Essentially, this is an OPINION piece I felt compelled to write. 

Building a better franchise community

I want more brands and people to take real action on building a better franchise community, in particular for welcoming investors, but to also instil confidence in every stakeholder within the sector. This is so that people can be proud of, benefit from, and be part of a thriving sector well into the future.

With that in mind, if you are researching getting into a business of your own, wouldn’t it be great if you could be guided by a simple 1 - 5 star rating scale, to help you zero in on better-performing brands to put your faith in when investing your hard-earned cash? 

Yep, I thought so too. 

But, given a system is available, I don’t understand why good brands have not been falling over themselves to get their franchise rated. Yes, a few have, but nowhere near enough in my view considering the crisis of confidence in franchising being faced. 

Looking at it purely from a marketing perspective, I see the golden opportunity to position your offer away from lesser-performed competitors. As I am a person closely witnessing the actions of buyers of franchises, I see it as a long-welcomed way to finally help compare brands and opportunities. 

The system 

A well-established, and well-credentialled company in our market place called FRANdata, led by CEO, Darryn McAuliffe, has brought its own independent franchise rating system to Australia. And it is great news for buyers and sellers of good franchises.

It’s based on the system and IP that has been used in the USA by FRANdata over decades in that market. Darryn explains, “...we supply the methodology that the US FORBES publication uses to compile its annual best and worst franchise list. FRANdata has created the three-tiered recognition system required to participate in the USVetFran program, and we built the Franchise Underwriting (FUND) score model relied upon by the US franchise lending community. In short, we know what we’re doing, and we have a track record of doing it.” 

The credibility and robustness of the ratings should not be in question.

So, exactly how do the ratings work for franchise brands? It’s based on an extensive 7-point criteria; 

1. System performance, 

2. Franchisee financial performance, 

3. Franchisee engagement and satisfaction, 

4. Franchisor training and support, 

5. Franchisor financial performance, 

6. Lender relations, 

7. Compliance and assurance.

Nothing else exists in Australia that comes close to this type of independent assessment of franchise brand performance. It should be a ‘ticket to the game’ if you are a franchisor wanting to grow in the Australian market. My hope is that it becomes exactly that, and the sooner the better.

I think the brands that have been the leaders in this, by getting themselves rated, should be commended. I wanted to recognise these brands and their commitment to openness, transparency, and in essence, a desire for excellence. I’ve listed them in this article, and again, I commend them.

That’s not to say brands who are not currently rated, are missing the qualities I mentioned above. It’s just that for some reason they are not on the front foot demonstrating it. The extraordinary recent circumstances of franchising as a business model being under the microscope, and the subsequent impact felt sector-wide, calls for bold action - by all of us with good intentions.

I not only think a ratings system is good for you if you are researching buying a franchise, but you should consider it good for you if you are a franchise system that is worth investing in.

So why don’t you prove it? 

In the market going forward, you need to prove it. And if you can’t prove that you’re worth investing in, either stop growing, or stop franchising and become a company owned locations business. 

People are relying on you to be hitting all sorts of benchmarks, as they often invest all they have into you and your concept. So get on board and give them comfort that you’ve got it all covered. Or, even if you don’t have everything covered (very few do), you’re open to being rated and addressing what the ratings process identified for you to improve in your franchise opportunity. 

If you’re in a franchise system, I implore you to play your role in lifting the standards of the entire sector. For every brand that is an open book and gets rated, and uses it to improve, it means a poor brand finds it harder and harder to compete in the market for an ever fewer pool of potential franchise investors. 

Thus, committing to the Franchise Rating Scale makes your franchise network more viable. I thought that was obvious, but it clearly needs to be spelled out. 

Why am I so vocal about this? 

Because it’s so important! But only if you have an interest in the success of franchising broadly in Australia that is - not just your particular brand. And if you’re reading this far - that is you! 

As the founder of a franchise buyer-focused media publication and business, I’m passionate about the rating system because, in particular, it goes a long way to greater transparency, and helps investors to compare one brand to another. And it helps protect us all from reputational damage from brands and people who don’t stack up to it. 

Ultimately, if widely adopted, it should in theory make it pretty hard to be a poor performing franchise company in Australia – because people will be able to see it. If you’re a brand and you aren’t rated, people will ask ‘why not?’. 

And, in my view, all of the above makes for a far better environment in which to consider investing in a franchise business. 

Franchisors, this is not just about you. If you are rated and end up with 3, 4 or 5 stars - that is still a ‘good’ rating and beyond. Being a ‘5 Star’ rated brand will not be the norm. 

Your actions would be making it harder for those people and companies who should not be franchising, as they lack either the ability, desire, or both, to be a truly worthwhile investment for people wanting to get into business for themselves.

The role of the Franchise Council of Australia (FCA) 

As the peak corporate body, I’d like to see the FCA drive the adoption of ratings in our market. They have been steadily releasing and supporting some good initiatives around a broader response to the problems and environment franchising finds itself in. The sector was firmly in the spotlight before the pandemic, and in my view, franchising in large part shined in supporting its stakeholders throughout it. So, it is essential that we do not lose this momentum as a sector. 

In that context, I can’t help but note the following. In appearing before the Parliamentary Joint Committee on franchising in late September 2018, FCA CEO, Mary Aldred was asked by the Acting Committee Chair; 

ACTING CHAIR: ...I wonder if there might be a capacity to have green light models, orange light models and red light models—that this is a very high-risk franchise. Is there such a discernment available to anybody? 

Ms Aldred: We are actually in the process of developing a star rating system at the moment for the sector, recognising the need for better information and data will assist in that task. 

ACTING CHAIR: That’s helpful. We would love that information. 

The FCA didn’t move on it, and FRANdata just powered ahead on its own, and it too should be commended. 

FCA, franchisors and franchising broadly, you can do so much better - so let’s get rated! 

If you agree or disagree, then talk to me about it -

glenn@franchisebuyer.com.au 

Find out more about franchise ratings HERE