By Damian Kay
In this first of a two part series, Telcoinabox's Damian Kay explores how to utilise the Franchise Council of Australia (FCA) when buying a franchise and what to do once you become a franchisor.
How do you use the FCA to better understand franchising, and does the FCA give you all the information you need? While the FCA is the go-to authority for potential franchisors/ franchisees, you shouldn't rely wholly on the information they provide. It is important to conduct your own due diligence to avoid the pitfalls of taking all information provided to you for granted.
Before taking that big step to become a business owner, you have probably gone through the decision process of 'trading hours for money'. Put simply, you have made the decision to either work for someone else and get paid for the work you do, or take the risk and work for yourself. Many people already know what they are going to do before they leave paid employment; usually it is within the same industry and with a unique approach. However, many others look for a business opportunity, which is where franchising comes into the picture.
Franchising is not for everyone. If you are not willing to follow a set system, engage with a franchisor closely, be part of 'an extended family' or be prepared to learn, then it is definitely not for you. The FCA run seminars throughout Australia on buying a franchise in a 'non-sales' environment. They have representatives from the ACCC, the relevant State governments, a franchisee and a franchisor. They are designed to educate you as to what you need to know before buying a franchise and they can be very helpful.
On the FCA website (www.franchise.org.au) under 'About Franchising', you will find details of these seminars as well as other interesting information including advantages and disadvantages of becoming a franchisee.
It is important to remember that when you buy into franchising you are buying into a way of doing things.
So, you have decided you want to become a franchisee and you now need to find the best system for you. Hopefully you know what you are good at and thus can match your skills with the right system. Unfortunately the FCA website does not provide a profiling tool to help you match your skills with an FCA member which would be helpful. However there is a directory of FCA members.
While the FCA website provides an excellent resource for potential franchise buyers, and has an excellent list of FCA approved franchises, this is not a full list of franchises available and sometimes the endorsements can be misleading.
I have been very vocal in the industry about this and many agree. In late 2008, I spoke at the National Franchise Convention in Sydney after a number of messages and emails went unanswered by the Chief Executive of the FCA.
Despite this, it took over nine months for the FCA to actually approach me to discuss this issue. Go figure. It has obviously been a sore point within the FCA that they are only now willing to face up to. The Chief Executive to this day has not bothered to return messages. Due to discussions I have had with some excellent people working within the FCA, I understand that this is finally on their agenda.
It is too easy to become a member of the FCA. Franchisors do not have to have a proven system or be assessed in any way whatsoever. There is no interview process or requirement to prove sustainability. As long as the system has been nominated by another member and the directors of the franchised system have not been convicted of an offence, you get your membership (I am sure there is more to it than that, but when my business became a member we did not have to do anything. I did not have any experience myself and the business had been only going for a couple of months).
The membership form to become a member is proof of this. I recently tested this theory out with a 'new franchise system' and nominated a business system to become a member of which the directors had no franchising experience. The business was closed down two months after becoming a member.
The moral here if you are considering buying a franchise is to conduct your own due diligence. You need to:
These are just some of the things that you should do even if the industry body finally does something about their inadequate membership requirements. You are about to invest a substantial amount of money, so you must do everything you can to ensure that you go in with your eyes wide open.
The amount of people that we talk to in our recruiting process that have done no due diligence or talked to our existing franchisees continues to astound me. We will not take anybody that has not done a good portion of the above. We even ask for a full business plan that our sales team can help them with (the key numbers). We put our potential franchisees through a very rigorous process of questionnaires and interviews to determine if they are right for our business.
Too many franchisors take people in that are not right for the business and therefore it ends up in grief.
If anything I hope this helps to get across the message that the FCA resources can be very helpful in determining if franchising is right for you and identify the members to look at, but do not rely on the 'sign', do your own work.
