Saturday, 12 August 2017

Diminished Value of a Successful Franchise

I have resigned as a customer of my local Brumby’s Bakery. But more on that later.

Buying a franchise is a popular means of becoming a business owner. If it is a well-established franchise with proven business and operational models, it is considered a relatively low risk and therefore appealing avenue to self-employment.
A franchise entrant may buy a new outlet or facility, opening and operating in an area or territory not previously serviced. Alternatively, purchasing an already operational and successful franchise may be preferred, and potentially reduce business risk further.

When buying an existing franchise, all things financial are considered when determining the value of the business. Other factors that may form a part of the purchase price include retail traffic flow, consistency of sales over a period of time and a value for goodwill.

I have been a happy and satisfied Brumby’s customer for about 4 years.

I referenced “my” store as being my local however the reality is, I pass several other Brumby Bakeries to shop at my preferred outlet.

I have been a customer of this particular outlet because the service has been outstanding over a long period. The staff are happy and engaging, work diligently, quickly, remember you and provide a really fulfilling bakery experience. They have also been there for as long as I have been a customer. One did have time off for the birth of her third child.

Occasionally you see the actual Baker who I also assume is the owner and he is equally happy, friendly and obliging.

On several occasions over the last few years, it was no surprise to see they were voted the best Brumby’s in Queensland or something similar.

The franchise has a new owner.

The franchise also has all new staff and a different feel, completely different.  After 3 of my last 5 purchases, I arrived home to discover they have not sold me what I asked for – and it is too far to go back.  Today was my 5th visit.

Errors aside, the new service is now at exactly the level of all other Brumby’s, so I will go where it is more convenient in future.

I am sure other customers will notice a difference too and while they may not have easily available alternatives, they may be tempted to try more economical suppliers or reduce their spend to essential items only.

I suspect a business buyer needs to do a little more than simply review the financials when buying a business.

I suggest they need to better understand more of what has made the business successful. They should ensure understanding of what is it about the staff and the relationship with the customers that makes a difference? How much does this relationship and service ethic contribute to “up sales”?

People are the most valuable asset in every business and in this case, they swapped them for younger, less experienced lower cost options.

Whatever the price the new owner paid, it is now too much.

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