Founder of Australia’s Franchise Advisory Centre, Jason Gehrke, is a director of two national franchise chains, a past chairman of the World Franchise Council, and a director of the Franchise Council of Australia..
Tell me something of your background
My very first job was in franchising, I just didn’t know it at the time, or even what franchising was. My parents and grandparents both ran service stations, and I worked in these from my early teens. I’ve worked in franchising in one form or another for my whole life. At the age of 20, I was one of the founding shareholders and directors of a startup real estate franchise in the early 90’s.
We were initially a multi-unit franchisee of another brand, and got the idea that we could do it better, so instead of renewing with the original brand, we started our own. It was a shooting star for a couple of years, but we made so many mistakes at a bad time in the economy that it eventually crashed. I learned so much about franchising from that experience – both good and bad – that I was hooked for life.
How does the Franchise Advisory Centre help franchisors and franchisees?
The Franchise Advisory Centre offers professional development courses for franchisors to help them be better at franchising, and in turn, to facilitate better outcomes for their franchisees. Our program of workshops, seminars and forums and conference presentations, plus our fortnightly news bulletin and online advice articles, have helped to improve the skills of thousands of franchisor executives across several countries.
What advantage does being a franchisee and franchisor assist your work as director of the Franchise Advisory Centre?
As a franchise educator, I practise what I preach through my other roles as non-executive director on the board of two retail franchise brands which between them have just over 180 outlets in Australia and New Zealand. In both businesses, we are highly focussed on the profitability of our franchisees, rather than just their sales. In one of the brands, we even pay bonuses to our field support managers for growing the profits of the franchisees that they support.
How important is educating people about franchising?
Education is everything. People don’t know what they don’t know. Start-up franchisors commonly think that all they need is a great business to build a franchise empire, and potential franchisees commonly think all they need is the money to pay for the franchise and the franchisor will do the rest for them. Both starting positions are incredibly naïve.
A great business in one location requires so much more before it can be scaled up to a national or international brand across multiple locations. The core franchising skills needed are rarely ever present in the early stages of development, leaving start-up franchisors dependent on expensive consultants, or otherwise free to make very costly and sometimes fatal mistakes.
Likewise, franchisees rarely understand their full obligations under the franchise agreement and the operations manual, and fail to maximise the value they could extract from the relationship by not following the system. People give up certain freedoms in business to become franchisees, and one of those freedoms (although not completely given up) is the freedom to fail.
What are the three most important things franchisors must get right if they are to franchise successfully?
The right business model that is profitable for franchisees; the right royalty model to ensure profitability for the franchisor, and fund the right support infrastructure; the right franchisee selection criteria and induction processes. It can take some brands years to get all three of these things right
What are the challenges facing the franchises industry just now?
Increasing regulation is an ongoing concern for the sector right around the world. Countries like Australia which already has comprehensive franchise legislation still finds itself dealing with calls for even more regulation of franchising, while other countries that have no franchise regulation whatsoever face the prospect of legislation being introduced.
There are some fundamental benefits of regulation, such as the requirement for franchisors to disclose certain information about themselves and their franchise offer before a franchisee can buy a franchise, but regulation must always be considered in a manner that does not harm the sector.
In particular, the prospect of joint employer liability where the franchisor is ultimately responsible for the wages of its franchisees’ workforce is a concern to a number of jurisdictions. A form of joint employer liability has existed in Australia since late 2017.
In response, franchisors are “leaning in” and becoming more prescriptive about how franchisees run their businesses in order to mitigate risk to the franchisor, however in other jurisdictions, the franchisor response is to “lean out” and move its franchisees further away at arm’s length.
The joint employer concept is one area where legislators are taking an aggregate view of franchise brands, and do not distinguish between franchisees or franchisors. This could set a precedent for other forms of legislation , and should be monitored with great caution.
Another issue to watch in some countries is growing scarcity of capital among potential franchisees. In nations with high household debt, fewer candidates are able to raise the funds to invest in a franchise. This leaves franchisors with a choice of taking sub-optimal candidates who can afford the franchise, or for the franchisor themselves to raise the capital by other means to fund their growth.
If you had to start over, what would you change next time around?
If I was to start my career in franchising all over again, I would have preferred to lose a lot less money to gain the valuable franchising and life lessons I picked up along the way. I would also be sure to enroll in all of the Franchise Advisory Centre’s education courses to learn about franchising the easy way, rather than the hard way.
