Busting the five most common franchising ‘cons’

Anyone considering a franchise has no doubt typed ‘pros and cons of franchising’ into Google once or twice and then spiralled into the vortex of results.

And of course, franchise networks themselves are super quick to list out all the ‘pros’ (because there area loads!), but they are less likely to dive into the ‘cons’ and throw some perspective on them.

So, let’s go there in this article! Let’s tackle the five most common ‘cons’ head on. We’ll be completely real with you about what each of these points can mean, and why they may be considered a ‘con’. But we’ll also explain it from our perspective, and try to broaden your understanding of what the model of franchising is all about, so you’re better informed and in control of making your own decision.

And we haven’t just plucked these ‘cons’ out of thin air; picking the ‘easy’ ones to answer. We did our own ‘pros and cons of franchising’ Google, and here are the 5 that come up consistently across articles and blogs!

Con # 1: You have to abide by the Franchise’s rules

True. You do. Some people consider this to be an onerous task, and for others, it’s the very reason why a franchise was how they chose to jump into business ownership. Because the other way of looking at ‘rules’ is that they are our systems and processes that we’ve spent 30 years developing and refining. When you join our network, we teach you how to run your business, effectively. And the reason we know how to run these businesses effectively is because we’ve spent 30 years developing and refining the systems to do that.

Here’s the real part… if you love figuring out your own way of doing things. If you love thinking outside the box and if you love having total creative freedom in what you do, then this is where you may feel constrained and frustrated by the ‘rules’ of a franchise. If going your own way is pulsing through your veins, then being a franchisee just may not be a good fit for you. But, on the other hand, if your looking for an accelerated business start-up, if your looking for systems already in place and training to show you how to run your business effectively, then a franchise is something you should be looking into.

Con # 2: High start-up costs

For most franchise networks, this can be true. But not James Home Services. We can confidently say, we blow this ‘con’ out of the water.

We recently launched our ‘subscription model’ to business ownership. Instead of a hefty upfront payment in the tens of thousands, you pay just $1,000 upfront and then from $100 per week (plus GST) depending on the business model you select and whether you require equipment.

For example, for an Interior Cleaning franchise you pay:

$1,000 + GST upfront

$100 per week plus GST (if you bring your own equipment); or

$125 per week plus GST (if we provide the equipment for you)

We are the ONLY franchise network in Australia, and indeed, we believe in the world, to be offering a subscription model to business ownership and it makes that dream of being your own boss more affordable and more accessible than it’s ever been before.

You still get all the same support, training, marketing and start up assistance that we’d provide if you were paying for your business upfront. We don’t believe in shortcuts. We back ourselves and the integrity with which we operate and deliver support to you, but we’ve just made that more accessible.

So we can safely say, Con #2 is actually a total myth!

Con # 3: Ongoing royalty payments

True. There are two core costs you must be aware of when you join a franchise network.

Firstly, you must pay for your business. Remember, your buying a business and that has value. For most networks, this is a hefty upfront payment. With James, you can now ‘subscribe’ to your business to make this cost manageable and so that you’re paying for your business as your building it.

Secondly, there are what we refer to as ‘franchise fees’ or ‘royalty’s’. Every franchise network in existence charges franchise fees. This is how we can continue to provide ongoing support, ongoing training, ongoing marketing, a call centre, our website, IT Software to help you run your business, just to name a few. Each franchise network is different in how it charges you these fees. Ours is based on a small percentage of your turnover, paid weekly.

One of our newest franchisees put it very simply to a potential franchisee he was speaking to a few weeks ago. The potential franchisee asked how he felt about having to pay a percentage of his turnover to James Home Services Australia. Our franchisee responded; yeah, sure, you pay that fee weekly, but there’s no way I could have started this business on my own and built it as quickly as I have, without the support they’ve provided. I have a business coach on call, available at any time, my training meant I could walk straight into my first job with confidence, and from day one, I’ve been quoting jobs so that I’m making enough money in my business; I couldn’t have done all that without James Home Services and for that service, you pay a fee. It’s no different to having a business coach or business advisor.

In a nutshell, when you pay for your business, you pay for an accelerated start-up, you pay for the right to use the systems, processes and brand we’ve invested 30 years into building and refining. When you pay the franchise fee, your paying us for a service, and that service is completely unlimited support to you in growing your business. We genuinely roll our sleeves up, and work alongside you in making your business work for you.

Con # 4: Reputation management issues

When your part of a franchise network, your reputation is partly yours to control, but it is also influenced by the reputation of Head Office and the reputation of your fellow franchisees.

If Head Office make some poor decisions and receive negative media coverage, then it could impact your business. If your fellow franchisees aren’t operating with the same integrity as you, then that may also reflect in your business.

There are lots of ways we manage this at James Home Services Australia.

At a Head Office level, we have a saying… ‘we steer this ship with sharp business acumen and a strong moral compass’… but it’s the last bit that really defines how we respond in tricky situations. Ultimately, we ask ourselves the question, ‘how will the decision we are faced with, impact the very people that have trusted us with their step into business ownership’. We very much live by the premise that if you just simply do the right thing by the people you work alongside, then you can’t go wrong. We often make decisions that reflect this thinking, rather than a hard-line corporate approach. Of course, there is always a commercial reality to the decisions we must make, but it’s a delicate balancing act between that, and ensuring we are simply taking care of our people. In turn, this means that under the current ownership, we’ve never received bad or negative media coverage, in fact, quite the opposite. We’ve received some incredibly positive coverage of our network over the past two years.

At a franchisee level, you receive A LOT of training in how we want you to represent our network and our brand. We are respected in the marketplace for being the professionals in home service delivery. We aren’t the cheapest and we aren’t the quickest; we deliver quality work, and we operate with integrity in everything we do.

If a franchisee isn’t upholding our values, then there are a series of strategies we use to help them to understand why it’s so important that they do. We work with them closely, but if that doesn’t work, there are also mechanisms that are in place for us to exit that business from our network, so that it doesn’t get to a point where it is negatively impacting our reputation or the other businesses in our network.

Our brand and our reputation is our second most important asset, behind our franchisees. So we work hard to ensure we are protecting it.

Con #5: You have to enter into a contractual agreement with the Franchisor

True. We’re not going to beat around the bush with this one. Entering into a Franchise Agreement is what gives you the right to operate as a franchise within our network.

The document is lengthy.

On the one hand, some people consider this onerous.

On the other, the benefit is that this becomes our ‘play book’ for how we operate. It sets out the responsibilities and obligations you have to us. But in our opinion, more importantly, it sets out the obligations and responsibilities we have to you as a business owner in our network.

Every single franchise network, has a Franchise Agreement.

We reviewed ours recently and we simplified the language, we removed clauses that were ‘standard’ but that we just never relied on. We made it as straight forward and clear as we possibly could, without the usual legal jargon.

We are an open book when it comes to our Franchise Agreement. We are happy to answer any question you have, provide examples of what it means and how it works in practice. And we’re honest about the reality of what our Agreement terms are.

We also emphatically (!!!) recommend that you seek out your own legal, accounting or business advisor professional to review the agreement as a third party, and provide advice to you on the agreement to help inform your final decision.

So there you go.

The five most common ‘cons’ of franchising, explained. Not justified. Just explained, so you have a more informed understanding of what they mean.

If you’re thinking about a franchise, and want more information, then why not reach out for a chat. Obligation and sales-tactics free! We promise!