5 successful owners tell how they spot and run a winning franchise

The hard work is done for you. Picture: Getty Images

Franchises. Sometimes they’re hugely profitable, sometimes they’re a devastating mistake.

But if you dream of being your own boss, opening a franchise can be cheaper — and considerably less risky — than funding a new small business or startup.

Peter Harris, CEO of franchise marketing platform Digital Stack, works with thousands of franchise businesses each year. He says most of flourish, but some struggle.

Harris says there are very clear patterns in the performance of franchise brands across different industries and locations.

“The most successful franchises often demonstrate the highest commitment to engaging with local communities both online and offline, creating value for existing and new customers through sharing customer stories/experiences, value-add promotions and retention campaigns – which may need to differ depending on the local catchment.”

Much of this comes down to due diligence on brand perception and professionalism. But there is such a thing as the “right tools” for empowering franchisees.

“We often notice under-performing businesses will also struggle to maintain customer engagement and an online presence that resonates with their audience, because they either don’t understand their customers, or are delivering a rigid one-size-fits-all message,” Harris says.

“Each location needs the ability to tailor their marketing for their own catchment. One location might live off an adjacent business park, while another is wholly dependant on transient tourists.”

For starters, Harris says it’s crucial for franchisees “to leverage as much support as they can from head office”.

“Your success is their success. Most franchise head offices have strong support programs in place to help franchisees grow and succeed.”

It also doesn’t hurt to have an eye for franchises which have the potential to establish a cult following, such as a health and fitness chain.

F45 owner Joel Pearce has shared his insights with us along with other successful health and fitness franchise owners on what it takes to build a booming business.

Joel Pearce, owner of F45 Preston & Coburg, VIC

Joel Pearce, F45 owner. Picture: Supplied

What is the most important thing to know before opening or investing in a franchise?
Understanding your local market and working creatively within a framework has been absolutely critical to our success. F45 Training provides such an amazing base to build a business and if you can execute their strategy with perfection while tailoring the offer to your community, you’re giving yourself and your team every chance to succeed.

How can you spot a good franchise opportunity?
Firstly you need to have an absolute passion for what you’re doing…. if the flame doesn’t burn hard for what you’re getting into, then you’re setting yourself up to fail or burn out! If you can align your passion with a franchise opportunity, then it’s about doing the due diligence, believing in the model and having a genuine connection with the people you meet and speak to within the business. First impressions, gut feel and intuition can’t be underestimated!

How do you spot a bad franchise opportunity?
Franchise concepts that may seem like great value but lack innovation or a point of difference in the market are something any potential franchisee should look out for.

One piece of advice for anyone looking at opening a business?
Invest time in your team, always share the wins, stay humble and create genuine, trusting relationships with any person you interact with.

Jason Maltby, Stepz Fitness Ashgrove, QLD

Jason Maltby, owner Stepz Fitness. Picture: Supplied

What is the most important thing to know before opening or investing in a franchise?
Do your due diligence on what will be provided so you know where best to direct your focus and energy.

How can you spot a good franchise opportunity?
Thorough analysis of the brand in other locations, what works for them, what doesn’t and seeing if your slice will fit into the local pie.

How do you spot a bad franchise opportunity?
For me it’s always the people within the organisation that make a business succeed or fail. Establishing which skill-sets are required for success, and the availability of those particular skill-sets on the team to determine whether it will be a success or failure, can often reveal a bad opportunity

What keeps you up at night?
Elon Musk quotes running any business as “staring into the abyss and chewing glass”. Unfortunately for most business owners, we have to lay the footpath that guides the way for ourselves, yet as they also say there is nothing new under the sun. Over-analysing and making thing that should be quite simple, complex, are often my favourite late-night activities. Too often we allow ourselves to get bogged down in the minor operational details instead of stepping back and throwing the business cap on.

One piece of advice for anyone thinking of opening a business?
Don’t be afraid to learn the trade beneath someone who has the visceral experience. Mentors provide insight and a leg up that no education can provide and may prevent many sleepless nights!

Belinda Szalinski, F45 Bentleigh, Vic

Belinda Szalinski, owner F45. Picture: Supplied

What is the most important thing to know opening a franchise or multi-location business?
The most important thing is location, location, location! You need to be easily accessible to members, have a location that has a high level of foot traffic that can create potential members and have sufficient parking. Being located next to a train station has been a great win for my business. Members can attend a class in the morning and then go straight to work, or come from work in the afternoon. It’s very convenient.

The next most important thing is having the right staff. Having a well-rounded and balanced team that can engage with all members goes a long way to retaining your membership base. In an industry that is known for a high staff turn over, it is important to attract staff that want to be part of growing the business and not just treating it as a job.

How can you spot a good franchise opportunity?
It needs to be something that aligns with your core values and beliefs and something you want to run, whether it’s as an owner / operator or as just an investor. Research is very important and finding out the background of the franchise you are looking at. Getting the financials, start-up costs, and growth potentials help with making the best decision for you. Speaking with other franchisees is another avenue to get a better understanding on how the franchisor operates and the support you will receive during set up and ongoing operations.

How do you spot a bad/ franchise opportunity?
If a franchisor isn’t prepared to provide a disclosure statement, then this would certainly be raising a red flag and would warrant further investigation behind the viability of the franchise and the product on offer. I would certainly be speaking with other operators and seeking professional advice before further embarking on such an opportunity.

What keeps you up at night?
Being a business owner throws lots of challenges at you and there are many things that can keep me awake at night. I go from wondering if I have made the right decision to give up my safe full time job to open a business, to staffing issues and do I have enough staff to cover the shifts so that I don’t have to be working every class. I worry about have I reached sales targets for the month and increased revenue, what has been done for retaining members and staff, and is our social media working for us.

I need to remember to take time out for myself so that I don’t burn out. Learning to be able to switch off at night is important. I have had to learn that emails and messages do not need to be replied to immediately and that it’s okay to take a day off. Establishing boundaries is very useful, something that I did not do at the beginning.

One piece of advice for anyone looking at opening a business?
Back yourself. If you have done all the research and know that this is what you want to do, be prepared to put in the hours and do whatever it takes to make your business a success. At first it will be hard and long days, but the reward is truly what drives you to succeed. Be able to delegate where appropriate and know that you don’t have to do everything yourself. And when there are times that you feel like giving up, take some time out, ask yourself why you started this and then power on.

Yvonne Cenciotti, Stepz Fitness, Thornleigh NSW

Yvonne Cenciotti, owner Stepz Fitness. Picture: Supplied

What is the most important thing to know before opening or investing in a franchise?
Expect roadblocks and have a financial buffer because you will invariably hit obstacles that you never knew existed and they can really slow your momentum and take away your focus for growth. We purchased a 12 month old gym that had little exposure and a drab reputation, lacking energy and direction. In our first 4 months, we have experienced power failures, external light box failures, member injuries, staffing issues, culture change, complete signage change, bad debt, total database cleanup and equipment repairs.

This isn’t the fun part of buying a near new business. It has all made me stronger and more knowledgeable but the truth is, it was a massive learning curve. Be open to the fact that there will always be problems and that it’s our job as business owners to solve them.

How can you spot a good franchise opportunity?
Do your homework. Understand the support network, the customer management systems and the reputation. Know your competitors in the local area and the nature of the market. Some franchises are very saturated and areas are competing against the same franchise in the next suburb. Understand your USP (unique selling point). This gives you a clear focus for heading into the consumer needs within your area. Is the area large enough to support your business?

Most franchises will help you with this, but local councils also have a wealth of stats and information available. Ring other franchisees. If you ask the right questions, you will get a good feel about how they are treated/ valued by the master franchisor and how flexible their parameters are. You will also get a feel for the pros and cons which are often not disclosed initially.

Most importantly, we are doing this for wealth creation, so look at the life cycle of the business, the industry, the income earning potential and timeframes to get there.

How do you spot a bad franchise opportunity?
I’ve seen many and without mentioning names, the things that sent up red flags for me were, businesses not disclosing information freely, not providing other franchisee information to do your due diligence and not returning phone calls to name a few. Do they really want you as a franchisee? Many models are saturated in certain states and give you lip service. Is there a clear support network? I think gut feel also has a lot to do with it. Understand your strengths and weaknesses and ask “is there support for those”? If not, run a mile.

What keeps you up at night?
Soooo much. I keep a Post-It note beside my bed to get out the things in my head. Usually it’s a to-do list for the next day that plays on my mind. It’s also any confrontational or difficult situations that need to be dealt with. Breaking even was a constant concern initially, and large financial outlays.

However, one thing I have learned is that without enough rest, the picture always looks grimmer. A good night’s rest clears the mind and increases productivity the next day. Time out is also important.

One piece of advice for anyone looking at opening a business?
Have a good support network- your partner, friends, family, your children. Let them all know what’s in store and take time to celebrate the small wins with them in bite-sized chunks along the way. It’s the journey, not the destination, that’s important.

NOW WATCH: Ideas videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.