How should you look for the right franchise system?
What preliminary steps should be taken to check a franchise offer?
It is generally the case that in order to be able to assess how attractive a franchise offer is, it must first examined in great detail. Before each appointment with a franchisor, therefore, it is advisable to first have all information available on the franchise offer sent to you. The following are important factors which can help you to assess an offer:
Letter of Reply
Franchisors react to letters of enquiries from potential franchisees by sending them a detailed description of the franchise system or a polite refusal. Unfortunately some franchisors do not even reply. If the letter of enquiry already contains fundamental information on the candidate’s professional experience, special knowledge and experience as well as his/her professional aims and wishes, then an individual reply from the franchisor can as a rule be expected.
Standard Requirement Profile
Many experienced franchisors, in order to identify a suitable partner, draw up a standard requirement profile with specific norms as criteria. Along with the introductory material these are sent to all those who have shown interest in buying a franchise. This procedure saves all parties time and money, as it deters candidates who are definitely unsuited from making an official application. Questionnaires are frequently used to help choose one of the possible candidates. They can be supplemented with in-depth interviews, practical tests and the checking of references.
Presentation and Processing of Information
A first impression is given by the franchisor’s visual presentation and the contents of his/her information material. If this is not carried out professionally, the chances are that the franchisor will be just as casual in the transaction of the essential business. However it should be borne in mind that as far as the information contents are concerned, franchisors have good reason only to divulge their know-how one step at a time.
The business concept should be convincing and in some way original. Only offers which can show definite advantages vis-à-vis the competition stand a chance in an ever tougher competitive atmosphere.
The success of a franchising system must be based on a permanent demand. Temporary fashionable trends offer no basis for a long-term franchising agreement. Many particularly successful franchise sellers have a business concept which is targeted at a key problem or a fundamental need of a narrowly defined target group for which it has discovered a new solution.
Presentation and Processing of Know-how
If for whatever reason the franchisor has not brought out a system manual, it is likely that the know-how specific to the system has not yet been laid out in a comprehensible and practical form.
Training and Advice
An intensive period of preparation before the assumption of business, accompanied by training and advice, is a fundamental element of the franchise system.
The practical value of the franchisor’s service package should be shown by having been successfully tried out on the market already. The franchisor should be expected to have tried out the concept already with at least one pilot project lasting over a long period of time. In particular the price, quality and ability to deliver of the service and product offered must be up to market standards.
A market presence over a period of many years and a growing number of partner businesses are a measure of the competitive strength of a given franchise system. Other points by which it can be judged are its position in the market and its development in comparison to its principle competitors and the average for the branch in question. The competitiveness of newly established franchise systems on the other hand is often difficult to appraise.
Adaptation to the Market
Business success abroad is no guarantee of a repetition of that success on the home market. Before the recruitment of franchisees has begun, the system should be adapted to specific home market conditions by means of a home pilot project. To this end a Master Franchisee is often appointed, who after a successful test phase takes over the tasks of the franchisor.
Dependence on Personnel
For some businesses in the service industries the franchising system is not so much dependent for its success on the system as such as on the quality of the service rendered. Competitiveness in this case is more a question of the quality of social contact than in the elaborateness or otherwise of the system. Many consultancy firms belong to this category.
If the total number of businesses has declined from one year to the next or if individual businesses have plainly had to be abandoned, it is essential that the background to such a development is explained.