by Simon Lord
last updated 30/08/2011
TAKE CARE when you use a consultant
by Simon Lord
last updated 30/08/2011
Franchising is a significant contributor to the New Zealand economy and the word 'franchise' now creates expectations of success. Sadly, however, there are some people out there who use those positive expectations to take others for an unexpected, unpleasant and expensive ride.
I am not talking here about those people who turn up occasionally on Fair Go having sold dud ‘business opportunities’ - such cowboys exist in every industry and are nothing to do with genuine franchising. The bigger danger to franchisors comes from a few so-called ‘experts’ who prey upon the business community itself.
Let us say that you have a successful business and are wondering whether to take the next step to grow it or whether to settle for an easier life and a few more hours on the golf course. In the process of considering this, you meet someone who knows someone who is a franchise consultant. ‘Franchising,’ you think, ‘that’s the answer – I’ll control the business and others will grow it and do the work.’
If the franchise consultant you start talking to is any good, he will soon make you realise that there is rather more to being a franchisor than sitting back and taking the money. He will help you analyse the suitability of your business for franchising and prepare a proper feasibility study and implementation plan. But if he isn’t any good – or isn’t as honest as he might be – then you could be on the verge of losing a great deal of money and even, as has happened in at least one case, control of your business.
Unfortunately, such characters do exist, and they do a great deal of harm. I have seen several good companies – potentially great franchises – deterred through using the wrong advisors or adopting the wrong structure. I have also known them spend tens of thousands of dollars up-front for plans that are not worth the paper they are written on, and for ‘Operations Manuals’ that are a simple edit-and-replace job on a Word document. This is not a recipe for success.
The sad thing is that, unlike the Fair Go cowboys, bad advisors attract little publicity. No business person wants his or her naivety to be publicised, so the victims quietly write off their losses to experience. Their story won’t get out to warn others, and if they believe the advice they paid for is good, they might actually appoint franchisees and get some way down the track before the wheels start falling off. If that happens, it won’t just be the new franchisor who suffers – it will be the franchisees too.
If you are interested in franchising your business, then, you need to take care to ensure that you get proper professional advice. Speak to several specialist franchise consultants, not just one (there’s a list on-line at www.franchise.co.nz). An initial hour’s consultation will generally be free and will help you judge whether you can work with them and trust them to respect your confidentiality. Take up references, not just from current clients but from people they did work for 4-5 years ago - a franchise, after all, must stand the test of time. Talk to people in franchising and find out what their reputation is. Get quotes, and agree staged payments.
Finally, never pay up front for a ‘whole package’ – franchises are tailored suits, not off-the-peg. The reason why franchising has been so successful is not because everyone can do a McDonald’s but because the franchise approach is adaptable to many different business styles and needs. Some consultants only know about one model of franchising and it may not be the appropriate format for your business. A good consultant will have experience and knowledge of a range of structures to suit different companies, different industries and different stages of the business life cycle. They will consider a wide range of options with you before recommending a model that brings all the individual parts together into a workable franchise operation.
If you take care to choose the right franchise consultant, then, you will find that it will be money well spent. A good consultant will help reduce the risks and speed your success. Get it right and you’ll find franchising incredibly rewarding - in every sense. Get the wrong advisor and your nightmares could come true.
This article was first published in NZ Business magazine