Franchising still on a journey to perfection

Two recent inquiries into the franchising sector show it is not perfect and must be prepared to evolve. JASON GEHRKE

By Jason Gehrke

The two recent inquiries into franchising conducted by the governments of Western Australia and South Australia have again raised the prospect of further legislation for franchising, with both inquiries suggesting improvements that would require Federal Government endorsement.

A number of the recommendations from these inquiries were not new to the sector, and in some cases repeated recommendations by previous inquiries or submissions to previous inquiries.

Yet irrespective of the extent and nature of these recommendations, it would be fair to say that the inquiries summarised that franchising isn’t perfect. This should not be a revelation to the franchise sector or its observers, and in fact directly reflects one of the key attributes of franchising itself – that perfection in business is a journey, not a destination.

Franchising as a method of doing business is itself evolutionary, and evolution occurs when new and better ways of doing or being replaces the status quo. Evolution is a natural part of life (and death) in any ecosystem and economy.

Franchising sits toward the top of the small business evolutionary scale for two reasons:

1. The original motivation and entrepreneurialism of the business founder and owner, who has developed a sustainable and profitable concept, built around a recognisable brand and market demand;
2. The entrepreneurialism of the franchisees whose diverse backgrounds and skills vastly expand the pool of talent available to build the brand and continually improve the operating systems behind it.

Not all businesses which aspire to become franchises necessarily prove themselves sufficiently across the dimensions of market demand, sustainability, and profitability prior to franchising. Consequently the entrepreneurialism of franchisees of such systems may be the driving force of improvement while the system is still at a relatively immature stage of development. In many instances, this provides a leg-up for the franchisor, but this depends largely on the willingness of the franchisor themselves to receive all ideas for improvement.

For some franchisors however, franchisee suggestions for positive change may be interpreted as a challenge to the franchisor’s authority, and result in no change at all, or only change chosen by the franchisor without regard to franchisee feedback. Where this occurs, the process of evolution is compromised and a franchise system’s long-term prospects may be shortened considerably.

Continuous improvement is an essential element of any successful organisation, and the dynamic nature of franchising in the main creates an environment where evolution can readily occur. What this means is that franchise brands can quickly overtake stand-alone small businesses, which are far less dynamic.

Any potential legislative changes for franchising will affect the nature and extent of the evolutionary process that all systems inevitably undertake. While the merits of any proposed legislation would need to be discussed separately, the prospect of additional legislation alone represents an evolutionary hurdle that not all franchisors will clear without stumbling along the way. This may present an opportunity for some, and threat for others.

Either way, in a dynamic business world, those who change, adapt and evolve will be better placed to survive. This goes to the very heart of franchising – for both franchisors and franchisees – and brings me back to the title of this column: Perfection is a journey, not a destination.

NB: The Franchise Advisory Centre runs a number of education programs including a full-day Introduction to Franchising seminar for potential franchisees and franchisors to be held in Brisbane, Melbourne and Sydney on June 11, 18 and 19 respectively. For more information, please visit www.franchiseadvice.com.au

Jason Gehrke has a passion for franchising. He has been involved in the sector for 17 years as a franchisee, a franchisor, provided PR and marketing services to more than 30 leading Australian franchise systems, and presented to literally thousands of potential franchisees and franchisors over the years. He is a director of the consultancy Franchise Advisory Centre and is the immediate past CEO of automotive paint and plastic repair franchise, Kwik Fix International, a 2004 Australian Franchise System of the Year winner.

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