posted on 17/06/2015 4:52:00 PM
Future proof your success by choosing the right franchise model for your goals.
Words: David Hundt
Franchising is fast becoming one of the most popular ways to do business in Australia with an estimated 1200 different franchise models currently operating. For most would-be business owners joining a franchise system has many benefits as it offers the ability to become part of an established brand, group buying power and the additional assurance and protection of a franchisor to step in and provide training and support if and when necessary.
The fitness Industry is certainly no exception with many prospective franchisees drawn to the numerous franchise opportunities available. From personal training and weight loss centres to full-scale gym facilities – there is a model for everyone.
A well-structured and efficiently run fitness franchise can provide immense advantages for both the franchisee and franchisor. It’s often described as being in business for yourself but not by yourself. However, choose the wrong franchise model or fail to complete the necessary due diligence and you may find yourself in the business relationship from hell, with little to no chance of escape.
WHAT TO CONSIDER
When evaluating the many fitness franchise options on offer, consider the following;
Is there a clear and distinct product offering differentiator? After all, you are buying a business to open in your local market with the aim of attracting customers. If your chosen franchise is unable to differentiate itself in some way and appeal to a distinct group of customers you will ultimately be competing in a commodity market. If a competitor franchise opened across the road would you be confident your product was unique enough to still attract a viable number of customers, year on year, until the end of your franchise agreement?
The success of many small businesses depends on a strong and loyal niche market, rather than trying to be all things to all people. In a commodity market the usual differentiator is price, which can have a huge impact on the forecast profitability of your potential business.
How rigorous is the franchisors recruitment process? Do you get the feeling they would sell a franchise to anyone or do they really screen you to make sure you are the right person for the business? Fitness is a people industry and building a sustainable member base requires caring about your customers and ensuring that they are achieving results. Without committed and passionate franchisees, heavily screened to ensure their suitability, the brand reputation will be damaged and the value of your business will be impacted.
Is the franchisor a member of the Franchise Council of Australia? The FCA has an established code of conduct regarding the sales and recruitment process of potential franchisees. This includes providing all prospective franchisees with a Disclosure Document outlining all the fees and charges associated with operating a franchise outlet. It also should include a full listing of all suppliers including any who may provide the franchisor with a financial rebate or other payment for service.
You should also be strongly encouraged to seek independent advice regarding your purchase. A credible franchisor will ask you to sign an advice statement certifying that you have taken advice from your solicitor, accountant or business advisor before they permit you to purchase a franchise outlet. What is the ongoing royalty payment? All franchise systems require you to make an ongoing monthly royalty payment to the franchisor for the use of the brand and access to the franchise systems. Most fitness franchises charge a flat fee with the suggestion that you benefit from a fixed cost with any additional revenue going into your pocket. The reality however is that under this model the franchisor has no incentive to grow your business as they are paid regardless of whether you are profitable or yet to break even. As franchisor revenue is also effectively fixed the focus of their efforts becomes on selling additional franchises meaning you could soon be competing for customers with members of your own franchise group as additional outlets open in your neighbouring suburbs.
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