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Asking the Expert: David Killeen on the Future of the Franchise Industry

🕒: Ten minutes

David Killeen of the Irish Franchise Association

The following is an in-depth interview with Irish Franchise Association (IFA) Chairman, David Killeen. This interview is a must-read for anybody looking to start a franchise, develop their franchise or simply learn more about the ever-growing franchise industry in Ireland. An expert on a wide range of topics, from the changing nature of the franchise industry to the role of the IFA in providing support to franchisors and franchisees, David has the answers to all your most pressing franchising questions.

How many years have you been involved with the franchise industry in Ireland?

Mr John Neenan, an accountant by profession and a native of Cork, as well as uncle to Bill Holohan of Holohan Law (who are legal advisors to the IFA) established the Association in 1985. I first engaged with the IFA in 2000 when I worked as the franchise development manager for Statoil’s retail and food service offering, 'Fareplay'. Throughout that initial period, I was fortunate that Statoil invested heavily in bringing in specialist expertise in business format franchising from the United States. These experts coached and mentored me in the best practices of business format franchising from the get-go.

When Statoil decided to exit the Irish market in 2005 and sell to Topaz, I took the opportunity to avail of a redundancy programme with a view to setting up my own specialist franchise consultancy service. There were relatively few 'bona fide franchise specialists' in the Irish market at the time, due primarily to the size of the Irish market and given the reliance on UK service providers.

From working so closely with the US-based franchise experts, I understood from the off that I could only work with clients who had a genuine interest in building a robust, best-practice-driven, ethical franchise model. Franchising done correctly is a three-to-five-year strategy. Not long after I started my own consultancy practice in late 2006, I headed up a strategy group to plan how best to move the IFA forward.

Through that strategic review it was agreed to set up a formal board of directors. Mr John Green, master franchise holder for Chemdry Ireland, chaired the Association from 1998 to 2009 and I took over as chairman from John in 2009. I am passionate about best practice ethical franchising and enjoy working in the sector, highlighting to both franchisors and franchisees the key benefits and challenges of franchising.

How does the IFA provide support to franchisors and franchisees?

We accredit members to our association through ensuring that they satisfy best practice franchising standards. The accreditation process is as follows:

  • We review their franchise agreements to ensure they are fair and equitable.
  • We assess how comprehensive the content of the franchisor's operations manual is.
  • We review the training curriculum and programmes offered to their franchisees.
  • We look for a written disclosure of the supports they have or intend to put in place, to assist their network of franchisees.
  • We request two years financials to show proof of the business concept in advance of franchising, given one can only franchise a financially proven business model.

The IFA has run the annual Irish Franchise Awards for the last 23 years. We are one of the longest running business awards in the country. The awards night aims to highlight the massive positive contribution that franchising makes to the Irish economy and also to formally recognise excellence in franchising through a suite of awards. These awards are decided upon by our independent panel of judges, chaired by Mr Bobby Kerr.

The IFA is the sponsoring body of the Irish Franchising Skillnet, a government initiative that provides funding for training and upskilling. We have worked closely with the Skillnet organisation to secure funding and training support for our members and businesses operating within the franchise sector. In addition, we also run a number of roadshow seminars around the country on an annual basis to promote ethical franchising as a way for business owners to grow their businesses both domestically and internationally. At these roadshows, we facilitate our members who are seeking franchisees in that area to promote their franchise to the attendees.

We have recently amended our website in a way that facilitates any visitors to our site who may be interested in researching a specific franchise opportunity to link up with that franchise. We do not provide a formal brokerage service to our members, more of a value-added service of trying to connect interested site visitors to member franchisors' websites. Part of our formal remit is also to lobby government and make them aware of the significant contribution that business format franchising contributes to the Irish economy.

With a turnover of circa €1 billion and more than 30,000 people employed in the franchise sector, we provide a voice on behalf of our members and try to best represent their interests. In conjunction with MFV Expositions we work to promote, within our membership and across the franchise sector, attendance at the Bi-annual Franchise Exhibition.

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How would you describe your role within the IFA?

As chairman of the IFA, my key role is to oversee the continued development of this association. I am, therefore, accountable to the board and act as a direct liaison between the board and the management of the association, through our Executive Director, Tom Shanahan, who manages the day-to-day activities of the association.

What would you say are the main functions of the IFA?

The main function of the association is captured in our mission statement: “To Promote and Develop Franchising in Ireland
and Create an Environment Within Which Ethical Franchising can Grow.”

Do you think the franchising sector in Ireland has changed much since the IFA was established, and if so, how has this organisation adapted to evolve with these changes?

There have been a number of significant changes in the franchising sector in Ireland over the last three decades. Traditionally franchising as a business model was heavily associated with food service brands. There has since been an explosion in business-to-business, health and fitness, children's education, and petcare franchises to mention a few. Many of these franchises are lower cost-of-entry models so the level of capital investment required now to set oneself up in a franchise has reduced somewhat.

Also, traditionally we were heavily reliant on entrepreneurs here identifying international franchise opportunities and bringing them to Ireland under a master franchise agreement. Now over 44% of active franchise systems are of Irish origin, meaning that Irish entrepreneurs are now seriously looking at franchising as a way to grow their businesses domestically. We also see a lot of established Irish franchise brands looking to grow into international markets through the vehicle of franchising.

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How do you see this sector developing in the future in Ireland? Is there room for more growth?

Ireland is a great 'test bed' economy to trial any franchise offering, especially if you have international aspirations for your brand, due to its representative nature of the European markets. There is room for growth but the key question in relation to franchising is always sustainability.

Which qualities do you think are the most important for running a successful franchise?

Franchisor:

  • Business-systems driven.
  • Passionate about their brand and business model.
  • Very protective of the operational standards.
  • Commercially astute and financially strong.
  • Collaborative yet direct in their approach.
  • Able to let go of the business model once the operations manuals, audits and systems are in place.
  • Confident with great integrity.
  • A team player with authority.
  • Good relationship-building skills.

Franchisee:

  • Have the required financial resources.
  • Have great personal support.
  • Capable of following rules and operating within the framework of a franchise relationship.
  • Not looking to fundamentally change the franchise model.
  • Possessing a personal commitment to be very successful.
  • Resilient.
  • Commercially astute.
  • Organised.
  • A good relationship builder.
  • Driven and determined with a strong work ethic.
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What are the main tips you would give to aspiring franchisors/franchisees?

Franchisor’s Perspective:

  • Build a robust, best practice franchise model from the get-go.
  • Take your time and do it right. Best practice franchising is a three-to-five-year business strategy.
  • Take advice from reliable franchise experts.
  • Understand clearly that successfully constructing, implementing and managing a franchise business is not the same as running your existing business with employees.
  • Properly orientate your franchisees through a systemised recruitment process to ensure that they understand franchising, that they are capable of operating within a franchise system and that there are no expectation gaps between you. It’s the gaps in expectation that cause future relationship difficulties.
  • Don't sell franchises, grant them to suitable candidates.
  • Never make projections on behalf of your prospective franchisee partners. Let them crunch their own numbers and satisfy themselves of what opportunity exists.
  • Build a comprehensive operations manual to support the franchise opportunity.
  • Develop a best-in-class training programme and train all the franchisees thoroughly on how to operate your business model.
  • Only grant a franchise to franchisees who have successfully completed the training programme. Use your training as part of the franchisee suitability assessment process.
  • Don't negotiate different terms for different franchisees. Your franchise programme needs to be built with integrity.
  • Use 'the Golden Handcuffs' and build a strong back-end business management system that is accessible online so that the franchisee becomes dependent on this to manage the business effectively.
  • Make sure your franchisees are fully aware of and clearly understand their obligations as set out in the franchise agreement.

Franchisee's Perspective:

  • Don't get blindsided by the trimmings of the sales process.
  • Always stay focused on assessing the robustness, the longevity and the financial viability of the business model being considered.
  • Crunch your own numbers. Don't depend on the franchisor’s projections as all projections provided are done so under strong disclaimers.
  • Make sure you are passionate about the business model, the service or the brand offering that the franchise serves.
  • Conduct a thorough due diligence test before you make the investment decision. Seek advice from franchise specialists.
  • Get information on the principles of the franchise business through services such as SoloCheck.
  • Try to secure or purchase a copy of their financial accounts.
  • Check if the franchise is accredited under the Irish Franchise Association or the British Franchise Association or some equivalent regulatory body.
  • If you feel a hard sell coming on or feel under pressure to sign…RUN.
  • At the appropriate stage in the recruitment assessment process, request the contact details of all the active franchisees in their network.
  • Request a supervised viewing of the franchise operations manual and training curriculum.
  • Understand that the risk of commercial failure sits squarely with you as the franchisee.
  • Personally understand what all the terms and obligations set out in the franchise agreement mean in practice. Do not just rely on your solicitor’s approval that the agreement is ok because it is 'standard'.
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What questions are you most commonly asked?

Franchisor:

  • Why did I not seek expert advice before now?
  • How can I rescue my franchise programme when I have invested so much into it?
  • What services do you provide to prospective and active franchisors?

Franchisee:

  • Can the franchisor actually do that? Yes, if it is stated in the franchise agreement.
  • Is this going to work for sure? No. There is no guarantee as there is a commercial risk involved.
  • Surely if it isn't successful for me, I can just leave? No, as a franchisee the franchise agreement you signed is a legally binding contract and the franchisor is within his/her rights to pursue all the agreed terms of this contract even if you are unsuccessful.

What do you think are the main benefits of being involved in a franchise as opposed to running your own business?

Franchisee’s Perspective:

  • A proven business model.
  • In business for yourself but not by yourself.
  • You should be fully trained in all aspects of running the business. Therefore, you don't have to invest time, personnel and financial resources to pull together a full training curriculum.
  • Many franchises offer a fully integrated back-end business management system.
  • In good franchises the franchisor will assist the franchises if they are struggling by identifying where they are going wrong and helping to get them back on track.
  • Instant customer/consumer brand recognition. There is no need to invest in designing, building and promoting your own brand.
  • You won’t make the expensive mistakes common when developing a new business model.

What is the most rewarding part of being involved in franchising?

I get a great kick out of watching Irish franchisors growing their businesses successfully, both domestically and internationally, by following the best practice principles of business format franchising. The annual franchise awards for me sum up all that is great about franchising here in Ireland. As chairman of the association it is an absolute privilege for me to be involved in the awards night as the key representative of the association.

To watch and engage with Irish franchisors and franchisees first hand as they grow their businesses, contribute to the economy, create jobs, and generate personal wealth through franchising is so rewarding. It is inspiring to see them have the courage, the conviction, the drive, the determination and the ambition required for this role. If I can assist one or two of them in successfully constructing, implementing and managing their franchise strategy through my private consultancy practice all the better. If you would like to learn more, please do not hesitate to contact me at killeenassociates@yahoo.com.

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