Beware the franchise website that only sells franchises

Franchise websites that talk only about the financial and lifestyle benefits of becoming a franchisee are a shining example of how to convey the wrong impression about your franchise brand, and the quality of your franchise offer.

This doesn’t mean that a franchise website shouldn’t include information about its franchise offer, but when the ONLY information on the website is designed to sell franchises (and not, heaven forbid, the franchise’s products or services), it becomes apparent that the franchise has its priorities out of alignment.

Unfortunately such websites exist, either through the naiveté of overly enthusiastic new franchisors, or those whose interest in this model of business growth is more about selling franchises than it is about establishing mutually beneficial long-term relationships with franchisees.

Any franchisor’s website that speaks only to potential franchisees, rather than the customers the franchisees will serve, casts significant doubts over the motivations and sincerity of the franchisor.

If the franchise exists only to sell franchises, then it is unlikely that the system has a well-defined consumer offer, or that a sustainable consumer market even exists for its services.

Furthermore, if the franchisor is so focused on selling franchises that their website excludes all else, it is also likely that this sales focus will come at the cost of providing ongoing support to franchisees once they have joined.

Potential franchisees who are drawn to such franchises based on the bold representations about income and lifestyle made on these websites may equally find themselves without the support they expected on joining, or that the breadth or depth of that support is so limited as to be largely meaningless.

Such franchises may also take a similar line in their non-website promotions, and advertise their franchise offers heavily in print media, exhibitions and elsewhere, with no public promotion for the products or services that their franchisees actually sell.

This focus on becoming a franchise-selling machine may initially swell system numbers, but does virtually nothing to ensure that consumer demand for the franchise’s products or services keeps pace with its growing capacity.

Simple economics dictates that where capacity increases, but demand does not, price discounting and other potentially self-destructive tactics may need to be used by franchisees to gain and retain customers. Coupled with an expected low level of franchisor support (due to the franchisor’s focus on selling franchises), then the franchisee may find themselves locked into a death-spiral of discounting that could see them working harder for less.

In low capital cost of entry systems (e.g. mobile service franchises with an investment level under $50,000), working increasingly harder for decreasing returns not only negates all the lifestyle benefits the franchisee thought they would obtain on joining the franchise, but actually creates an incentive for them to leave the franchise as well.

This incentive comes from the mindset that revenue and profit are more difficult to increase than costs are to decrease.

As one of the larger costs in a mobile service franchise, the value of royalties is then questioned by franchisees (particularly where support is low or non-existent). The temptation then to leave the franchise to cut this cost is augmented by the franchisee’s desire to work less and earn more, and achieve the lifestyle benefits they believe they were buying in the first instance.

Franchise systems that focus exclusively on selling franchises, rather than building sustainable long-term partnerships, are high-risk ventures that often result in poor business outcomes for their franchisees and for themselves.

Every franchisee is always recommended to undertake full due diligence before committing to buy a franchise and should always talk with as many existing franchisees as possible, and critically assess all claims made about the business.

With this in mind, franchisors that go overboard in their recruitment efforts through websites which sell franchises and nothing else, will find this type of sales promotion unlikely to create long-term success for them or their franchisees. 

Jason Gehrke is the director of the Franchise Advisory Centre and has been involved in franchising for nearly 20 years at franchisee, franchisor and advisor level.

He advises both potential and existing franchisors and franchisees, and conducts franchise education programs throughout Australia, and publishes Franchise News & Events, a fortnightly email news bulletin on franchising issues and trends.


 

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