20 Questions to Ask Any Potential Franchisor

Joining a Real Estate franchise can be a strategic master stroke to grow your profitability. A good franchise organisation will provide you with all the business support, systems, manuals and training you need so you can concentrate on what you do best. But how do you evaluate the various franchise offerings and choose the one that will match your aspirations and take your business to the next level? Story by Mark Lynch.

  1. What is the average turnover per office in the franchise group?
    Learning what the average turnover is per office will give you a far greater idea of the strength of the group than just hearing about the results of the top few offices. A strong median turnover indicates a franchise group that focuses on raising the performance of all offices, not just nurturing the good performers and leaving others to struggle. You should also consider where the average commission achieved by the group sits with your ambitions.
  2. Can I have a list of contact numbers for all the franchisees in the group?
    Many franchisors will provide you with reference franchisees for you to contact – and you can bet that these are the people guaranteed to sing the franchise praises. A franchisor who believes in their product and is genuinely providing the very best service to all their franchisees, will have no problem in providing you with a list of contact numbers for every one of their franchises and inviting you to contact any of them.
  3. What protection do I have in regards to the territory I am allocated?
    While some franchisors provide exclusive listing territories, some don’t and it’s important to understand the ramifications of both scenarios. An exclusive territory where only you can list, where only you derive the benefit of your local advertising efforts and where you’re not competing with another office under the same brand, seems ideal. However, it’s important to ensure that the exclusive area you are allocated is large enough to provide you with enough listings to generate significant wealth. If the listing territory is exclusive, are you encouraged to sell properties listed by other offices in your network? While an open territory appears to provide unlimited opportunity, you need to know what protection you have if another franchisee under the same brand wants to open an agency in your local area and actively chase your clients.
  4. What is the professional experience of the franchisor?
    The management structure is crucial to the sustained success of any organisation. Look for a management team that has proven business acumen, demonstrates a continual quest to improve the franchise offering and has a real understanding of the nuts and bolts of running an effective Real Estate agency.
  5. How stable is the head office team?
    Is head office a revolving door? Do they have problems retaining staff? Or is the team stable and committed to the company vision? The answer to this question provides an accurate guide to the company’s ability to form and retain an effective team. Franchisees rely heavily on the relationships they build with head office staff and having to continually build relationships with new employees is time consuming and frustrating.
  6. Who are the field staff and what is their experience?
    Imagine if your franchisor sent a business consultant to advise you who had less experience than you! All franchisor field staff should have a thorough grounding in running a successful business, running a successful Real Estate agency as well as experience in marketing, sales management and providing quality leadership.
  7. What is the training calendar for the next twelve months?
    Most franchises provide training. But you need to find out if it is structured, varied in content, updated regularly to match the market challenges and with a calendar published well in advance. Is there a twelve month calendar of training, or is the timing of the training ad hoc? The success of your office is directly linked to ongoing quality training and support from the franchisor. Is the training in-house or external? Are the trainers available to visit your team at your office? Do all sessions have manuals? Does the training cover a variety of levels of sales skills, leadership and property management? How much does the training cost? Is the majority of it free?
  8. How many franchisees have left in the last three years to re-brand to another group?
    Sure, sometimes the relationship doesn’t work out for a various reason and a franchisee will move on. But a pattern of high turnover should ring warning bells. It could be an indication of a franchisor that is consistently underperforming.The last thing you want is to be re-branding after a few years.
  9. What are the key points of difference of the company?
    Look for a franchise organisation that is leading the pack with constant innovation; a group that is providing USPs that put the brand on the shopping list for vendors. The best franchisors are continually evolving and tweaking the system to improve it. In franchising there is no finish line – the challenges keep on coming and the franchisor must have the energy and commitment to keep moving.
  10. What is the long term business plan of the franchisor?
    Is it about just adding dots on a map or adding quality offices? How many franchisees do they want? How will their long term plan and the strength of their brand impact on the price you get for your business when you ultimately decide to sell down your interest?
  11. What marketing initiatives have been put in place in the last three years?
    There’s local, office level branding and there’s top level promotion of the brand. What has the franchisor done at both these levels to support offices? Are they providing strong, creative messages for offices to use? Do they have a penetrating, well balanced media campaign planned for the next twelve months?
  12. What events does the company hold?
    The calibre of events held by the franchisor and the franchisee support for these events is an excellent yardstick of both the commitment to excellence by the franchisor and the value the franchisees place on these relationship building events. Look at the quality of the venues, the quality of the speakers, the number of people the events attract. The events should be a mix of business related and just straight out opportunities for fun – full day sales seminars, conferences, principals’ meetings, professional networking events for women, property management seminars, awards nights, Christmas parties, family picnics, golf days – opportunities for people in all areas of your business to learn, network and enjoy themselves.
  13. What is the culture of the company?
    Many franchise groups have advertising taglines. But are these advertising positions reflected in the culture of the company? Do they support professional industry bodies? Do they actively promote professionalism and ethics? What about community involvement?
  14. How does the franchisor assist my business?
    What is their plan to help you succeed? Is it based on what you wish to achieve or what they want from you? There’s a big difference and without both parties understanding and agreeing on the goal, the chances of success are severely diminished. What plan is in place from day one? What’s the plan for the next ten years? Do they have a solution other than “recruit more people”? As well as a comprehensive business consultancy, training and marketing support, does their plan support your property management department?
  15. What strategy is in place to keep abreast of emerging technology?
    Real Estate is heavily dependent on technology. From online ordering of boards, to internet advertising of properties, to collection of databases to automated client management. Then there are the emerging social networking areas to explore – such as Facebook, MySpace, Twitter, SMS and MMS, customised internet sites on your mobile phone, search engine optimisation of websites. Is the franchisor aware of the changing communications landscape? Do they have a cutting edge technology partner to provide them with the information on new technologies to keep them ahead of the pack? Or are they still in the last century?
  16. What help is available in areas like employment law, OH&S?
    Do they help you in the time consuming and challenging areas of industrial relations, human resources and occupational health and safety? Do they have an Enterprise Agreement in place? How can they help you avoid unfair dismissal claims? What strategies are in place for minimising risk to your employees in their workplace?
  17. Can you provide me with case studies of businesses joining you and their journey over a five year period?
    Ask for a range of studies; those who have joined the franchisor as a start-up operation, those who have moved from another group and those who were successful independents who became franchisees. The franchisor should be able to provide you with the figures for each case and show you the journey over a five year period.
  18. Do you provide assistance for property management and are there any fees involved?
    Many franchisors view property management as the agent’s superannuation (as it is a saleable asset) and avoid charging fees whilst still providing assistance in this area as part of a value add package. However, there has been a trend by some franchisors to now include a property management fee. It’s important to be clear about this before you open a franchise.
  19. Is there a walk away clause after twelve months?
    Challenge the Franchisor to provide this. While the due diligence process (and asking all these questions) is important, it’s not foolproof. After twelve months you’ll know whether they are the group for you or not. And if not, you need to be able to walk away without any restrictions. A franchisor that believes in their product will have no issue with this.
  20. Does the franchisor have any financial interest in any offices?
    Some franchisors have a financial interest in an office purely to use it as a “beta” office – to test initiatives and prove their systems. Others run offices as profit centres. Regardless of why they are set up, the franchisor needs to devote the time to make those offices successful – therefore diminishing the time and effort they can devote to you. If their income stream is 100% reliant on the success of their franchised offices, that’s where the focus will be.

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Mark Lynch

Mark Lynch is the Business Development Manager for the Barry Plant Group. Prior to joining Barry Plant, Mark was a Franchise Manager with both Ray White and Wilson Pride (now Century 21). Mark also ran a successful Real Estate business within the Wilson Pride network.