Asia Pacific Centre for Franchising Excellence Is Go, Almost

"Griffith University created the Asia-Pacific Centre for Franchising Excellence to give you access to independent franchise information, education and research to help increase the profitability of your franchise and help the franchise sector grow."  Asia-Pacific Centre for Franchising Excellence

I've reviewed the Griffith University franchising education website over the last week and I believe it has the potential to positively influence franchising in what could be a first in Australia.  This is relatively early days and those involved are said to be committed to further development. 

I immediatley thought to suggest greater access to more content and that this site's existence would need to be reasonably and effectively promoted to ensure impact.  Here are some more of my thoughts on what is missing or not highlighted appropriately:

Exclusive Dealing and Third Line forcing [‘tie in'] is a regular and contentious issue within franchising.  Mandatory purchasing of specific products/services from specific suppliers has its pros and cons.  Even in good systems franchisees often get confused about s47 so I consider that it is something that should be dealt with early.  Franchisors also need to understand where the line is.  There can be a fine line between what is the franchisor's legitimate right to maximize his/her bottom line and where such arrangements are detrimental to the franchisee financial model - abusive profiteering.

The ACCC do its usual poor job in determining such arrangements and with section 47 and its application to franchising the definition offered and the interpretation taken are miles apart.  The implications of s47 should be emphasized in available information and in any franchising course and given a high level of import.

Much the same can be said for rebate systems in general when considering important information in franchising courses.  Both are often related in that they are subject to abuse and when it is considered to be abusive it is extremely damaging to the franchise relationship whether concerns/allegations are justified or not.

Leases are another area where franchisees and franchisors get confused and if people are to be given an introduction to franchising they should be given the opportunity to understand their legal rights and the history of lease abuse - this particularly relates to shopping centres but such abuse can be perpetrated by rogue franchisors.

A legitimate franchise model will cater to determining what rent benchmarks produce what can be considered acceptable levels of rent to realistically achievable sales figures.  Greenfield sites are a roll of the dice unless network figures are accurate and supported by an effective, historically proven, rollout strategy.  There is a lot to lease management and negotiation and it can bite when performed by the inexperienced. Players typically look at the monthly/annual figure and miss the add-ons that bite later including reviews, outgoings, annual increases above GDP among other things.  

Another point; I often mention 'risk' awareness but I do realise the difficulty in promoting the risk factor associated with any small business if you are going to promote entry into small business.  Greater minds than mine need to come up with a better balance as to how we get franchising prospects to perform in-depth, 'killer' due diligence through an absolute understanding of the 'risk' involved when a franchise fails for any reason including those that are deliberately induced. 

I accept that in any business venture there is risk but in the franchising relationship where a rogue operator has control of your typical franchise contract a failure is something that can be totally devastating and long past end of contract term.  Its an ugly thing but people should be more aware of just how ugly the risk can potentially become.  I don't want to frighten people away - I just want to lift awareness way above where it is now to best ensure that people have an incentive to make a sound decision.

The vast majority of people entering franchising don't perform effective due diligence.  They have some vague idea that someone once said it was important.  They don't know what to ask, what to look for and how to find information and how to interpret what they find. People don't ask questions because they are not sure whether it is an 'appropriate' question.  

Personally I don't believe you can effectively train a novice to perform effective due diligence in what is a relatively short time-frame. Not when there is a scammer in the wood pile - their offerings often appear better than how legitimate offerings appear - because they have to work at perfecting the pitch. It takes years of understanding franchising and most lawyers and accountants would not have any idea of how to determine whether an offering contained a viable long-term business model and concept and whether the franchisor knows how to develop a system and a relationship that would give confidence that a ROI is achievable.  In a perfect world every franchisor would ask prospective franchisees this question; ‘How much money have you allocated to due diligence as a start up cost?'

Due diligence begins with the careful selection of experienced and proven franchising advisers.

Common mistakes in dealing with conflict.  Both franchisors and franchisees can inflame situations by reactionary stupidity and the ramifications can be enormous.  What not to do in resolving disputes should be covered.  It is one thing to discuss effective complaint resolution but it has quite an impact when participants understand why/how reactionary mistakes can lead to more reactionary mistakes and the potential implosion of a brand.

What I also consider to be extremely important to franchisee and franchisor success is the formation and support of franchisee representative bodies within networks.  I could offer a long list of benefits for both parties when these associations are supported.  Used properly they are ultimately an efficient way to develop a brand and introduce rationality to contentious issues.  A consultative approach to franchising does not diminish the franchisor's ultimate ability and need to determine the direction for a franchise model.

I would like to see national conferences of association representatives.  A great way to train networks in best practice franchising is to train the leaders first and I don't have a problem with franchisors participating when that participation is the control of such conferences. 

I don't see anything wrong with stating the obvious.  Some franchisors steal.  Some franchisees steal. Brilliant Royalty Cheats.

Should any franchising course deal directly with the pros and cons of scam franchising?  I don't see why not - might save some franchisors from what is becoming an ugly reaction and brand damage exposed on the internet.  As we are all aware many travel close to the line between legitimate franchising and abuse.  Caught out with a toe over the line and the system reacts badly to everything whether such a reaction is justified or not.  Fickle franchisees are often small minded and live in a small world.

I have a question for the APCFE and it relates to the claim of independence. Franchise Council of Australia would want control and historically they get control just as they have with Law reform.  Can APCFE assure independence?  I am sceptical.  If the courses get necessary support then this Centre could remain independent.

‘I put it to you that the FCA, representing franchisors who sell franchises, should be the last people to control pre-entry education.'

One concern that will no doubt be expressed by some in the franchisee community would be that Professor Lorelle Fraser and Jason Gehrke [FCA director] are involved.  Lorelle because her research findings have been widely and selectively quoted by FCA suggesting there are no problems in franchising.  I believe that the FCA has funded and set parameters for that research but I'm prepared to be wrong.  She appears to have a purely academic perspective to franchising while many others cross to the ‘human' element.  

Jason because he is an FCA director and published one or two articles that were howled down by sections of the franchising community - including me.  I may be wrong again but in my discussions with Jason there is a strong case to suggest he holds his own opinions and perspectives on problems facing franchising.

I expect we will all have a better understanding in 12 months of what need we are fulfilling here.

As I suggested in the beginning of this blog; I'm not convinced this site and the efforts of Griffith University will be a part of the solution for fair franchising - but I would like it to be.  If this effort can be turned up it could make a huge difference and offer stronger competition in good franchising.  Thorough franchising education makes scam franchising difficult and it lifts the reputation of an industry that needs it.  To that end I would ask for constructive and critical comment from BMM readers.  And I would also like to hear from the people at APCFE and any other academics.

Perhaps the Minister for Small Business, Craig Emerson, would like to commit to ensure that such a vision produces what is needed.

Launch