Franchising is widely considered to be one of the most progressive business sectors in the Australian economy. 

Despite, or perhaps even partly because of this progressive nature, there has still been a raft of recent negative media around the industry on a range of factors including the regulatory environment to transparency.

The need for change

All in all, change is essential. Darryn McAuliffe is someone who is well abreast of the state of the franchising sector in Australia. He has a rich history in the sector and as CEO of FRANdata Australia, he also has some very noteworthy views on how to help the Australian franchise sector address some key strategic challenges.

Darryn, a CPA, became involved in the franchise sector primarily through his various roles at the NAB Bank. Obviously, something in his involvement with the sector piqued his interest as he hasn’t left it since!

“In 2005 – 2006 I was a credit manager in a Business Banking Centre where we did a fair amount of franchise lending. On the whole the bankers found the transactions fairly straight forward and I was able to approve them quickly without too many conditions because the loans (for other franchisees) were performing well.

That’s because the model was proven. In 2009 I was appointed to the National Manager’s role to drive the Bank’s developing franchise banking strategy and for the next couple of years the bank invested heavily in marketing, staff resource and building relationships within the franchise sector. The Bank was rewarded with great success from that investment.”

A passion for franchising

However, the nature of a large corporate banking environment meant that staying in the field was not really a possibility for a prolonged period. Darryn says, “Unfortunately, while normally a positive for career prospects, bankers normally only had a tenure of 18 to 36 months in any one role. This was a looming problem for me as my new passion of franchising had become an obsession, and I wasn’t too keen to stop dealing with a sector that was giving me such career satisfaction and enjoyment.

More than anything I valued the variety and the relationships; new franchisees, being sole and ex-corporate people, experienced multi-unit operators, dealing with C Class executives from public companies, and partners in professional services firms and the international observers. So many people, and so different, yet with such a common goal.”

While noticing and enjoying the variety within the franchising industry, Darryn lamented the lack of good quality information as an to decision making and strategy.This was particularly evident in his last role at NAB as he liaised with the sector. It was at this time roughly 6 years ago that Darryn was approached by FRANdata in the US.

Darryn said, “FRANdata appealed to me as it brought together relationship banking skills, accounting analysation skills, networking in the franchising space and the opportunity to build something new in Australia that was already proven in another market.”

Despite the proven methodology in the US market (established over 30 years), it has still taken several years to earn trust in the Australian market. But industry experts are backing FRANdata and there are many reasons why. Read on.

Challenges in the Franchise Industry Darryn says, “It’s become very difficult for brands to let prospective franchisees compare brands. It’s a very crowded and confused market and they don’t have a mechanism that allows them to actually define a quality brand from a lesser brand.” With more than 1,000 brands in Australia to choose from, recruitment is one of the key challenges faced by the sector. 

Those interested in becoming franchisees currently have a complicated process ahead of them to determine the best and most successful fit. They must complete extensive and diligent research however the current risk is that the information is coming from someone with an interest in the transaction.

Access to finance is another key challenge, with franchisors needing to make themselves more “lender friendly”. Lenders have resource challenges and would benefit from franchises who are transparent and demonstrate that they have a strong risk profile.

Darryn believes these challenges can be overcome with an independent ratings system that supplies superior levels of information and also ensures samples given are fair and of the whole franchise group. 

WATCH the detailed videos on the Franchise Ratings Scale

FRANdata’s Franchise Ratings Scale

The Franchise Ratings Scale is an independent mechanism that allows a consistent evaluation of franchise systems. It allows both buyers and sellers to cut through a lot of the‘noise’ in the market and focus on the key metrics that are most important when making a franchise decision.

The Scale is built on 7 key performance standards:

1. System Performance,

2. Franchisee Financial performance,

3. Franchisee Engagement and Satisfaction,

4. Franchisor Training and Support,

5. Franchisor Financial performance,

6. Compliance and Assurance,

7. Lender relations.

The Franchise Ratings Scale doesn’t just have benefits for prospective franchisees. Franchisors have the opportunity to demonstrate their transparency and performance with findings that are otherwise confidentially held and only used for the ratings system. Franchisors are completely in control of who sees their rating and can choose to use it internally as a diagnostic tool where FRANdata will provide guidance on improvement areas. Darryn has sound advice for anyone looking to become a franchisee. “Do your research.

Effective research. Who are you listening to? Are the insights meaningful? Is it a sales pitch or information delivery? Speak to existing franchisees and work in their outlets if you can.”

According to Darryn, the future is bright for quality franchise brands who are transparent and who invest heavily in their franchisees.

“The Australian franchising mission should be to make better strategic decisions from better, independent information.” 

Visit: www.frandata.com.au