The following article is by guest contributor, James Peterson from Smith & Sons Renovations & Extensions.
For transparency, Xact Accounting acts as accountant for a number Smith and Sons franchisees as well as other franchise groups, including Renovare and David Reid Homes. The views expressed in this article are James’ and Smith and Sons, however we’re happy to endorse them. Whilst franchising isn’t for everyone it’s an excellent option when you consider the support a franchise system can offer. As with any commercial or financial decision, we recommend you do your due diligence and consider your specific circumstances before committing.
Franchisors will promise you quick cashflows, high rates of business growth, leads and a never-ending work pipeline. But how do you cut through the advertising buzz and sales pitch to find-out if a system is right for you?
Franchising can be a ‘dirty word’ within Australia, which is a shame, as there are many well-run, highly beneficial franchise systems within this country, especially in the building industry. Overall, the franchise industry features 70,000+ franchisees, about 1,100 franchise systems, and a combined $136 billion in turnover.
If you are considering methods to grow, both personally and for your business, a franchise can be a fantastic choice. Franchises can offer you a shortcut to a large business and high profitability, often in exchange for a relatively small fee. In sharing these profits, you gain a trustworthy brand, volume pricing, secret know-how, training, and ongoing comprehensive support.
Specifically, in the building industry, a franchise should save you wearing a ‘million hats’. There should be a system to quote quickly, manage clients, manage staff, establish marketing, a good website, social media accounts, suppliers, subbies, and more. They also offer industry experience and ‘know-how’ to save you from making preventable mistakes, assisting you to do things as quickly and with the most profit right away.
With everything, franchising is not for everyone. A franchise is a long-term commitment, and you need to know how to select a franchise system that best aligns with you. From my perspective, studying franchising and small business now working as a franchisor in the building industry. Below are my top-5 (non-obvious) questions I’d be asking any franchisor right away to find out if their brand can help you to grow and improve your lifestyle.
Franchises normally have large support-offices with a significant amount of these resources (time and money) spent on marketing and brand. This means you can have the opportunity to become a part of a successful brand that is constantly being reviewed and refined to best suit the market. Additionally, you will benefit from the collective good work of all existing and previous franchisees building consumer trust, and driving better leads.
To put this simply ask, what makes their brand stand out to your customers? Why is a customer choosing them over all the other builders in the local area? What is the mission and vision of your brand? Ask to see leads, so you know how many people are enquiring, so you can see if these are the types of customers you would like to work with. Look at the reviews of their existing franchisees to see if customers are already talking about the good work the brand has done. A good sign is a building brand that you believe resonates with customers, and where it is already bringing in many high-quality leads.
Many long-standing franchises are successful and have seen continual growth as they bring in more builders and complete more work. Finding out if the brand has been growing, how this growth has been achieved, and what their targets are for the future should be a large part of your decision.
You should also ask for the expertise of the support team, building and franchising experience is critical. Ask what the average tenure is for people in the brand, how many people have been joining, and how many have left or been terminated. Consistent steady growth with both regular franchise exits/sales and terminations is normal. Pay attention to any reasons for termination and ask for an explanation, sometimes situations change and a franchisor who is willing to move people on for the right reasons is a great indication that they are managing their network.
A franchise will save you from wearing a ‘million hats’, their support team, structured systems and operating model should immediately make you more efficient. Understanding your role as a business operator will clearly show how much support you can expect from the franchise system.
How much marketing involvement do you have? Do you call and qualify leads? Is the system set-up for you or are you expected to set things up? How does your role change as time in the system move on? Each system will be set-up differently based on the needs of its customers and feedback from existing franchisees. A system that offers you less to do in the day to day is preferrable as this should allow you to take-on more work.
To ensure the entire franchise system is successful often different restrictions and requirements will apply. Ensuring all franchises operate legally and to the same high standard is critical to building the entire brand. As an example could you imagine if every Maccas had a different menu? This would almost immediately turn customers away as the great taste, quick service and consistency is gone.
An example of this in building might be your territory. If territories are decided with data and evidence to give everyone franchise an equal opportunity for growth, then collaboration takes-over. As an example, in Smith & Sons our territories give everyone the opportunity to become a very-large business.
Our team pass-on leads to each other as we collaborate to best serve our customers to grow the brand. Commonly building franchises may restrict things like work area (territory), suppliers, accounting systems, quoting systems, etc. Some common requirements are to hold minimum insurances, use certain contracts, display homes, offices, etc. You should ask about these and understand why they exist, as a rule of thumb they won’t exist unless they are critical to the success of each individual business.
As a franchise system grows, they have the benefit of taking on only the best operators in the industry. A robust recruitment process is one of the best signs a franchisor has their brand running well. Working alongside other highly skilled, quality builders is one of the best parts of being in a franchise group. As a sign if the franchisor doesn’t seem to ask you many questions, require references or suitability testing it may be a sign they are willing to take-on anyone.
A good franchise system should be focused on ensuring the success of every franchisee, as such taking the time before people join to ensure they will fit-in and are likely to overachieve is very important. This is achieved through business planning that is focused on your specific area, giving you all the information needed to be 100% committed before making the jump. A good business plan will give you confidence as any expectations you have are noted and contingencies are planned for.
Remember, a franchisor has done this many times before and has the benefit of data from many individual businesses. Often even going through this process will be a big benefit as you will learn about your business vs the franchise group.
Overall, I would recommend you take the time to have constructive meetings if genuinely considering a franchise. Ask these questions and many more, chat GPT or Google are great tools in coming up with a list of questions. Ensure you discuss with trusted advisors, like Xact accounting, to get an additional perspective. Ask for all the information you need and decide if a franchise system can take your business to the next level.
Don’t shy away from a franchise on its face, this is a $136 billion industry with many people working tirelessly to find great people to not only grow but to help them grow.
