Is there a lack of essential information from franchises?
When we originally looked at franchise opportunities for Lisa using her redundancy money (which she would have needed a business loan too to top it up to afford), there seemed to be a lot of focus on the business processes, which boded well.
However, the big thing that jumped out as us as distinctly lacking was the lack of any real help with getting customers through the door.
A lot of theory and advice for more traditional marketing like leafleting, going to events, placing ads in magazines (etc) which of course are all extremely relevant.
But, there was no substantial information promoted for things like sorting websites out, performing in search engines, brand values, sales processes and so on. Well at least nothing that we could see in their own marketing literature (although we could find ‘marketing tips’ offered by one franchise).
In our view (as we’ve proved with many years of successful trading at Blossoms) these subjects are massively important. For example, what’s the first thing that you turn to if you’re looking for something nowadays? Whether a product or a service? I’d wager that 80%+ of the time most people go straight to the web on their laptop, tablet or mobile phone.
There are exceptions which include repeat business and referrals, but these will only come with time and experience – you can’t really buy that sort of advertising, only earn it.
This is true of any business or franchise opportunity. You can enjoy any positives that a branded franchise brings, but you can also suffer if their reputation isn’t that good. At the end of the day though, it will be down to you to build your own reputation (or that of a franchise) in your local area.
Franchises - tried and tested formulas
The thing that Franchises really bring to the business model are their tried and tested formulas. Processes and formulas that work once you have people coming in through your door. However, these things come at an incredibly hefty price – both at the start with the buy in, and on an ongoing basis with monthly commission.
This was something I was resolutely against paying for, as I knew with my business experience and marketing background and some hard work (and trial and error), we could make a much better go of this business ourselves. And for a fraction of the cost associated with even the best franchise opportunities.
In my opinion, and it is only my opinion, the franchise opportunities we looked at (and this isn’t exclusive to the dog grooming world) seemed to totally lack any credible marketing and new business generation information in any of their marketing material. This is essential to get people through your door in the first place. What’s the point in having amazing processes for running the business if you don’t have any customers?
We found ‘21 top marketing tips’ included in one of them. We’ll I’m sorry, but I can get 1001 marketing tips just by sitting on Google all day. People don’t need tips with setting up and marketing their new business - they need proven formulas and facts. You can have the most amazing business processes and be the best dog groomer (or other skill) in the world, but if you can’t market yourself properly, you won’t get people through the door and your business will fail.
Do you really need all the extras?
A big question for us when looking at franchise opportunities was ‘do we really need all of this ‘flashy’ stuff that the franchises are telling us we need? Do we really need ‘Our own IT network with online storage system...’, lots of expensive computer software, stationary, uniforms and a van (that we must pay for) branded with other people’s logos? Do we really need to take card payments and pay yet more commission out to other people (ie the bank)? No thanks.
If we’ve got to put all of this hard work in, then we might as well do it for ourselves! Add to this that there seems to be a lot of staff at the franchise HQs who’s wages all needs paying. Who’s footing the bill for that?
Here are a few examples of what I mean with ‘flashy stuff’ (and these are taken word for word from franchise opportunities (UK based):
1. ‘social networking sites’ (what on earth does that mean? They have made their own Twitter or Facebook software? Or, they have a Twitter / Facebook account of their own that they will mention you on? Either way, it’s not really a unique selling point in my opinion).
2. ‘3 month’s supply of shampoo & conditioner’ – in the first three months, it is unlikely that a new business will be grooming 10 dogs a day, so in reality what does this translate to? A couple of bottles of each? Hardly ground-breaking stuff is it? And I’ll bet they get discount for buying bulk anyway. And tie you in to using their products so they as a franchisor get even more financial kickbacks. I recognise that this is speculation on my account, but I can’t find anything to disprove this.
3. ‘loan of operations manual’ – so you buy into what you think is one of the best franchise opportunities, and the manuals aren’t even yours to keep. Brilliant. Pure genius.
4. ‘PDQ Machine £18pcm’ – they don’t mention anywhere the commission per transaction (and unless you’re taking several thousands of pounds a week, that commission is likely to be quite a high percentage ... possibly 2-3% plus 20p per transaction). For Lisa, she has been asked if she takes cards on only a handful of occasions, but they have all been more than happy to pay cash or cheque when she says no. She has never lost a customer from not having a machine.
5. ‘FAQ – Do I get my own website? Yes, part of your package includes your own page which we update regularly for you ...’. So, you get a page on their site. Not a big deal at all. If you are based geographically close to the franchisor that could help in view of how Google’s algorithm works, but if you’re not, then being part of their website could actually go against you. In this day and age, you really need your own website in order to succeed online in the dog grooming world (or at least an amazing Facebook page and following – again something that people offering franchise opportunities neglect to tell you).
6. ‘Telecommunications - £10pcm) – WTF?! Really makes me crazy seeing these kinds of rip off inclusions. £120pa on what exactly?
(These inclusions will probably change over time and the above are my interpretations of what the points infer. I’ve not contacted the relevant organisations to see exactly what they do offer as part of each point above so there could be more to them than initially meets the eye.)
Why do franchises cost so much?
So, what has really shocked me? I guess the single biggest thing must be the cost – there is no doubting that.
Then there’s the ongoing costs of on top of the initial set up (for most franchise business opportunities (UK or otherwise)) where 10% of turnover seems to be the average. And there’s the almost complete lack (in most cases) of any real help with generating new business – this is the most annoying aspect when I really think about it.
And finally, there’s all of the flowery crap they dress things up with, which when you break it down what they really mean, they are utter nonsense. Or they infer there’s a lot of stuff included, but it’s so ambiguous or open to misinterpretation I’d personally class some of it as almost bordering on being false advertising.
Follow this link if you really want a laugh at franchise costs (they are pet related, but click around a few of the other categories too) : http://www.entrepreneur.com/franchises/categories/pet.html.
This will help you convert the prices in to UK sterling http://www.dollarsintopounds.co.uk/.
Dirty Little Secrets of Franchising
Finally, do a search on Amazon books for franchising, or franchising opportunities. Very, very interesting. I found a book called:
7 Dirty Little Secrets of Franchising: Protect Your Franchise Investment Seven Dirty Little Secrets of Franchising shows you how to take franchise due diligence, the explorative work that you must do before you buy a franchise (if you plan to succeed), to a new level of expertise. There are secrets that franchisors don’t want you to know; secrets that they are not legally required to disclose. Most prospective franchisees have no idea these secrets exist so they don’t ask about them, and that makes it all the easier for franchisors, franchise brokers, franchise consultants, and others who sell franchises, to stop short of revealing information that could kill the deal.
I purchased a copy and saw a few quite eye-opening points. The author, Dr. John P. Hayes has not only written a bucket load on franchising, but has sat on both sides of the franchising fence both as a franchisee and a franchisor. He has a wealth of knowledge and even offers mentoring for ‘wanna be’ franchisees.
If you’re looking at buying in to a franchise he has some amazing information and provides questions to ask franchisors, whether they provide UK franchise opportunities, a small business franchise or even an overseas franchise opportunity.
Although he does seem to be aiming everything at the USA franchise market, there are certainly many points relevant to the UK franchise opportunities and other countries that you can learn from.
Dr Hayes recognises that with any franchise opportunity, franchisees and franchisors do sometimes fall out. He illustrates quite fairly that there are valid reasons and arguments for both sides, although he does comment that in the early years of a franchise relationship the franchisor has to invest a lot of time and energy for little initial commission or revenue.
He does kind of brush over the fact that the franchisor has just received many tens of thousands, if not hundreds of thousands, of dollars from the initial purchase of the franchise though.