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Franchisee Advice

Ten Good Reasons Franchise Buyers Need a Lawyer

Before you sign for that franchise, have a pro read the fine print.

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Finally you’re poised to become an official franchisee.

You’ve completed due diligence: researched potential firms, found a product that ‘fits’ with your interests, interviewed ten to15 other franchisees to hear the pros and cons. You’ve narrowed it down to the business you favour and it’s time to sign on. Then, the franchisor provides a copy of the franchise disclosure document and agreements.

Whether you understand it or not, once you sign, you are legally obligated to uphold all the document’s provisions. Now is when you need to consult a lawyer. Too often they aren’t called in until there’s trouble, but with your buy-in fee at risk, it is well worth the extra cash for an expert’s oversight.

But not just any expert. Go to a specialist. Anyone looking to open a franchise should get professional advice either from an attorney or from a franchise firm that has some experience in the field. Your local general practitioner isn’t going to have a clue what they’re looking at. A franchise attorney knows what to look for, otherwise it’s a waste of time and money. You don’t want to pay them to learn.

Talk to My Lawyer

In case you’re still hesitant, here are ten good reasons to bite the bullet and invest in legal counsel.

1. Setting Up the Business Entity

For tax and liability purposes you have to establish a formal business. Whether you decide to operate as sole proprietorship, limited or general partnership, private entity, etc, the lawyer will work with your accountant to help you choose the arrangement that will best protect your home and personal assets from liability claims and ensure your proper percent of the profits.

2. Plain English

When you read it, you may not always get the details of the deal; the lawyer reads the documents and explains. Attorneys are familiar with the terminology, recognising standard conditions and clauses and alert to red flags when there are unusual demands or missing critical items. In evaluating the company’s track record, one warning sign is litigation history. Your lawyer will be wary of any past lawsuits or bankruptcy filings involving the firm or its principals.

3. Looking for Negotiables

The franchisor holds the cards; you are the franchisee and there’s not much leeway for discussion. With the playing field tilted in the franchisor’s favour, the lawyer’s job is to level it. Depending on the company’s leverage – how long they’ve been operating, the extent of their business and experience, how eager they are to expand – some franchisors may soften some of the terms. While the monthly royalty and advertising fees you’ve assessed are probably set in stone, there might be room for concessions on time deadlines for your start-up date, ‘grand opening’ support and how much time you’re allowed to correct transgressions before they call a default.

4. Setting the Boundaries

The size and extent of the sales territory you are granted is critical to protect you from undue competition. The lawyer clarifies the extent of your dominion, determining the geographical area and demographics you’re granted for your outlet. How many kilometres is its radius? Are the boundaries guaranteed? What exclusivity or protection is granted? Do you have the right to relocate if your lease expires or if your shop turns out to be in a bad business location?

5. Support

The franchisor agrees to provide back-up support for your fledgling business and the lawyer helps spell that out answering questions such as: What kind of instruction will you get? How many days or weeks will it take? Will it occur at headquarters or close to your home? If away, who pays travel? McDonald’s, for instance, requires nine months of on-site training.

Once you’re up and running, how much will the franchisor monitor your business? Does the company provide a free operations manual and how often is it updated? What restrictions specify details of remodeling, redecorating, obtaining supplies, uniforms or ‘trade dress’?

All franchisees are required to contribute to the advertising fund. This must be carefully worded regarding possible challenges to how ‘advertising’ is interpreted. Is it brochures? Flyers? Booklets? Media ads? Local or national? Who pays for the company website, is it supported by the firm or by the advertising royalties?

6. Disputes About Performance

Both you and the franchisor are expected to honour the letter of the arrangements between you, and clarifying default conditions is a critical element of protecting you if something goes wrong. What happens if one of you doesn’t perform up to par?

Failing to pay royalties or to uphold franchise standards are common areas of dispute. Are you expected, for example, to pay a minimum Management Service Fee each month whether or not you meet your required gross sales? Careful legal language is required to ensure your ability to cure a default.

7. Renewal and Termination

While you may be entering the franchise gung ho, the lawyer steps back and considers what happens if something goes wrong.

  • Under what circumstances can either you or the franchisor end your relationship?
  • Can you be dismissed if you fail to meet performance levels or if the franchisor merely decides to move from that location?
  • Can the franchisor cancel your agreement if you lose your lease?
  • Are you planning to be able to renew when your current agreement expires?
  • If so, are you required to remodel?
  • What rights might you have to sell or transfer your franchise location to someone else?
  • Would the franchisor have a right to veto potential buyers?
  • What about disabilities and death?
  • If your franchise fails, will the franchisor be required to purchase your inventory and supplies?
  • If you terminate, will you be able to pursue other business opportunities without undue hardship?
  • On the other hand, what provisions are there if you decide you want to expand to additional franchises?

A good franchise can help fulfil your dreams but you have to keep your eyes wide open – and two sets of eyes are better than one. Typically a franchisee has already identified a franchise concept and fallen in love. At that stage, it is very useful to have someone who is detached review the agreement and look at the system non-emotionally to be sure you understand the commitment you are facing.

8. Dotting the Is, Crossing the Ts

Once you’ve decided to go ahead and buy the business, the lawyer oversees the paperwork before you sign, preparing the asset or stock purchase agreement along with other documents that may be required.

9. Negotiating with Other Parties

In setting up a business, you’re apt to be hiring contractors, arranging deliveries with suppliers, employing staff. A lawyer helps work out the stipulations and clarifies responsibilities. For instance, when you’re leasing a business site, a lawyer may alert you to the required language that ensures you’re allowed to post signs and logos on the property.

10. Managing Dispute Avoidance and Conflict Resolution

Despite the care taken in drafting agreements, disputes do arise. Some common issues calling for litigation include lying about earnings, failure to provide ongoing training and support, terminating the franchise and enforcing post-term obligations.

In starting your search for a lawyer, word of mouth can be a very effective first step, so ask friends and colleagues for referrals. Then, do some research on the Internet. Besides legal firms specialising in franchise law, potential franchisees can also consult with search firms and brokers that specialise in matching up franchisors and franchisees. Additionally you can turn to FASA for a list of suppliers as well as some advice.

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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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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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