A new study of 6,800 Australian franchisees has found that conflict arising between franchisees and their franchisors is inevitable and confirms that communication at all levels remains a crucial pathway for franchise business success.
The study was conducted by a team of psychologists at the Franchise Relationships Institute (FRI) and gathers data from more than 60 different franchise systems. According to FRI Managing Director Greg Nathan an average of 19% of franchisees in a franchise system at any one time will feel like challenging their franchisor about aspects of the franchise relationship they are unhappy about.
“This statistic is surprisingly consistent over time between franchise systems, ranging across all industries and even across different countries,” Mr Nathan said.
“Despite the best efforts of business advisors and politicians to encourage franchisees to take an arm’s length, dispassionate approach to their investigations into buying a franchise, the fact is the majority of franchisees investing in a franchise business are largely driven by emotional factors.
“While most franchisees start off very satisfied with their franchisor, as they gain more confidence in running their business they begin to question the value of the fees they pay to their franchisor, the support they receive and the extent to which the franchise system contributes to their success,” he said.
Bartercard Australia is recognised within the industry as being a good example for franchise businesses with its heavy focus around open communication with their franchisees.
Bartercard Sydney North Franchise Principal Linda Squires was a Bartercard member before she joined Bartercard as a franchisee in 2001.
“The decision to become a franchisee was easy as my previous health food shop was already a Bartercard member. With prior knowledge of how the system worked, I could already identify with the opportunities Bartercard could present to franchise business owners,” Ms Squires said.
“I have had a positive experience in the nine years I have been working with Bartercard. If you follow all Bartercard’s processes and procedures, implement the training and tools provided, then you will succeed.”
In 2006, one of Bartercard’s top salesmen and recipient of Bartercard’s ‘Godfather’ of Sales’ Award Stephen Mills joined Ms Squires in purchasing the Northern Beaches territory. Together they now own franchises in two territories; Chatswood and Northern Beaches.
“When I first took over the Chatswood business I only had 38 members and with the ongoing support from Bartercard National Office, we’ve been able to increase this number to 650 members over both territories,” she said.
“Of course, like any interdependent relationship there are ups and downs but the systems we have in place including the regular two-way communication with National Office has assured the longevity and success of our business.”
FRI’s Greg Nathan says, “Good business systems are essential to success in franchising. But they need to be driven by people who have the passion and ability to bring the systems to life. This is why good franchisee selection practices are so important.”
The success of a franchise system largely depends on the quality of its franchisees. So what makes a quality franchisee? FRI’s team of psychologists has found 10 predictors for success:
10 predictors of a successful franchisee
1. Do they have access to adequate working capital? Check they have enough to see them through the ramp up period and will be able to service their borrowing costs.
2. Do they have a positive attitude to life? Franchises who like to achieve and who have an optimistic approach to life are significantly more successful.
3. Do they relate well to other people? Success in business is largely about being able to build and maintain good interpersonal and community relationships.
4. Is their family supportive of the venture? Encouragement helps to cope with the inevitable stress and long hours. Negativity by partners can lead to under performance and failure.
5. Are their expectations realistic? This includes the money they believe they will make, the amount of work they will need to put in and the support they will receive.
6. Do they have adequate business acumen? They will need to review financial information and data trends on the performance of their business.
7. Are they comfortable selling? Franchisees need to appreciate all businesses rely on selling and they will need to get behind sales initiatives if they are to succeed.
8. Do they have high levels of stamina? Running a successful business involves continual investment of energy to ensure everything is getting done.
9. Are they well organised? Our studies have consistently shown that franchisees who value order and systems are more likely to run good businesses.
10. Have they been in your type of business before? Our research shows this can be a negative. If you accept people with prior experience check their assumptions.
About the Franchise Relationships Institute
The Franchise Relationships Institute is an independent research and education organisation based in Brisbane that has been studying the dynamics of the international franchising sector for 21 years.
Greg Nathan is a registered organisational psychologist, expert on the franchise relationship and author of four books on franchise management, including Profitable Partnerships, which has sold over 35,000 copies.
Bartercard was founded in 1991 on the Gold Coast, Queensland, and has grown to become the world’s largest barter exchange, with over 40 offices around Australia.
Bartercard assists approximately 20,000 businesses in Australia (55,000 around the world) to barter their goods and services – without the challenge of a direct swap.
Although the concept of barter is thousands of years old, bartering through Bartercard is an innovative way of combining modern technology, a network of businesses and direct and indirect marketing channels to increase a business’ customer base, sales and profit, and improve cash flow.