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Franchisee Advice

Franchising Mistakes You Need To Avoid

Here are six common mistakes companies make when seeking to franchise their business.

Mark Siebert

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I’ve seen hundreds of businesses succeed at franchising, but I’ve also seen a number fail. While the paths taken by the successful are many and varied, the paths to franchise failure are surprisingly predictable.

Failure, like success, does not happen without reason. It happens because people made the wrong choices. Unfortunately, the mistakes we make in business are often avoidable.

Related: Financial Facts you Need to Know About Franchises

Ready, Fire, Aim

Probably the single greatest mistake made by budding franchisors is a lack of planning. Too often, we find that new franchisors start out by asking their lawyers to draft their franchise legal documents without giving a thought to the importance of the business decisions that these documents contain.

Franchising is like business on steroids. Small mistakes get replicated over and over until they cause major failures.

A small mistake on a royalty – multiplied over 100 franchisees – can cost a franchisor tens of millions of rands. That is often the difference between success and failure.

There are dozens of these make-or-break decisions that an entrepreneur needs to make when structuring a franchise offer.

Me, Too

follow-the-leader

Closely related to the issue of planning is the ‘follow the leader’ mentality that often finds its way into the franchising process.

Many entrepreneurs will come to franchising after observing successful competitors, believing that success depends on duplicating their strategy. This could not be further from the truth.

Few of us are old enough to remember that when McDonald’s first arrived on the scene, it was promptly greeted by dozens of knock-off concepts that have long since disappeared. Why did Burger King succeed? It said, ‘Have it your way,’ and dared to be different.

Too often, we see franchisors whose business strategy seems to be to duplicate that of their largest and most successful competitor, only to find years later that the strategy failed miserably. The key to success can lie in differentiation.

But even if its competitor did a good job of planning – and there is no guarantee that it did – the new franchisor’s circumstances are different.

A different business model. Different management team. Different philosophy. Different market. Different investment requirement. Different training requirements. And if nothing else, different competitors.

Copying the industry leader’s strategy is not a strategy. It is often a recipe for disaster.

Do-It-(Wrong)-Yourself

New franchisors typically have one thing in common: They are already running a successful business. The entrepreneurs who founded these businesses are almost universally resourceful, self-confident, and accustomed to substituting hard work for growth capital.

Odds are good that they built their first business without relying on outside help, so why would franchising be any different?

The business of franchising requires the franchisor to have or acquire expertise in a number of areas in which they probably have limited experience. These, to name a few, may include strategic planning, organisational development, financial analysis, franchise legal documentation, operations documentation, training, franchise marketing and franchise sales.

Related: Understanding the Terms of Agreement

I often see new franchisors relying on their internal resources and a local lawyer who does not specialise in franchising, only to repeat mistakes that were easily avoidable. Trial-and-error is an expensive way to learn franchising.

Failure to Budget

Franchising can be a low cost means of achieving rapid growth for your business. But it is not a ‘no cost’ means of growth.

To start franchising, new franchisors usually need to budget time and resources for the development of strategic plans, operations manuals and marketing materials.

They need to anticipate legal fees associated with the development of their contracts, disclosure documents and registrations.

They are likely to have accounting, printing, travel and other associated expenses as well. And they will need to invest in franchise marketing and in building the franchise organisation.

For franchisors who only want to sell a franchise or two and just get their feet wet, the investment in franchising can be minimal. But for a franchisor with aggressive growth goals, these costs can be significant.

Can’t Say ‘No’

One of the biggest mistakes in franchising can happen soon after the franchisor initiates its franchise sales efforts.

After spending a few million rand on the development of a new franchise programme, franchisors generally come out of the gates ready to sell. And when a marginal candidate comes to the door waving a cheque for R400 000, the first instinct may be to recapture some of the capital invested in franchising.

But these first few franchise sales can end up being the ones they regret in the future. Nothing is more important to franchise success (and to a brand) than the quality of its franchisees.

The best franchisors start with high standards from the outset, knowing that these franchisees will be brand ambassadors for years to come.

Focus

Perhaps the most ironic mistake made by new franchisors is that they do not fully understand the single most important tenet of franchising: Make your franchisees successful, and you will succeed as a franchisor.

Young franchisors may focus on how fast they can grow the business, when they should be focusing on making their franchisees successful.

Related: Franchise Or Start-Up?

Successful franchisees pay more royalties, require less support, provide great public relations, buy more franchises for themselves and promote the brand to prospective franchisees. Failing franchisees cost more, pay less and make it harder to sell and grow.

The greatest strength of franchising — the ability to grow largely unconstrained by the constant demand for investment capital – can also be its greatest weakness.

Sell faster than your ability to support your franchisees, and you’re likely to fail as a franchisor. Focus on their success, and odds are good that success will follow.

As a franchise consultant since 1985, Mark Siebert founded the iFranchise Group, a franchise consulting firm, in 1999. During his career, Mark has personally assisted more than 30 Fortune 1000 companies and over 200 startup franchisors. He regularly conducts workshops and seminars on franchising around the world. For more than a decade, Mark also has been actively involved in assisting U.S. franchisors in expanding abroad. In 2001, he co-founded Franchise Investors Inc., an investment firm specializing in franchise companies. He's on the board of directors of the American Association of Franchisees and Dealers and the board of advisors to Connections for Community Ownership, which encourages minority business and job development through franchising.

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Company Posts

Col’ Cacchio: A Passion For Pizza

Greg Mommsen left the IT industry to join the restaurant trade and set up Col’Cacchio Bryanston in 2003. Greg is now a director at the Col’Cacchio group and shares the success of the 25-year-old brand and his journey as both franchisor and franchisee.

Nedbank Franchising

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Greg Mommsen

Vital stats

  • Player: Greg Mommsen
  • Franchise: Col’Cacchio
  • Established: 1992
  • Visit: colcacchio.co.za

What are your daily challenges and advantages, as a franchisor, in both corporate and franchisee stores?

col-cacchio-pizza

With the ownership of corporate stores we have the opportunity to test and trial new products, IT upgrades and new innovations within our corporate structure upfront. This way we can gauge the success of these initiatives without disrupting the franchisees.

Due to the hands-on nature of Col’Cacchio restaurants, it’s proven to be successful when restaurants are owner-operated.  This becomes a challenge with the corporate stores where reliance is placed on managers to run the restaurant.

Catering to the individual needs of corporate and franchisee stores from an operational support point of view can also be challenging.

Related: Col’cacchio Holdings Launches First Base

What contributes to the success of Col’Cacchio as an iconic Italian franchise?

Italian franchise

We have taken our time to expand the brand and have rolled out new stores at a slow and steady pace. Choosing the right franchisee partners and the right sites has been key to our success and sustainability. It always remains a major focus for the brand to produce products that are best in its class, and we take great pride in having a hand-crafted and exclusive product offering.

How do you continue to stay relevant in a niche market?

pizzeria-niche-market

To ensure that we are on trend with the market, we constantly reinvent ourselves through innovation. Our menu items are updated every six months and we continually broaden our offering to ensure that we evolve to stay ahead of the curve. We strive to be the consumer favourite in Italian food and offer a premium product that is of the best quality, value and overall experience.

Col’Cacchio has a great application-based loyalty programme that puts us at the forefront of change. On-demand purchases and deliveries have become a major trend in the market and we are currently evolving our online ordering solution to accommodate this need.

Related: Col’Cacchio Launches Mio

What qualities do you require your franchisees to have?

pizza-franchise-south-africa

Our franchisees have to be resilient entrepreneurs with good business acumen. However, too much entrepreneurial flair is not ideal, as franchisees need to understand and be willing to work within the brand’s guidelines and standards.

To be a restaurateur, you have to be comfortable with non-traditional trading hours and be customer service focused.

With ample new pizza brands entering the South African market, how has this affected your business?

new pizza brands

In general, the food industry has been active with the development of new brands in South Africa. We embraced this as an opportunity to develop a smaller Col’Cacchio offering with a slightly limited menu and more focused on takeout and delivery in order to cater for this segment of the market.

We continue to focus on leveraging off the strength of our existing brand by offering the best quality handcrafted products.

The menu has expanded to include light meals and breakfast in a wide range of healthy options, including gluten- and wheat-free bases and pastas, as well as carb conscious, low calorie and vegan-friendly dishes. We’re also in the process of revamping many of our restaurants, to ensure that our stores have an updated, fresh look to increase our appeal to a wider audience across the various parts of the day.

Related: The Pros & Cons Of Owning A Restaurant Franchise

Why is it important for successful franchises to have a strong relationship with their banking partners?

v-and-a-pizza

Funding is critical to the development of new restaurants. Having a great banking partner that understands your business, the industry as well as its risks is pertinent. This plays a big role when it comes to specialised funding solutions and ensuring the application process is quick and easy.

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Company Posts

Leading SA Franchise Group Cash Crusaders Continues On Its Growth Path

The company is growing from strength to strength thanks to its recession-proof business model that is built around three profit centres – specially imported new goods, secondhand trade and secured financial lending.

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National franchise group Cash Crusaders continues to show positive growth results despite a rollercoaster economy. The 1,7-billion-rand company saw an impressive 13% year on year same store growth between 2015 and 2016 with figures remaining favourable in 2017.

The company is growing from strength to strength thanks to its recession-proof business model that is built around three profit centres – specially imported new goods, secondhand trade and secured financial lending.

New store openings

The results speak for themselves. This year, the brand opened its landmark two-hundredth store in Soweto (the second store for the area), with ten new store openings following in quick succession including Mayfield Square, Robertson, Raslouw, Vryheid, Tembisa, Parow Station and Lydenberg.

Related: What Franchise Model Is Right For You?

By the end of the year, the total of new stores is expected to reach 214.

Cash Crusaders is South Africa’s largest secondhand retailer – three times the size of its closest competitor- and hasn’t stopped growing yet, with new store openings scheduled well into 2018.

A sure thing for franchisees

The brand is seen as a lucrative business opportunity for franchisees, most of whom own more than one store.

“The investment that the franchisor makes on innovation, research and development ensures we stay ahead of competition, remain relevant in the industry and persist as a strong player over the long term,” says Franchisee Damian Ohajunwa

With a successful track record of more than 20-years, Cash Crusaders is seen as a ‘sure thing’ business opportunity by potential franchise owners who see to  benefit from a proven three-tier profit system and an existing customer base.

3 Customer drawcards

Cash Crusaders’ unique business model incorporates three distinct product offerings, namely private label new goods, secondhand goods and secured loans, all of which translate into good sales figures.

Cash Crusaders’ directly-imported private label goods include home theatre systems, home and car audio, DJ equipment, musical instruments and household appliances. For value-conscious consumers, these quality products present a less-expensive alternative to big brands, a trend that’s becoming more pronounced in South Africa’s tough economic climate.

A reliable business partner

Cash Crusaders unique business model ensures franchisees have the support they need. A highly-experienced team are on hand to offer advice, planning, training and ongoing support from day one. It’s a symbiotic relationship that benefits everyone.

Business owners form part of the Cash Crusaders network, and are equipped  with a proven system of operation, thorough training and all the tools needed to succeed. The Projects Department work closely with franchisees, giving them the full benefit of their expertise from day one.

Related: Savvy Sales Skills To Grow Your Franchise Footprint

“Set up was assisted greatly by Operational Management who was involved from the get-go, from lease negotiation to build out costings and contractor sourcing. The final quality of workmanship was exceptional,” franchisee Christo Burger.

Dedicated to raising the industry

cash-crusaders-capitalThe proudly South African brand is dedicated to empowering entrepreneurs to be in business for themselves and helping them grow every step of the way.

Cash Crusaders has also shown its commitment to raising and changing the public’s perception of the secondhand  industry by advocating honest trading and regulating secondhand trade in South Africa through its association with National Association of Franchised Secondhand Dealers (NAFSHD).

The group is also a member of The Franchise Association of South Africa (FASA) and proudly subscribes to the FASA code of ethics and business practices.

“Make no mistake, Cash Crusaders is not just another secondhand business. We maintain the highest standards and ethics, and have gone above and beyond to change the public’s perception of the secondhand trade by proudly demonstrating our honesty, integrity and legitimacy,” says Cash Crusaders CEO  Sean Stegmann.

R300 000 start-up assistance

Cash Crusaders is the only franchise group that offers financial assistance to help entrepreneurs find their feet. If a potential franchisee has R800 000 in unencumbered capital, Cash Crusaders will give them R300 000 start-up assistance to cover initial running costs. T&Cs apply.

“Franchising is our passion, and our network of Franchisees are our family. From the outset, we pledged to partner with entrepreneurs who share our vison – innovative thinkers as committed as we are to building this brand. We want to do business with you and work together to ensure the success and profitability of your business. You’ll soon come to appreciate our “Make It Happen” attitude,” says Stegmann.

dont-take-chances-on-your-store

For more information about the franchise opportunities available, please visit www.cashcrusaders.co.za

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Franchisee Advice

Want To Leave Customers Grinning And Vowing To Return? Do The Following

These five quick tips will keep your customers coming back for more.

Basil O’Hagan

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happy customers

1Admit when something has gone wrong

Customers will respect your willingness to admit a mistake and effort to rectify things.

2Focus. Pay attention to customers

Don’t go into autopilot when serving them.

Related: Zappo’s Customer Service Excellence Comes Down To Company Culture

3Aim to be an expert

Don’t just be an expert salesman – be an expert in whatever your customer is interested in. The ability to offer genuine advice (instead of a generic sales pitch) is something customers will come back for.

4Pay attention to new customers

Aim to make new customers regulars by offering the sort of service they don’t receive anywhere else. A free gift can be a good idea as well.

Related: Go Above And Beyond With Your Customer Service

5Make customers feel valued

There’s nothing worse than being ignored by staff when you’re in need of service. Always be on hand when help is needed. Never chat on the phone when a customer is waiting.

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