To Franchise or Not?

Joining a franchise could be the making of a business – or its undoing. If you’re thinking about becoming a franchisee, you should interview prospective franchisors and assess your options. Ric Mingramm gives his opinion.

To take up a franchise is a commercial decision. It isn’t about paint colour, it is about what service and support you get for your investment.

It is important that, before making the decision to join a franchise, you determine what it is that you get for the fees that you pay and ask does it fit with your medium to long term plans in real estate?

The real estate market is a dynamic mainstay of the Australian economy supporting development, industry growth and employment stability. In 2008 (remember then?) the Australian real estate market turned over $6 billion in commissions.

It is interesting to note that real estate transactions are skewed to national and regional brands and these brands dominate the majority of competitive markets. No discount brokerage agencies have dominance in any major market and there is a trend for independent operators to brand to maintain a degree of visibility in their markets.

The residential market is stratified into three major tiers: full service franchises; marketing groups; independent agencies. Each tier provides a different level of comfort and support to its participants.

A full service franchise is a business that agrees to a method of operation as outlined by the franchisor. Franchising offers the franchisee the advantage of the franchisor’s experience, assistance, support and training. The business can be started with greater efficiency, proven systems, brand recognition and has a higher expectation of success.

A marketing group is an umbrella business that provides access to a brand, marketing methodology and limited support. Marketing groups offer the franchisee a reasonably inexpensive brand position and operating model.

An independent agency is usually a small or family owned concern located in niche suburban, rural or regional locations. Due to the dependence on the proprietor’s name, reputation and involvement, there is often little ongoing brand equity, which limits future sale potential.

To take up a franchise is a commercial decision. It isn’t about paint colour, it is about what service and support you get for your investment. Consider when interviewing your prospective franchisor asking some of these questions:

  • How long has the brand been operating in Australia?
  • What is the brand recall and share of voice of your brand?
  • What is your position on personal marketing and how do you facilitate branding in the market place?
  • What corporate resources are available to me on a day-to-day basis?
  • What support is available in the field and at what frequency?
  • Can you explain the business model employed to improve my business?
  • What is the fee for joining the franchise?
  • What ongoing fees are payable, on what and how are they calculated?
  • What support do I receive during the setup or transfer phase?
  • How is your franchisee fee applied?
  • What training is provided and at what cost?
  • Who are your accredited trainers?
  • Are there any supplier advantages to being part of the franchise network?
  • What corporate plans are in place to support my growth?
  • What management information/CRM systems do you use and how will this improve my business?
  • Who hosts email and websites?
  • Who creates the web site?

Good luck with reviewing your options.

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Ric Mingramm

Ric Mingramm is a licensed Real Estate Agent and Auctioneer in NSW and QLD and has recently joined PRD Nationwide North Lakes as Sales Manager.