by Simon Lord
last updated 30/03/2022
SUCCESS: what makes a quality franchise?
by Simon Lord
last updated 30/03/2022
Buying the right franchise can take the fear out of starting your own business – but how do you choose a good one? Here's what to look out for
The first issue of Franchise New Zealand in 2022 is all about celebrating success – and includes plenty of examples of franchisors and franchisees who have created the businesses and the lifestyles they wanted. Some have won Awards, some have bought their first homes, and others have found the perfect mix of work and family life. Some, like Gary and Kirsten Camoin, the newly-crowned Westpac Supreme Franchisees of the Year, have achieved all three. You can read our full report on the Awards here.
But, if you’re looking for a business opportunity, how do you go about finding a franchise that can deliver what you want? Buy a good franchise and you stand every chance of success. All the effort you put into developing and marketing your new business will be directed towards activities that really work, offering a product or service that people really want – as Gary and Kirsten have proved. But buy a franchise that isn’t so well developed and you’ll use all your energies trying to overcome the flaws; worse, your efforts might just multiply problems you can do nothing about. That’s why you need to choose your franchise carefully.
What are the differences that make one franchise successful while another one struggles? Let’s look at the ingredients that make up a quality franchise system. These can be broadly divided into seven main categories:
- The business and industry
- The franchise itself
- Establishing new franchisees
- Systems in place
- Ongoing business management
- Maximising return for franchisees
- The franchise culture
1. The business and industry
For any business to succeed, it must provide a product or service that people actually want, at a price they are willing to pay, and which delivers a profit to the business owner after all costs are taken into account. The key ingredients here are:
Proven product or service
If you are looking at any franchise, you need to be certain that the main product or service is a popular one with a real market. If the business has been operating for some time that should be quite easy to confirm. Talk to the franchisor, to franchisees and to customers. Have a look online to see what people are saying about the brand and what feedback they give about its products or services versus those of its competitors.
Successful franchises not only have a great product or service; they have a large enough market to sell it at a profit on an ongoing basis. New Zealand has a small population and if a product only appeals to a niche market, then it may not work here – even if it is successful overseas. But be aware that new niches are developing all the time: concepts such as Katsubi and Driving Miss Daisy have been made viable by changing demographics. Equally, new technologies and new legislation constantly open up more opportunities: for example, the rise of online shopping has created massive demand for Aramex and Pack & Send, while changing legislation makes PeopleCare a very interesting business option.
For a business to attract customers, it has to communicate what it stocks or what it does, and what advantages it offers compared to others in the same market: price, service, quality, convenience, range or whatever. Having a well-known brand means that the business can short-cut that communication. If you see the Pizza Hut logo, you know it stands for speed, cleanliness and a value range: if you open a new store with their name above the door, you will have a ready-made fan base. The stronger the brand, the more the franchise is worth – provided that it has the rest of the elements for success in place. A big customer base is only worth having if every sale makes a worthwhile profit. Which brings us on to …
2. The franchise itself
For a business to be successfully franchised, it must be capable of being reproduced in other locations and run by other people – the franchisees. Crucially, the level of profitability must be high enough that both the franchisor and franchisee can make a fair income from the business.
Proven business model
All of the winners in this year’s Franchise Awards have one thing in common: experience. Good franchises know what a franchisee needs to achieve in order to be successful and have proven it across multiple locations. They have target percentages that have to be met in key areas such as rent, staff costs, power bills, fuel costs, wastage and so on. They have target...
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