Franchise recruitment is always a hot topic and one that was discussed at an FCA event in Queensland this week.

The research was conducted by Seek Business who has an extensive database of potential buyers and surveyed over 4,600 of this group for the research piece. What they found was that there are an estimated 7.4 million people in Australia interested in buying a business.

Some interesting insights include:

  • One-third of those surveyed had been interested in business ownership for more than 10 years
  • In terms of the motivations for owning a business, only three of the 17 motivations were financially related. Other more important factors identified, according to the research include self-worth and aligning with the individual’s passion.
  • When asked what ‘’was the strongest emotion felt when thinking about business ownership’’  66% of respondents felt joy and the second biggest emotion, was…you guessed it, fear (33%)

 

Segments were also analysed in terms of key characteristics and time until purchase.  The two biggest segments, according to the research are ‘’Young Idealists’’ and ‘Family Traditionalist’’. Young Idealists are 28% of the population equating to 2.2 million people and ‘Family Traditionalists” are 1.6 million (22% of the population).

Young Idealists are not the immediate target as their time frame for purchase of a business are 3-5 years away.

Contrasting this is the ”Family Traditionalist” segment, with 30% of this group wanting to purchase a business within the next 12 months.  According to the research, 17% of this group are interested in a franchise. This means that 5% of this segment are interested in buying a franchise in the next 12 months.

Doing the sums again, this equates to just over 80,000 potential franchise buyers in the next 12 months. These figures seem high, considering there are only an estimated 80,000 franchisees in the country currently.

Remember too, the author of the report, Seek Business, is in the business of selling advertising and the more positive the picture, the greater the potential for advertising spend.  However, there are still some good takeaways from the research including characteristics of this Family Tradition group.

Characteristics of this Family Tradition Group include:

  • 49% speak English at home.
  • 84% have exposure to business ownership (often family members) 
  • Trust and transparency are very important to these buyers

Make sure you think about these characteristics when building your franchise recruitment activities.  Make sure you paint the picture about bringing potential franchise buyer’s passions into the business and it was also highly recommended that videos are used more extensively.  Videos receive greater engagement and are the favoured medium on all social media platforms.

FranchiseED’s Research on Potential Franchise Buyers

FranchiseED surveyed those who completed the Franchisee Pre-entry Program to identify their sentiment on franchising in late 2018. The research indicated that less than a quarter had changed their decision to buy a franchise due to negative publicity around franchising.  A small part of the group did not know anything about the negative publicity.

 

Has the current publicity around franchising changed your decision to buy a franchise?

Percentage       Actual Statements of ‘’The Reason for Your Decision’’
Yes 21%
  • I don’t want to be bitten by previous practices of either franchisor or franchisee, especially over staff.
  • Current terms and regulations are only helping franchisors and landlords
  • Most franchisors seem to be in financial trouble at the moment.
No 42%  

  • Made up my mind before
  • I am not aware of current publicity around franchising
  • I’m good with my decision
  • I am determined to buy one regardless of public perception
  • Insufficient due diligence seems to be the problem with those failed franchisees.
Don’t know 28%  

  • As I am currently still researching the franchise model and deciding if it is a good fit for my requirements, I am still uncommitted.
  • Need more information on franchises
  • Uncertainty
Doesn’t apply to me 8%  

  • I’m not sure what the ‘current publicity’ is.

 

What Does All This Mean?

From the research, there is still a strong interest in franchising and the negative stories and publicity do not seem to have affected people’s interest in the franchise sector.

However, beyond interest, there are other headwinds affecting franchise recruitment and these include:

  • Access to financial capital.  This will be particularly important to the emerging Young Idealist group
  • The options of other business models emerging in the economy, such as the Shared Economy and these may be of particular interest to the Young Idealist group

What you need to think about:

  • Making sure you have a profitable franchise system and satisfied franchisees.  Profitable franchises are much more likely to be successful in franchise recruitment.  See here for what makes a profitable franchise.
  • Only sell corporate-owned stores and not greenfield sites.  I know of franchisors who have decided that they will no longer sell greenfield sites but set them up as corporate stores, run them for a few years and then sell them as established businesses.
  • Having different levels of franchises available at different pricing levels.  For example, a mobile or small kiosk available for entrance level purchasers which can be traded up over time. Think about minimalizing fit-out costs to reduce upfront entrance costs.
  • Assisting funding through joint ownership models that enable franchisees to purchase with less upfront capital. An example of this is facilitating high performing franchisor staff into their own franchise with the assistance of capital that is paid off over time from the earnings of the franchise.

What do you think? How have you changed the way you are recruiting franchisees?

To learn more about how you can improve in your franchise recruitment activities, click here.

 

Comments