Should franchisors charge franchisees for their training?

By Sarah Stowe | 29 Oct 2015 View comments

Should franchisees have to pay for their training separately from the franchise fee, or can training be considered an essential part of the ‘all-inclusive’ business package?

There is certainly an argument for cost transparency which means incoming franchisees can see where there money goes. Corinne Attard, partner at Holman Webb Lawyers, says “An existing franchisee may not require the full training so the training fee can be tailored to suit. If more training is needed it can also be justified and charged for accordingly. It is more transparent which has to be for the benefit of both parties.”

Vivienne Beech, franchisor of Resort Room Coffee, says “Personally I feel franchisees take more responsibility for learning systems and implementing them and the role they play in getting results when they pay for the training and a value has been placed on this training.”

But could a franchisee justifiably feel they are paying extra for something that should be integral in the franchise fee?

“It may depend on the cost of the franchise, the higher the cost the more they may want it all included,” says Beech.

According to Ken Rich, director of franchise training at US business CPR (Cell Phone Repair), if training is good, no-one has a problem paying for it on top of their franchise fee.

“If I teach someone how to professionally run their business – all aspects – and do it in a way that not only makes sense to them but it’s something they can replicate, then I can feel totally safe in telling them there is a training cost, what it contains and a time frame.

“Then with an ongoing training process there will be webinars, regional training, visits from an RSM [ ] who knows about all segments of the business, then I can charge for that and I want them [franchisees] to know that it’s outside of their initial investment.

“I just think if you separate it, you get to give it more value and it has more potential impact.”

All inclusive costs?

Full House Group licensee Tracy Richardson disagrees. “I believe start-up training should definitely be included in the cost of the franchise. This is what a franchisee purchases: a proven business model that they need to learn and understand. This, to me, is definitely part of the purchase.”

Richardson, who operates her license in the Sydney area, believes that ongoing training should also be included but the inclusive packages shouldn’t extend to specialist skills training.

For Ray Margiano, CEO and founder of Balance Walking and the international franchise chain Foot Solutions, there should be no hidden cost in a franchise fee.

“I believe that the cost of training on an ongoing support should be a cost covered by the franchisor. That is why they get a continuing royalty and upfront fee. There is not a concept out there that cannot be copied or closely duplicated, so there has to be real value in why a person chooses a franchisor. Training is a key factor in the success of any business and certainly is critical for people entering a field they know nothing about.”

Former franchisor and now consultant Carolyn Dufton conducts training sessions for clients. For one top-class franchise system an initial session is included in the induction training for new franchisees. “We spend a morning with the franchisees presenting on "Being the best in franchising". We find it really helpful at this point when the franchisees are eager and receptive to get some key points across in an interactive session. We also talk about franchisors' best practice too so it's a balanced discussion.

“Induction training is usually at a separate cost to the franchise fee and is disclosed fully,” she says.

Ongoing training

Kate Groom, co-founder of SmartFranchise, says that to offer the training needed these days, franchisors must pass on some of the costs directly to franchisees rather than hoping they will recover them through increased revenue.

“My experience is it's entirely possible and reasonable for franchisees to pay directly for training that benefits their business. I believe it's also vital for franchisors to encourage franchisees to participate in external training if they are to get the type of development and fresh perspectives that's needed to stay ahead.”

The general manager at Fastway Couriers Sydney region, David Ciantar believes general franchisee training costs need to be shared. “Franchisors are always challenged to provide ongoing training for the more "mature" longer serving franchisees,” he says. “Training shouldn't be regarded as an initial project or good deed before a franchisee commences. Really strong franchisors will put aside dollars for ongoing training.”

But franchisees who invest in their own training, will see the benefit of their own businesses growing and becoming more profitable, he adds. “External courses are sometimes the answer to self-investment and acquiring more knowledge that the franchisor may not be able to give or teach.”

Steve Johns, director at Collaborative Business Solutions, says “Ongoing training is a component of the franchise agreement and is covered as a part franchise fees,” he says.

"Ongoing Training is a complex issue and difficult to classify and apportion a cost to. Separate costs or percentage apportioning isn't feasible. Any attempt to charge for ongoing training could possibly just add to the already high cost of doing business and ultimately be detrimental to the brand.”

Case study: Poolwerx

A brand new training centre will give the company a significant boost by providing a greater depth and breadth of hands on training for franchisees and staff, says Ian Jenkins, Poolwerx learning development manager.

Training is included in the total entry fee to join the Poolwerx system and is costed so franchisees can account for it appropriately in their first year of business.

Q: How much time is spent on training in the beginning?

New franchisees undertake a three week training program at the recently opened world class Global Support Centre. Known as Pool School, this program offers everything from practical and technical training in pool maintenance through to retail training in sales techniques, merchandising and POS management, and formal business skills training. 

Following this, the company offers 16 hours of online self-paced pre-learning, encouraging franchisees to continue with the good habits program in the first few months of trading.

Q: What about the costs of ongoing education?

Franchise-specific training is provided throughout the year as part of the overall offering at no extra cost. This includes access to Pool School, Winter Workshops, online training modules, one-on-one field training with field staff and technical advisors. Product-specific training is also offered during monthly business meetings and via online modules as and when products are brought to market at no additional cost.

If a franchisee wishes to send a team member to any part of the Pool School induction training (held every quarter), there is no additional cost to do so except for personal travel and accommodation.

“Every year during our quieter months (May to July), we offer franchise partners and staff our Winter Workshops program, which involves an in-depth one day training program in each state covering specialist product, marketing, software and business training modules. Again, the only cost is accommodation and transfers if required. 

“We also have an annual three day convention in August which is arguably the biggest information sharing and learning opportunity for our entire network. The fee for attending these events is subsidised by half through utilizing our partners and suppliers.

“This past year we have sourced Federal Government funding to assist our Franchise Partners to receive the industry’s new qualifications, Certificate III and Certificate IV in Swimming Pool and Spa Care Service.”

With the two-thirds Federal government contribution, Certificate III costs Franchise Partners $500 and Certificate IV costs $510 respectively.

Q. Has the amount of training provided increased in recent years?

“Yes, particularly around our specialist CRM software – Evosus. This entails one-on-one training sessions, live group webinars, recorded training videos, onsite training and involvement at business meetings – all at no additional cost. Training manuals are shared with franchise partners and staff for further instructions on how to use the system.”

The Datamate water testing software was recently introduced to the network with training delivered through the retail executive and supplier. This is done through business meetings and in-store at no additional cost. The training involves how to use the software, how to prepare and analyse the reports for clients. Software updates and training are shared with franchisees through group forums.

“We also have a variety of digital online marketing platforms that help make LAM easier. To support this, we have a free online learning management platform to aid in the management of this important part of our franchise partners’ businesses.”

Q. Will the creation of the training centre mean an increase in this element of franchisee support?

The opening of the new training centre coincides with Poolwerx’s Federal and State (Queensland only at this stage) funding for the delivery of the Certificate III and Certificate IV in Swimming Pool and Spa Service qualifications.

“We are now able to offer new and existing Franchise Partners the best training on offer in the industry and a nationally recognised certificate, giving them a huge lead in the marketplace at the start of their journey.”