by Philip Morrison

last updated 09/12/2021

Philip Morrison is principal of Franchise Accountants, a specialist accounting practice which has worked with over 250 different franchise brands throughout New Zealand.

Risk versus Reward

by Philip Morrison

last updated 09/12/2021

Philip Morrison is principal of Franchise Accountants, a specialist accounting practice which has worked with over 250 different franchise brands throughout New Zealand.

Philip Morrison has evaluated more franchises than most. Here he shares some of his experience

Whenever I tell anyone that I’m a specialist franchise accountant, I always get asked the same question: ‘What’s a good franchise to buy, then? You must know, you’ll have seen heaps.’

Well, yes, I have seen hundreds of different franchises, and I’ve seen thousands of different franchise buyers, too. And that’s why my answer is always rather unsatisfactory: 

‘It depends.’

You see, what defines a ‘good’ franchise depends as much on the individual buyer as on the franchise itself. Everyone has different skills, everyone wants different things from a business and everyone’s financial profile is unique to them. That means what works for one person may not work for another.

Benefits and drawbacks

Franchising offers a lot of potential benefits for a new business buyer. You’ll be selected for your ability to run the business; trained how to run it successfully; given proven systems to follow; benefit from group buying power and group marketing; and have ongoing support to help you maximise sales and profitability. 

But at the same time, any business – franchised or not – has risks, and you have to evaluate those, too. You also have to be aware that franchises have some specific limitations: you can’t usually change the system or the products to suit your own desires, you may have a limited marketing area and, of course, you will have to pay ongoing fees in one way or another to fund that support. 

Whether the advantages outweigh the disadvantages is something you need to weigh up with the help of an experienced professional advisor.

Unicorns don’t exist

Of course, what everybody is ideally looking for is a high reward, no-risk business. I’m sorry to tell you that, like unicorns, they don’t exist. If you want no risk, put your money in the bank or in government bonds, but be prepared to get a very low rate of return. As the old saying goes, ‘Without risk there is not, and cannot be, any reward.’

It’s therefore important that, when choosing a franchise, you have realistic expectations around risk and reward and can find a balance that you are comfortable with. As far as the risk side goes, there are two areas to consider: your own level of comfort with risk, and the risk profile of the business you are looking at.

Your appetite for risk

If you haven’t been self-employed before, moving from the ‘safe haven’ of a job to the excitement and uncertainty of owning your own business can involve a major leap of faith. It can be a time of great personal growth when you leave your comfort zone and put your trust in your own abilities. If you are buying a franchise, you are also putting your trust in the franchise system, people and process.

Buying a business is often the second-biggest financial decision you’ll make after buying a house –­ and it could be larger. So you need to ...

This article appears in full in Franchise New Zealand magazine (Year 30 Issue 4). You can read it in the digital magazine here or request a free print copy here.

Philip Morrison is principal of Franchise Accountants, a specialist accounting practice which has worked with over 250 different franchise brands throughout New Zealand.

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