking for people with qualities and commitment to implement its systems, look after its customers and help to build its brand. It will consequently treat the recruitment process with the care and consideration that it deserves. I encourage you to do the same. ABOUT THE AUTHOR

GREG NATHAN

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Greg Nathan is the Founder of theFranchise Relationships Institute www.franchiserelationships .com/

5 THINGS TO KNOW BEFORE YOU BUY A FRANCHISE

How much do you WANT to make?

BY PETER KNIGHT & KATE GROOM

5 THINGS TO KNOW BEFORE YOU BUY A FRANCHISE

Most people want to make more than just a basic living. They want savings for their holidays, money for Superannuation, and to set something aside for a rainy day. How much CAN you make? Think in terms of ranges of income. For instance, do established franchisees make in range $50,000-80,000 per year or more than $80,000? Do any make more than $100,000?

BUYING A FRANCHISE IS A BIG DECISION. IT WILL HAVE SIGNIFICANT FINANCIAL If it appears that your income needs can be met, CONSEQUENCES, SO IT’S IMPORTANT TO CONSIDER THE MONEY SIDE RIGHT FROM THE then it’s worth continuing your investigations. START. 2. Can You Afford It? In fact, the Franchising Code of Conduct recommend that people obtain independent advice on the financial aspects. HERE ARE 5 KEY AREAS TO CONSIDER.

There’s no point in looking too deeply into a franchise if youcan’t afford it. To work out if you have enough money, you’ll need to know the costs involved. There are 3 broad categories to consider:

1. Financial Expectations

One of the first areas to consider is whether the business can provide you with the income you need. There are 3 important questions to answer:

Set up costs, such as fit-out of premises, stock, and vehicles. If you’re buying an established business, this is the purchase price. Payments to the franchisor, such as franchise fee, training, and initial marketing fees. Professional fees, such as advice from your lawyer and franchise accountant.

These figures should be clearly laid out in the Disclosure Document together with others that This includes mortgage or rent, groceries, living may be relevant for your franchise. expenses, school fees, car, phone, and so on. How much do you NEED to make?

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5 THINGS TO KNOW BEFORE YOU BUY A FRANCHISE employ staff, you may have the potential to earn more income as there are others working with you. 5. Independent Advice — Financial Due Diligence No matter how confident you feel about your decisionto buy the franchise, it’s important to ask an accountant to look over the numbers. Not only does the Franchising Code recommend it, independent advice is vital because you’re closely involved. 3. Profit A business must make a profit if it is to be viable. This means sales revenue must exceed the costs of operation after taking into account your own wages.

There are 2 key factors you need to b aware of: Financial Due Diligence is a specific process that accountants undertake. Bear in mind, however, that not all accountants have expertise in this area. Franchising has unique characteristics that should be considered from a financial perspective. For instance, there may be restrictions on purchasing, pricing, and what you can sell.

There are two parts to consider: The costs to operate the business and The level of sales you need to cover these costs. To work out the costs, the place to start is the Disclosure and other financial information provided by the franchisor. Once you know the costs, you should calculate the level of sales you need to cover them and a decent living. Then decide if this level of sales is achievable. 4. Earnings Capacity

Different franchises have different earning capacities. This means that sometimes there are constraints on the amount you can earn. For instance, if you work on your own, the amount you can earn is limited by the hours you work: for example, as a bookkeeper, cleaner, or handyman. Alternatively, if you

When you choose your accountant, it’s best to use one who is skilled and experienced in these areas.

ABOUT THE AUTHORS

PETER KNIGHT & KATE GROOM

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www.getfranchiseready.com is an initiative of Peter Knight & Kate Groom, the founders of Smart Franchise and the Franchise Accountants Network. Peter and Kate help franchise owners get the best results they can from owning a franchise.

Published by Franchise Media Group Pty Ltd