Ben Forrest writes…
While there are undoubtedly some systems out there that really are nothing more than buying yourself a job, this is nonsense for most cases. Single operator businesses may not provide the financial returns of the bigger businesses, but they also generally require far smaller outlays. On a pure return on investment basis (ROI), many of the so-called buy yourself a job businesses outperform larger operations.
To suggest that someone has bought themselves a job overlooks a raft of things they have had to do to build a business that provides for their family. The difference between a great franchisee and a very average one is usually the same whether you are looking at lawnmowing businesses, car painting businesses, fast food businesses or large retailers. Customer service, quality, reliability and consistency are all critical components of almost every business no matter how big or small. Probably the only difference is staff management.
Perhaps one of the reasons that small single operator businesses are often tagged with ïbuy yourself a jobÍ is that in many cases, the franchisor performs tasks that are usually done by the franchisee in larger or full-format businesses. For instance, Superfinish Express franchisees donÍt have to bother collecting their accounts, their franchisor does this for them. Not because it is cumbersome or the franchisees arenÍt capable of doing it themselves, but because it makes more financial sense for the franchisor to do it. The franchisor can do this for the network far more economically than the franchisees can as individuals, which means that it costs the franchisees significantly less than paying a bookkeeper for the same service. This same economy of scale is what drives the call-centres of other service-based franchises and is fundamentally the very idea of franchising in the first place. Why have hundreds of individuals doing the same repetitive work that can be done faster and cheaper if done centrally? In most businesses this would simply be considered a smart way of doing business, but for some reason in franchising itÍs too often referred to as buying yourself a job.
Other than the financial benefits there is another great benefit to this type of arrangement: quality of life or franchisee satisfaction. By creating a structure where the franchisees can focus on what they do best and leave the less desirable tasks to the franchisor, you tend to get happier franchisees. They donÍt have to go home after a hard dayÍs work and do lots of paperwork or marketing plans or debt collection which eats into family time.
It also means that franchisors arenÍt trying to drive a square peg into a round hole by getting hands-on technical people to perform tasks that they have little or no training in. Ask any tradesman about bookwork or marketing and youÍll draw a blank look most of the time, so why rely on them to do it if it can be done centrally by specialists? Having people focus on what theyÍre good at and enjoy goes a long way to creating harmony within a system. It also helps to drive sales and profitability by allowing franchisees to spend more time focusing on the things that create revenue.
The success of these strategies is best measured in terms of financial returns to the franchisees and cannot be denied. Systems like Superfinish Express and VIP have both been recognised by the Financial ReviewÍs Smart Investor magazine for their ROI. Ask their franchisees if they are happy with the returns they get from their business and youÍll likely hear that itÍs the best decision they have ever made, as their financial position and quality of life have improved since starting their business. TheyÍll also likely say that it hasnÍt been easy and has involved a lot of hard work and dedication. I doubt that theyÍll consider themselves as having simply bought themselves a job.
Ben Forrest is the former CEO of Superfinish Express
Jim Penman writes
In tough economic times when paid employment is hard to come by, some people will see a service franchise as a way to buy themselves a job. On the whole, this as a very bad notion.
A couple of months back, a young man got as far as attending our franchisee induction training before it became clear that he was not at all suited to being in business. One of the trainers drew him aside and informed him that we would not permit him to join. He was very distressed and phoned, asking to speak with me.
During our conversation he pleaded that I let him sign with us, saying it was his last and only chance to improve his bad financial situation and maybe even save his marriage. It was clear to me that my trainers were right and he did not have the emotional stability to run his own business. I told him so, as gently as possible, offering to rebate his course fees but telling him I would not permit him to put his house and future at risk when — in my opinion — he would likely fail.
Running your own business is not for everyone. It requires emotional stability, self-discipline, a customer service focus and good communication skills. A supportive franchise system makes success far more likely, but it also requires character and determination from the franchisee. Most of my people are flat out and weÍve knocked back almost 40,000 leads so far this year, but as many as 12 percent of my franchisees report less than satisfactory income. And though many of these are new and will improve with time, in the end some will almost certainly fail.
There are many good reasons for buying a service franchise: freedom and independence, reduced stress and travel time, even the chance to build a major business and achieve financial independence. But the kind of people we need would never be unemployed for more than a few weeks. If someone canÍt find a job, they should most definitely resist the temptation to buy one.
Jim Penman is founder of the JimÍs Group