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Franchisee Advice

Save on your Franchise Start-Up Costs

When starting your franchise, there are times when you should pay for convenience and efficiency, and times when you shouldn’t.

Jeff Elgin

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Save-Spend

Most franchise owners will tell you that they could easily have saved quite a bit of money from the costs incurred while opening their first units. This begs the question:

If this is such a universal truth, then why didn’t the franchise companies show them how to save this money as part of their training?

The answer is that they probably did.

The biggest money waster in terms of start-up costs, by far, is impatience of the franchisee. Most new franchisees are thrilled and excited to get going, as they should be, and they can’t wait until their new franchise opens for business. If there are two ways to do something, and the faster one costs more money, most new franchisees opt for speed. Those kinds of choices can really add up to a lot of money and in many cases the time gained doesn’t really produce any long-term value to offset the increased costs.

The secret to reaching the best result in terms of start-up costs is balance. If you picture the cost vs. speed quandary as a continuum, you don’t want to be at either extreme. Trying so hard to save money that you never open the business isn’t going to be any better for you than spending too much to open a little sooner than you otherwise would.

 

Where to Find Savings

There are five common expense categories where most start-up cost savings are found. Some of these are quite easy to take advantage of while others require some extra work or expertise. The old adage that ‘time is money’ applies to virtually every category since you’re usually trading some of your time to get the financial savings. The key areas to focus on include:

1. Franchise Company Fees

Though most good franchise companies don’t negotiate their fees, occasionally you’ll find one that does. If this is the case, make sure you save as much in this area as possible. Contact existing franchisees to determine what kind of deal they received so you have a ballpark idea of what’s possible. If you’re not comfortable negotiating yourself, use an attorney or someone who can drive the best bargain.

2. Turnkey Packages

Many franchise companies offer a turnkey package where nearly all you need to start, is available in a package from the franchisor or a third party vendor. In either case, the package is often chosen because it’s so convenient. Keep in mind that convenience is what is being sold in these packages – not the best value or lowest price. It’s quite common to learn after the fact that the components of a turnkey package could have been acquired by the franchisee for a significantly lower overall cost. The tradeoff, of course, is that the franchisee has to invest the time and effort to source and purchase each component to get the savings.

3. Construction Costs

Most franchises have a physical location and that site needs to be prepared according to the specifications of the franchise. There are a few simple things that can produce significant savings in this area. First of all, get multiple bids for the work that needs to be done. You won’t believe the variances you’ll see in the bids from one contractor to another.

Second, give a little thought to what you might be willing to do yourself. As an example, if you’re renting a 1 200-square-foot bay in a strip centre and the construction bid says it’s going to cost you R10 000 to paint the walls a simple off white colour, you may want to consider painting it yourself.

4. Equipment, Signage and Fixtures

This is a substantial expense category for most franchises and there are two big secrets to saving money here. The first is, again, get multiple bids on everything. It takes a little more work but you’ll see price variances of as much as 100% on things as simple as a standard sign for your business. The same is true of the cabinets and other fixtures. In terms of your equipment, you may be able to realise big savings from buying used items. Some franchises don’t allow the choice but most will allow you to source and purchase used equipment as long as it meets guidelines.

If you’re opening a business with a commercial kitchen as an example, you can potentially save a ton of money. Used equipment is readily available for many businesses and your franchisor should know of good sources in this area.

5. Lease Terms

This can be a huge category in terms of potential savings and it’s an area where you want expert advice and assistance if you’re not experienced yourself. This expertise is found in a good commercial realtor but you’ll also want an experienced real estate attorney familiar with the local market. All leases are negotiable to some extent, but most leases don’t initially offer a number of concessions that may be obtained through negotiation.

Use both your realtor and your attorney to determine what’s standard in the current marketplace in terms of items like the square foot rental rate, the Common Area Maintenance (CAM) charges, free rent periods, construction allowances and other economic terms. Then you have a baseline to use in determining if you’re getting a really good deal instead of just an average one. A good negotiator can sometimes get a landlord to include tens of thousands of rands in build-out costs into the lease that can be direct savings to you.

Learn From Others

As a final thought on this topic, remember that it’s easy to determine which areas will produce the most savings for you in whichever franchise you select.

All you need to do is ask the existing franchisees. Again, this will take some of your time but it will be an investment that can pay you big dividends in savings on your start-up costs if you’re willing to learn from their experience.

Jeff Elgin has developed a consulting system that matches pre-screened, high-quality prospective franchisees with the franchise opportunities that best fit their personal profile.

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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

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  • 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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cash-crusaders

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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