Franchise-Guide

How should you look for the right franchise system?

What exclusion criteria are there in franchising?


Before people interested in becoming a franchisee start serious discussions with a franchisor, they should first check whether they are really suited to becoming an independent business person within the framework of a franchise agreement. Possible exclusion criteria might arise from taking the following into consideration:

Private Life
Wrong decisions made in business can have far-reaching effects on the business founder and his family, which may possibly go way beyond simply the loss of savings. Building up a new business requires 100% commitment with the family, sport and hobbies often having to take a back seat. A 60/70-hour week is the norm rather than the exception with the difficult building-up phase lasting months and sometimes years. The potential businessman must be aware of the private sacrifices and dangers as far as his family life is concerned.

State of Health
Founding a business as an independent business person makes great demands both psychically and physically on the person involved. As the management of the business over the first years depends for the most part on the franchisee as an independent business person, chronic illnesses or proneness to certain illnesses should be taken into consideration.

Economic Security
Despite the fact that the franchisees’ economic freedom is to a certain extent limited they are independent business people and subject, therefore, to certain laws and duties. Whereas an employee can count on certain protection rights for himself and his family with respect to his employer and the State, a person founding an independent business often finds himself fighting for the economic survival. Compared with the foundation of classic company forms the probability of a failure with franchising is considerably lower. Here too, though, there is no guarantee of success even with a well-tried and tested franchise system.

Entrepreneurial Dependence
Whilst the decision to join a successful franchise system considerably reduces the economic risks of founding a company, it also involves considerable restrictions concerning the freedom to make decisions. By deciding to join a franchise system the independent entrepreneur entrusts himself to a concept which must be strictly kept to. As a franchisee he works in the name and under the logo of the franchise system with the customers being able to expect the same services and products wherever they go. Usually licence fees must be paid to the franchisor throughout the whole of the contractual period as well as in the case of an extension. When the contractual period ends it is possible under certain circumstances for the franchisor to end the cooperation, even if this should not be the wish of the franchisee, thus preventing him from carrying on with his business.

Self-Realisation
The franchising philosophy is not suitable for people who wish to fight alone and be completely free to make all decisions. People wishing to start their own business and who possess a considerable amount of business creativity should also choose the path of total independence as experience has shown that within a very short period of time such people feel that franchising systems prevent them from realizing their true entrepreneurial potential. Although franchisees have considerably more scope for individuality, independence and autonomy than, for example, a branch manager, they find themselves nudging the limits of the system again and again. A very important question, which a potential franchisee must ask himself is whether he wishes and is able to indefinitely put up with the franchisor’s intervention and supervision.

Ability to Work in a Team
As a member of a franchise system the willingness and ability to work within a team is particularly important. A single franchisee can cause a system considerable damage if he draws attention to himself by constantly criticising other franchisees or the franchisor himself. Whilst specialist knowledge can for the most part be gained from intensive training courses, the social conduct of a franchisee can only be changed to a very limited extent and involves a great deal of time and effort.

Professional Illusions
Whilst it must basically be recommended that a new business be built up on the basis of specialist abilities, personal contacts and professional experience already gained, franchisors rarely expect franchisees to have special knowledge of a branch. Some potential franchisees deliberately choose the opportunities offered by franchisors to break away from the monotony of their chosen profession and to start afresh in a completely new area. There is, however, the danger that the franchisee’s expectations have little to do with the reality and that he is forced to accept after only a few months that he lacks the necessary know-how or interest. At this point he has already invested time and money into the project and has entered into a long-term agreement. For this reason every potential franchisee should examine the new business area as intensively as possible before concluding a contract to be able to reach a well-founded long-term decision.

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