LOOK BEFORE YOU LEAP

Historically, decreasing employment opportunities lead to an increased interest in entrepreneurship for many. The motivation to be independent and the experiences of a tough labour market encourage people to consider other options, specifically starting a business of their own.

However, individuals may have the capital or the expertise to start an independent business, but not necessarily both.

The numerous challenges of starting an independent small business without prior experience motivate individuals to consider franchising. Franchising offers an opportunity to start a small business with the support of the franchisor’s brand and expertise. The franchise brand provides an immediate leg-up for the new franchisees. The franchisor also offers the much-needed know-how to manage a small business. Franchisors’ expertise help franchisees streamline their processes. The franchisors’ ‘tried and tested’ business model can be a great way to leverage the market for potential franchisees.

The franchisees also contribute to the success of the system with their capital, capability, and time.

Franchising has the potential to offer the delicate balance between being independent and yet mitigating some of the risks of starting a new business. Potentially, the franchisor-franchisee partnership is a recipe for great success.

Thus, it is not surprising that there is an even greater interest in franchising. As with prior downturns, there has been a significant increase in franchise enquiries.

Franchisor-franchisee relationships are long-term relationships. But, not all such relations are ‘marriages made in heaven’. The path to success for new franchisees is not straightforward, especially as there is considerable difference among franchise systems.

The need for careful consideration

Prospective franchisees should conduct careful due diligence in their choice of franchise systems. Else, the pathway to success could easily turn into a recipe for disaster.

Individuals interested in franchising should understand the franchise business and assess the working relationship with the franchisor before committing to franchising.

The Parliamentary Enquiry delivered its report Fairness in Franchising in March 2019. The report focused on efforts to improve the working relationship between