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To franchise or not to franchise?

October 13, 2011

Very often potential franchisees tend to get excited over the latest new franchise opportunity – without any thought about whether it is the best business model, the right return-on-investment, or whether it means them working “in” the business or not.

Sales expert, Andy Preston, highlights the dangers of entering into a franchise opportunity without thoroughly investigating the vital element that will determine whether the business will be success – or a failure.

It is highly likely that a substantial percentage of people visiting franchise exhibitions are desperate for something to buy into to avoid them ever having to go to work for anyone else again.

Many will be lined up to watch demonstrations of the latest cookery implement or aerobic craze and getting excited about being a franchisee and what kind of money they’ll be making in 2, 5, or 10 years time without any sort of plan on their part of how to get there – in fact many might not have even heard of the franchise before they walked into the exhibition hall earlier that day.

All too often potential franchisees get excited about the prospect of buying a “turn-key” business that will bring them good revenue in years to come, without them having to work too hard.

In reality however, franchisees have to usually work very hard in the initial stages of a franchise to even survive, let alone make a healthy profit and with some franchisees spending up to £50,000 on a business opportunity, the most common mistake they make is their failure to consider how they are going to get a return on their initial investment, what it will mean in terms of further investment, time and many other factors.

“For many franchisors looking to sell franchises, their main concern (depending on the type of franchise and the franchisor themselves) may well be to sell more franchises to bring more revenue in to the franchisor, without heavily screening the potential franchisee for essential attributes like sales skills and motivation for selling” explains Andy, who regularly see new franchisees at his sales training seminars, desperate for some support and guidance.

The most common scenario is that new franchisees have been left to sell with minimal support from the franchisor and the challenge for people already in a franchise and aren’t selling well is wondering where their sales are going to come from. Andy advises that the first 3 months in a franchise will be crucial to determining whether their sales are going well or not and whether they need to improve their selling techniques.

Small business tend to fail through lack of sales and lack of cash flow and in Andy’s experience – the lack of sales can be a massive problem for most new franchise owners. “Good “new business” sales skills are not something that can just be acquired overnight and without learning some simple but crucial sales techniques, many franchises end up unnecessarily being sold at a loss, or given back to the franchisor as the franchisee has been unable to make them work” explains Andy.

When purchasing a franchise which requires the franchisee to “pro-actively” sell in (i.e cold calling, face-to-face meetings etc, rather than a retail environment where the customers come to them and all they need to do is attract more) Andy describes the following scenario is a common occurrence;

Step 1 – They visit the franchisor and decide to buy a franchise

Step 2 – They receive 2-4 weeks “training” on the new franchise

Step 3 – They start their franchise and have to prospect for between 80-100% new business.

“Most of the training from the franchisor will be on the systems and processes of how to “work” the franchise and if the franchisee is lucky, they may receive 3-4 days sales training from them – which again is more likely to be on the “system” of selling the franchise products or services” explains Andy.

“Suddenly the franchisee is thrown into the realisation they need to do some pro-active selling – and quickly! They may pick up the phone a call a few leads, or – if they are really brave – some “cold” prospects and will more than likely get knocked back at objections easily, fail to get through gatekeepers and when they do, the decision maker doesn’t see the value in meeting with them or even discussing their offering” adds Andy.

As a result, many franchisees end up frustrated, feeling the franchisor has “deceived” them and Andy often hears comments from franchisees such as “they never told me it would be this hard to get appointments, win business, and find new clients” or “I’m not cut out for selling in such a competitive market”.

Andy explains that whilst in some cases, a franchisee may get lucky and land a client that gives them a lot of business, refers them to others and literally save their bacon, but more often they give up or give the franchise back within six months because they couldn’t bring in the new business.

But making a success out of a franchise which requires pro-active selling is entirely obtainable argues Andy, providing the franchisee understands the market and the requirements of the role and considers undertaking sales training to enable them to do this successfully before embarking on the franchise.

“Ultimately, the first and most critical question for a new franchisee should be “who is going to undertake the selling?” as if they have no sales skills themselves and do not want to learn, they need to either have a business partner working in the business who is skilled in selling, or employ someone to fulfil the entire sales process from generating their own leads, to visiting clients and closing the business as well” concludes Andy.

Andy Preston is director of highly acclaimed training company Outstanding Results. This article is provided for general consideration only and the information contained herein is not to be acted upon without professional independent advice.