Meeting The Franchisor...
Rachel Spaul explains how to get the maximum from your first formal meeting with the franchisor.
Meeting the franchisor for the first time in a formal environment is your chance to have their undivided attention away from exhibition halls and telephones. Take this opportunity to make a good impression and to ask searching questions into the history and viability of the franchise.
Be Prepared Preparation is the key to ensuring you get the most from the interview. Before the meeting you should have read through the franchise prospectus, made comparisons with competing brands, made an initial evaluation of your locality for competition and customers, and had an initial discussion with the franchisor over the phone or at a franchise exhibition.
Based on what you know so far, make a list of searching and qualifying questions. Not only will this ensure you have all your questions answered, but it also shows the franchisor that you have a real interest in the business.
Matthew O'Neil, Snack-in-the-Box (SITB) Franchise Sales Director, confirms: 'If somebody attends an interview without a list of questions it makes me wonder how serious they are about investing their money in a franchise.'
William Little, Cleaning Doctor Founder, agrees: 'Selection of a franchisee is a two-way process, not only is the franchisor selecting a good candidate but the applicant should also be selecting a suitable franchisor, so I would expect some probing questions.'
Just like any interview, you will want to make a good first impression. Most franchisors will require you to be smartly dressed - although you can't go wrong with a suit, many will accept smart casual. Mel Clarke, In-Crease:De-Crease UK Ltd Commercial Director confirms: 'Although we expect shirt, suit and tie, casually formal is also acceptable.' Some companies however may ask beforehand that you dress 'appropriately'. One vegetable delivery franchise for instance is based on a working farm and will request in advance that you dress casually.
Some franchisors may ask you to bring your spouse or partner to the meeting. In franchising, the support of the family is of prime importance so the franchisor will not only want to evaluate you, but will also want to ensure that you are supported by your family. In-Crease:De-Crease UK Ltd for instance insist that the partner or spouse attend a second meeting if they weren't at the first, and SITB always request that all 'decision makers' attend the meeting.
Franchisor & Company Background When you arrive at the meeting take a moment to soak up your surroundings. What impression does the office project? Does this feel like a business that has national capabilities? Is this the sort of image that you want your business to have? National Schoolwear Centres' head office at Ketteringham Hall in Norfolk for instance, clearly reflects the brand with its use of furniture and branding, even down to the model shop floor set up on-site in one of the rooms.
During the course of the interview, evaluate the franchisor. Is this someone you can build a lasting relationship with? Does s/he share your ambitions and aspirations for the business? Is the franchisor the right person for helping you achieve those goals? 'Getting into a franchise operation is like getting married,' compares Little. 'Select the wrong partner and it could end in failure, but select the right partner and it will be a very successful relationship with many happy days and great financial rewards.'
Before you can delve into the real workings of the business and the background of the franchisor, don't be put off if you're asked to sign a non-disclosure document. This is standard practice and prevents candidates from passing on sensitive information to competitors.
The franchisor's and the company's background will usually be covered by the franchisor in the interview, however ensure that it corresponds with your own research and also that you find out if any franchisees have terminated their contracts and why. This does not always spell out bad news for the franchisor, some franchisees leave due to illness or family issues, they may sell up the business to realise their investment or to take on a new venture, others may not have the same aspirations as the franchisor. It doesn't always mean that the franchise is not a viable opportunity, but beware.
Also make sure that the franchisor covers the background of the company and the history and experience of its directors. What is its trading history? When was the company franchised and why? At this stage, the franchisor may not go into detailed analysis of profit and loss figures for the franchise. This will be reserved for when you've made the decision to proceed and you meet for a second or even third time for more in-depth discussions.
The Franchise Package Much of what you will want to know about the franchise should be covered by the franchisor's presentation. However, try to look through the sales talk and get to the crux of the matter. Where will you make your money and where does the franchisor make money? Ideally, this should be through the franchisees' management service fees, which are the franchisor's incentive to provide ongoing training and support to the network. Be wary if the franchisor's only apparent source of income is the franchise fee as this may suggest that the franchisor is more interested in recruiting franchisees than supporting the existing network.
What exactly is included in the franchise fee? Are there any additional costs such as the aforementioned management service fee, the cost of fitting out a shop, marketing the business or leasing a van? From this first meeting you will need to find out the 'total' cost of the franchise including the initial franchise fee, working capital and any additional costs so you can calculate how much extra you'll need to cover personal expenditure such as mortgage payments, rents, utility bills, property maintenance, insurance, food etc.
Following the Franchisor's presentation, check your notes to ensure all your questions have been answered, if they haven't don't be afraid to ask.
The Next Step Following the meeting you should have a better understanding of the franchise opportunity and if it fulfils your needs and expectations. The next step is to speak with your family, interview existing franchisees for a more balanced view and collate all the information to decide if this is potentially the business for you.
The Irish Franchise Association (IFA) strongly encourages potential franchisees to speak with as many existing franchisees as possible. 'It is important you are systematic in the search for a franchise and do not rush in to the first franchise that comes along,' advises John Green IFA Chairman. 'Even though you may be in a hurry to start a business because of redundancy or job insecurity if you do not get the selection right you could lose your savings and end up in a worse position than when you started.'
With pages of information, facts and figures, evaluating the information can be confusing, so don't forget your greatest asset - gut feeling - does the business feel right for you?
Some Franchising Terms ExplainedFranchisee The person who buys a licence to replicate a business system.
Franchisor The person or company that sells a licence to replicate their system.
Master Franchise The systems & brand, owned by a 'Master Franchisee', of a large territory licence - a country, region or city.
Area developer Effectively a regional-size franchisee who has the rights to expand a region by either appointing sub-franchisees or through managed outlets.
Business Format The purest form of franchise in which the franchisee buys into a total system of brand, know-how, training, methodology & support.
Franchise Agreement Documents the legal relationship of obligations existing between franchisor and franchisee.
Management Service Fee Another term for royalties, usually in the form of fixed rather than percentage fees.
Disclosure The practice of revealing detailed information about the business track record & franchise package.