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Franchisee Advice

1 Simple Rule To Avoid Bad Client Relationships

It’s simple. There’s a formula to great customer service; you and your team just have to follow it.

Basil O’Hagan

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Often what a customer wants most from a company is to be treated like a person. They want real, authentic human interaction. Mostly, this human kindness will come while you cater perfectly to their every need, deliver the goods and services efficiently and then send them on their way with a massive smile on their face.

But every now and then things will go wrong. The customer won’t get exactly what they were looking for, the service won’t be 100%, or there will be some kind of misunderstanding.

This is unfortunate and nobody wants this to happen, but occasionally it does. If handled properly, these hiccups can be converted into an opportunity to improve customer relations, build real human interaction and turn an unhappy customer into a happy one.

When a customer calls into your bank branch to complain that an unauthorised debit order was taken off her account, you should treat the person like you would like to be treated.

Related: Good Customer Service Is About Relating At The Same Level

Here is a good procedure to follow that fixes the problem while building a real human interaction:

  • Understand the problem. Listen carefully and make sure you know exactly what the client’s complaint is.
  • It doesn’t matter if they actually signed an authorisation and it’s technically their fault. This isn’t about who’s right or wrong. It’s about building a relationship on good customer service.
  • Take immediate action. Fix the problem timeously. In this case, reverse the debit order.
  • Ensure it doesn’t happen again. That means working out who authorised the debit, and why, and adjusting your systems so it doesn’t happen again.

If you go through this process as efficiently and as pleasantly as you can, you might find the customer comes out the other side in a pretty good mood. Their complaint has been acknowledged, they’ve got an apology and it’s been sorted out.

Manage Client Expectation

Communication is a crucial skill in all aspects of business — you can seldom have too much of it. Customer service also improves the way we communicate.

New customers especially, need to be told what to expect from their interaction with you, so you need to communicate with them.

If you don’t, the great work you’re doing for them can be misunderstood and lead to complaints simply because the customer doesn’t understand your process.

Case Study: Managing client expectation

Let’s imagine you run a florist. A customer comes rushing into your store. He wants a flower arrangement immediately for his wife’s birthday tomorrow. Half out of breath, he insists, “Just sell me one now.” But you’re a custom florist — you don’t have many floral arrangements ready to go.

You need to explain to your customer that all your bouquets are made to order. He can make a selection from your online catalogue, provide the address and his selection will be delivered the same day.

So, while you can supply a quality arrangement quickly and efficiently, you don’t supply over-the-counter bouquets immediately.

Related: What Does Great Customer Service Actually Mean?

Other cases where client expectations should be managed:

  • For instance if a client is buying outdoor media advertising, the execs should explain the process, and the timelines before the client’s ad appears on a billboard.
  • Any service that involves a wait. Why is there a wait? How long will it be? What is the best way to see out the wait? Communicate all this to your customer. The Hartbeespoort Cableway, for instance has signs all along their queuing area announcing, ‘expected queuing time from here: 15 minutes’
  • New services. We all know how toy shops work. But what exactly happens at the Build-A-Bear Workshop? It’s a new concept that needs to be clearly explained to new customers who are trying it out.
  • A problem. Has your computer system gone down? Are you experiencing ‘unexpected call volumes’? All of these should be explained to the customers affected so they know what to expect.

How To Lose A Customer

managing-client-expectations

A customer who complains won’t necessarily stop supporting your business. If you resolve her complaint properly, she might become your most loyal customer ever. On the other hand, you often never even know about the customers you lose.

These people have a disappointing experience, and then they walk out of your business and never come back. That disappointing experience is usually poor customer service.

Here are some no-nos that will cost you customers every time:

  • Disinterested staff. This would be someone just going through the motions, unable to raise a smile, lurking with folded arms and only there to ring up purchases and collect a pay cheque. A customer will always prefer to shop somewhere with dynamic, friendly staff.
  • Poor atmosphere. This includes the cleanliness of your premises, your phone manners, attitude and appearance of the staff, the music and the lighting. If you don’t have a good vibe, people don’t come back.
  • Pushy sales people. A telesales person who hounds a potential customer will only end up getting blocked. Likewise those timeshare agents who pounce on every hotel guest they see. Your first instinct is to avoid them.
  • Slow service and response times. If someone orders a printer from your electronics store and you never get back to them, they will never return. I guarantee it.
  • Hard to pay. If your store doesn’t have a speedpoint machine and you have no change in your till, or your ‘systems are down’, then not only don’t people want to buy from you, they can’t.
  • I once almost bought a second-hand car from a dealer who said it had only had one owner, a 90-year-old man. His colleague told me it was a 60-year-old woman. I would have felt more comfortable with someone who under-promised, rather than over-promised and made
    up stories.
  • No staff available. If no one answers the phone, or I can’t find a shop assistant, or no cashier is prepared to ring up my purchases, I don’t buy anything, simple.

Related: Go Above And Beyond With Your Customer Service

Avoid these at all costs — whether customers complain about them or not.

Customers want authentic human interaction and you can give them that by catering to their needs as well as possible. Deliver the goods and services proficiently and they’ll not only leave smiling, but return for the same experience.

Basil O’Hagan is the founder of both O’Hagan’s and The Brazen Head. Today, he runs Basil O’Hagan Marketing, which serves chains, independent operations and small family businesses, pinpointing and overcoming problems through proven neighbourhood marketing solutions.

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Franchisee Advice

Types Of Funding Available For Franchisees

If you’re interested in investing in a franchise, there are a number of funding routes available to you.

Darlene Menzies

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In South Africa, a franchise is considered a separate, specialised field of business and from a financing perspective is viewed differently to an existing business. It’s typically easier to get funding for a franchise as franchises have a proven product and they vet potential franchisees and offer support to new business owners. This support can include extensive training on running the franchise, branding and marketing, operational policies and procedures and a highly-tuned supplier network.

The reputation of the franchise will, to a large extent, dictate which finance options you choose and how easy it will be to raise the required funds.

It’s important to understand the cost of purchasing the business and the expected operating costs to work out how much finance you’ll need until the business starts to generate profits. Be clear about the upfront costs, including access to the brand, the market structure, start-up support and the set-up fee, which usually includes construction, equipment, stock and other necessary resources.

Related: 6 Great Tips For A Successful Shark Tank Pitch

Consider the operating costs, which must include management service fees and franchise marketing and advertising levies. The franchisor will advise you on the time it should take for the franchise to start generating profits. Upfront costs plus operating costs are the total amount of finance required to purchase, set up and run the franchise.

What’s available for prospective franchisees?

Franchisor Funding

Many of the large franchisors have their own funding mechanisms. These can range from their own established finance arm to funding assistance through partnerships with external lenders. Franchisors seldom fund 100% of the purchase costs; the amount of funding varies according to the size and reputation of the franchise and usually ranges from 25% to 75% of the costs.

Once a franchisor approves you as a franchisee, your chances of being approved for funding are significantly stronger. Some franchisors go a step further and suggest a business partnership with another potential franchisee who has good financial resources but less experience. Pairing experience with finance can be a useful option, but needs to be explored properly as it is a long-term partnership that must work for both parties.

Tandem Funding and Specialised Franchise Funders

South Africa’s B-BBEE legislation has led to a new option for franchise funding. It’s a particularly innovative way of quickly upskilling inexperienced potential franchisees. The franchisor funds the new franchise and retains ownership of the majority of shares in the business.

The franchisee initially purchases a small number of shares and is then mentored by the franchisor to set up and run the franchise. Profits are used to buy more shares until the franchisee has purchased all the franchise’s shares.

Specialist franchise funders are also a useful option. They typically consider a wider variety of franchises than banks and have in-depth knowledge of the industry. However, like other funders, their primary concern is to be sure that the loan will be repaid within the required period.

Related: Expansion Funding Options For Your Growing Business

Franchise Funding from Banks

franchise-funding-from-banksAll of the large banks have specialised franchise funding departments. Their approval rate for funding franchises is generally higher than for independent businesses.

Banks will expect you to provide a sizable contribution toward the purchase of the franchise and funding is dependent on proof that the business will be able to repay the loan.

Other factors they consider are the location of the business and its proximity to competitors and catchment markets, your level of business experience, your credit record and the amount and type of support offered by the franchisor. The higher the level of support, the less the risk to the funder of the business under-performing.

If the franchisor is willing to enter into a joint venture with you to partially fund the purchase, the bank will consider this positively as it means the franchisor has a vested interest in helping you to succeed.

Government Franchise Funding

All of the government funding agencies offer franchise funding primarily to encourage black entrepreneurs to enter into the franchise business. For example, the National Empowerment Fund considers funding based on a minimum of 50,1% black shareholding, provided that the black shareholders are actively involved in managing the business.

They prefer to fund well-established franchises, fund up to R10 million and expect to exit within seven years, so you’ll need detailed projections to show that the loan can be repaid within that period. Ithala Bank considers funding for KZN-based approved franchisees who do not have collateral.

Related: Should You Purchase An Existing Franchise?

What funders expect from you

Lenders expect you to provide detailed information that will enable them to assess the risks of lending to the franchise. This means they require a detailed business plan, comprehensive and well- substantiated financial projections and full details of the franchise, its agreement terms and the levels of support they will provide. They will also need details of start-up costs; for example, construction, set-up costs, equipment and other resources required to establish the franchise.

Franchise lenders expect you to have concluded discussions with the franchisor and want to know that you have been approved. This pre-approval means that there is less risk to them. You’ll also be expected to provide feasibility studies from the franchisor.

The purchase of a franchise requires an injection of your own cash and if you are borrowing money, you’ll probably need to provide collateral. You’ll need a statement of personal assets and liabilities for each of the directors, a good credit record and detailed CVs of the owners to show the required business experience.

Choose wisely

The more well-known the franchise, the higher the price, so do your homework before applying for finance. Understand the full cost of starting and running the business to make sure you aren’t in for future surprises. In particular, work out your current liquidity status.

Keep a small contingency fund available for unexpected expenses, so don’t invest all available capital in the venture.

Shop around. Compare finance institutions’ offerings to make sure you get the best deal. In the case of less expensive franchises, consider working with a couple of lenders; for example, an asset funder to fund equipment needs and a franchise funder for the start-up and working capital costs.

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Franchisee Advice

Factors To Consider Before Signing Up As A Franchisee

Franchising is a brilliant way to get into business with not many entrepreneurial skills as it comes with a roadmap to follow for success.

Diana Albertyn

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You’ve been considering entrepreneurship for a while, and now that you’ve finally raised some money and been approved for a loan, you’re ready to quit your 9-5 job to run your own business. You may even already have your eye on a particular franchise, but while franchising is considered an easier and more low risk way to get into business, are you suited to being a franchisee?

“The question is not ‘is franchising right for you’, but rather, are you right for franchising? Because if you don’t have the right attitude and skill set, it can be a very expensive mistake,” says small business expert and author Steve Strauss.

Franchising may seem like an easy way into entrepreneurship, but along with an established name and proven systems, come rules, regulations and little room for creativity. If you’re not ready to become a franchisee, but want to go into business for yourself, you may find yourself struggling to operate within the system’s blueprint.

Ask yourself these three questions before proceeding with the process of franchising:

1. Will you be able to follow the directions of the franchisor?

You’re buying into an existing and proven concept so it’s safe to assume that the franchisor knows best, and so you have to be open to learning and following guidelines for business success. If, for example, you have experience in advertising and think you have an improved technique of marketing the franchise, you may want to change the advertising material provided by the franchisor – don’t.

Related: 3 Ways You Can Innovate And Improve As A Franchisee

“Being a franchisee means following the directions of the franchisor, even when you think you know a better way,” advise experts from strategic and tactical advisory firm MSA Worldwide.

“In addition to initial training, you need to be prepared to accept coaching and advice from the franchisor on how you operate or market your location.”

2. Do you have the need to experiment?

Lou Groen may have had success in launching a new menu item that McDonald’s approved of in 1962, but not all franchisees are that lucky. Stick to the plan and limit deviations to the menu or anything that involves the customer experience.

If the franchisor’s concept doesn’t involve deliveries, offering them to your customers may cause issues for others within the franchise system. “If it’s not part of the franchisor’s concept, you’re deviating from the concept and therefore, no longer running your store as a franchise,” according to MSA. Franchising arguably limits innovation opportunities, so if you’re prone to implementing creative ideas and evolving business offerings based on said ideas, rather start your own independent business.

Related: 3 Pricing Tactics To Recession-Proof Your Franchise

3. Are you a team player?

These first two questions you address should already lead to the realisation that everything you do affects everyone in the franchise chain. One bad experience at your establishment and suddenly, all the stores are affected by bad press or unsavoury social media attention.

“Other franchisees are relying upon you to offer to the consumer a consistent level of service, product quality, and brand message. You are going to have to work with others in the system in making decisions,” advise experts.

Remember that as part of a chain of other business owners, you may have to accept that majority rules when it comes to decisions where franchises do have a say.

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Franchisee Advice

3 Ways You Can Innovate And Improve As A Franchisee

Although your role as a franchisee isn’t really to innovate, there’s room for creativity if you go about it the right way.

Diana Albertyn

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When you signed on the dotted line after reading and agreeing with the franchise agreement, you knew that you were buying into a proven system where everything has already been thought out for you, and all you have to do is follow the formula for success.

But you’re a franchisee longing to put your own imprint on your business, and it may be frustrating to feel boxed in by a formula, while you’re bursting with new ideas.

“Franchising, by its nature, discourages innovation on the part of franchisees, who are required by their franchisors to follow very specific policies and procedures on exactly what they will sell, how they will make or deliver it,” notes Randy Myers, contributing editor for CFO and Corporate Board Member magazines.

Related: Types Of Funding Available For Franchisees

This doesn’t mean your ideas will never see the light of day though. But before you approach your franchisor with your brilliant insight, consider the following steps that may well lead you down an innovative path:

1. Get the basics right first

Franchisors know that customers like consistency as it makes them comfortable and trust every location of their franchise they choose to visit. But, even the strictest franchisors get hungry for new ideas. It’s the timing that’s vital for your idea to even be considered.

“Most good systems don’t want new franchisees to even think about innovations until they learn the existing system inside out and prove that they can execute it like a star,” said Jeff Elgin, CEO of FranChoice, a network of franchise referral consultants. “At that point, they have become successful, their base is secure, and they have earned the right to consider innovations.”

It’s wise to ensure you’ve learned your franchisor’s existing business model before you suggest any improvements.

2. Do your homework

So, you’re doing well and you’re sure your idea will be welcomed as a crucial innovation to the franchise system – but research your proposal, suggests Kim Stevens, VP of Regional Development and Director of Franchise Awarding at Woodhouse Day Spas. “Especially if you’re suggesting something that would impact all franchisees, create a business plan before approaching your franchisor,’ she says.

Related: To Buy Into A Franchise Or Purchase A Licence? 3 Factors To Consider

It’s also good to have another look at the franchisor’s policy for accepting new ideas to ensure you’re prepared for tough questions before you propose your idea.

3. Speak to the right people

Elgin recommends you first identify the person at the franchisor’s head office who’s responsible for receiving new ideas. “Many of the ideas a franchisee comes up with will already have been proposed by another franchisee,” notes Elgin.

To avoid wasting your time, no matter how great you think the idea is, present it as early as possible before spending anything developing the idea.

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