Economic Recovery Creates Franchise Rush

Here is a timely warning for budding franchisors from Australia’s DC Strategy as the Recovery Sparks Rush Of New Franchisors.   And here also is a warning to prospective franchisees.

India At Home director, Rajesh Bhatia, has turned his successful 5 chain restaurant concept into a franchise offering with an initial investment of between $350,000 and $500,000.

We've come to the point where individually managing a store is more important than growing, in the sense that I can't be doing both. If we're going to grow, franchising is ideal, because we can't just invest all our money in this, other people need to do it too.

Adrian McFedries [DC Strategy] may be accused of over-simplifying the array of new franchise systems but he does have a point;

I think it's important to remember there are two types of people coming into franchising. One group has already managed a profitable business, it's grown well under a structured model and they do fine. Unfortunately, another group starts a business, gets an inquiry and the majority of the time runs with that. So nine out of 10 times the business stops because there's a lack of consideration for a sensible growth plan.

Oh how our US friends are going to love this;

Franchising is popular in Australia, boasting about 1,250 franchising systems with a population of 21 million, compared to about 700 franchising systems in the US with a population of over 300 million, McFedries says.

Again we unfortunately see a little confusion about the numbers of Australian franchise systems where recent reports have suggested there were anywhere between 1,000 and 1,100 franchise systems? US figures conflict dramatically with the much publicized numbers that promote the health and glitter of Australian franchising?  But not by much depending on which US state you refer to?

I must admit that while I was taken by this next quote, the entire emphasis of this article does appear to distract from the need to perform very serious, very deep and very heavy, due diligence on any and all franchise offerings.

I recently spoke to a franchisee that had undertaken an amazing level of due diligence and he would have been making a great decision for someone else but unfortunately he really was just not suited to being a franchisee.  It appears there will be an amicable parting of the ways.

Franchisees should be asking themselves - how good is the quality of the franchise? Many move too quickly, are underprepared and it forces you to do a lot of things on the run.

There are many great franchise offering out there; on the other hand, every prospective franchisee needs to appreciate that they are almost impossible to differentiate from the many poor or possibly dangerous offerings without expert guidance.  The great and the very not so great all tell mostly the same ‘truths’. They all present mostly the same ‘truths’.   Some deceive and at the same time make those that don’t look fairly shabby. And they wear it … well.

While the Australian franchising industry is talking up its growth, no one in Australia actually knows who, being franchisors and franchisees are entering or even who, being franchisees and franchisors, are folding. This sounds like a job for _Emerson Man^