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Franchisee Advice

Buyer Blunders

The five biggest franchisee mistakes that lead to failure – and how to avoid them.

Entrepreneur

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Virtually all the business media have been guilty of glamorising the positive side of owning a franchise. Unfortunately, the negative aspects are sometimes either glossed over or simply ignored. As a result, many people go into business with blinders on, and end up well on their way to failure before they’ve even begun.

There are many common misconceptions that may ultimately lead to business failure. For starters, most people are used to working an 8-to-5 job, with a ‘boss’ directing them. When you’re in business for yourself, you must have the discipline to work independently.

You can never say “Gee, I don’t have anything scheduled this morning, so I’ll sleep in.” You must maintain the same work schedule or the same number of hours virtually every day.

If you don’t have anything scheduled, you should read educational materials to further your business knowledge and capabilities.

In addition, prospective franchisees who come from a corporate background may be used to putting in their eight hours, then putting their work behind them. Many people actually assume that when they own their own business, they’ll be able to work less and take more time off for recreation.

Unfortunately, the opposite is true. When you run your own business, you usually have to work more hours, not fewer. You have to be willing to put in long hours and, if necessary, work weekends as well. This is especially true in the start-up stage.

Blunder #1: Inadequate Financing

A considerable number of people have unrealistic expectations when it comes to the funds needed to start a business. Prospective franchisees often lack the necessary start-up funds and can’t come up with adequate financing. Furthermore, a considerable number of them have virtually no cash or liquid assets. In this case, many expect either a bank or the franchise firm to provide 100% financing.

In most instances, finance organisations will not provide someone with financing unless that person is investing a significant portion of his or her own funds, boasts a good credit record and has the means to pay back the loan. If someone has no cash at all, it usually reflects poorly on his or her ability to manage finances.

Blunder #2: Lack Of Planning

Another fact rarely considered is that the majority of new businesses fail within a few years. In most cases, business failures are due simply to poor planning or no planning at all. Most people who go into business enter a field related to their current employment or a favourite hobby. They don’t do a market study first to see whether the demand for their product or service is growing, declining or stagnating.

They also fail to allot the proper time for administrative tasks. Most new business owners assume that most of their time will be spent producing and marketing their product or service. Unfortunately, this isn’t the case. An inordinate amount of time is spent on administration – talking on the phone, purchasing supplies and equipment, filling out government forms, and taking care of other mundane duties.

Blunder #3: Unrealistic Expectations

Many individuals assume not only that most businesses succeed, but that they’re lucrative from the get-go. This is definitely not the case. It usually takes at least a year to develop a
profitable business.

As a general rule, we recommend a first-year goal of earning back your investment. Even then, the money has to be reinvested in the business. In other words, in your first year, you should have other sources of income to live on.

Blunder #4: Inability To Commit

Even though most people would like to start their own business, only a small percentage actually do it. When push comes to shove, most lack the self-confidence to make a decision and act on it. We tell people in this position that in order for their businesses to succeed, they must be able to gather information, weigh the facts and then make a prompt decision.

Blunder #5: Unwillingness To Take Responsibility

A business owner is 100% responsible for his or her mistakes. There’s always a risk of a business failure or less-than-expected financial return. If that should happen to you, you can’t blame it on someone else.

Getting Ready

Those who can overcome these obstacles are ideal candidates for business ownership. Many of these qualified people don’t make the attempt, however, because they’re (understandably) unwilling to give up the security and benefits of their full-time jobs.

My personal recommendation is this: Unless you’re currently without a job, you should start a business that can be operated on a part-time basis. Once the business has proved itself and you’ve made a little money, you can convert it into a full-time operation and quit your job. Not only are the financial risks considerably less, but this allows you to see whether you fit the entrepreneurial mould.

Finally, I’ve found that the single most important factor by far, in determining who succeeds and who doesn’t is simply the amount of effort exerted. If you aren’t ready and willing to work – and work hard – franchising is probably not for you.

Entrepreneur Magazine is South Africa's top read business publication with the highest readership per month according to AMPS. The title has won seven major publishing excellence awards since it's launch in 2006. Entrepreneur Magazine is the "how-to" handbook for growing companies. Find us on Google+ here.

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Franchisee Advice

3 Ways To Ensure Your Loyalty Programme is Working Hard For You

Plastic cards are making way for app-based loyalty programmes. Is your franchise keeping up with the digitally savvy consumer?

Diana Albertyn

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The average consumer today is a member of at least five of the 100-plus loyalty programmes in South Africa, according to a 2017 study by Nielsen. As the loyalty playing field becomes more cluttered and competitive, what are you doing to ensure each one of your franchisees are catering to customer needs when it comes to loyalty?

Mobility. It’s not the newest buzzword, but it is useful for attracting customers who don’t want to lose loyalty points because their card is lost or not with them. Ailsa Wingfield, Nielsen’s Head of Emerging Markets: Thought Leadership, says that as adoption of non-traditional payment methods increases, loyalty programmes also need to introduce payment type flexibility.

“Mobile payment platforms will increasingly deliver an opportunity for loyalty-programme engagement with consumers, providing a convenient and personalised way for programme members and retailers to engage with one another all along the path to purchase.” – Ailsa Wingfield Nielsen Head of Emerging Markets Thought Leadership.

Related: 11 Ways To Double Your Customers In 4 Weeks

Have you considered what role tech could play in your current loyalty programme? Here are three ways to apply digital enhancements that appeal to present and potential customers: 

1. Offer differentiation through more options

Research has concluded that the loyalty programmes devised by retailers and franchises are not innovative enough to capture the attention of the youth – Millennials and Gen Z. it’s time to diversify your rewards offering. But how?

If your customer base is predominantly younger, being omni-present is key, according to the Truth Loyalty Whitepaper: “An omni-channel approach will not only meet the demands of the younger customer, it will also allow your business to combine intelligence on shopping, search and web behaviour history to assist you in identifying when to offer an in-store promotion, extend a seasonal offer or make a product recommendation through the appropriate channels.”

Implementing a digital loyalty campaign is also a smart way to reduce costs. Coffee shop franchise Mugg & Bean’s Generous Rewards App and partnership with Vitality Active Rewards, means members can earn cash-back rewards to spend on their favourites. Just downloading the app earns you a R25 voucher.

2. Use your tools to engage more

A crucial mistake most franchisors make is not communicating consistently with their loyalty programme members once they’ve signed up and increased numbers. They spend a lot of time recruiting customers to join, but expect them to prompt cashiers for points’ balances and produce their cards independently in their various locations.

“You have gained permission to talk to your customers and created the opportunity to collect enormous amounts of valuable data. Use this to your advantage by creating meaningful and relevant engagement initiatives and communications across your customers’ lifecycle,” advises Truth, a boutique consultancy business specialising in customer centricity and loyalty programme strategy and design.

When enhancing your engagement strategy, Accenture advises that you keep the following in mind:

  • 54% of South African consumers are loyal to brands that actively engage them to help design or co-create products or services.
  • 57% are loyal to organisations that present them with new experiences, products or services.
  • 47% are loyal to brands that engage them in ‘multi-sensory’ experiences, using new technologies such as virtual reality or augmented reality.

Related: 3 Ways To Stop Taking Your Most Loyal Customers For Granted

3. Keep the experience simple

Review your loyalty programme. Honestly. Then ask yourself if you’ve made your programme too complicated for the layman. If your answer is ‘no’ or even ‘maybe’, how can your target consumer ever reap the full rewards of this programme if they don’t understand the rewards on offer and how to redeem them?

Changing rules too often is the first complication to go. No matter which one of your stores they choose to shop at, the redemption and earning process should be simple enough to keep members interested and engaged in the programme. Make sure you keep your programme simple and transparent.

“Clicks made a simple but fundamental change to its redemption process – paper-vouchers were replaced with virtual points that can be redeemed as cash-back when you swipe your card at the till. While Clicks and Dis-Chem are among only a handful of brands that do this, it’s a sure-fire mechanism for increasing redemption,” said Amanda Cromhout, founder and CEO of Truth.

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Franchisee Advice

3 Crucial Considerations For New Multi-unit Franchisees

Your marked success as a single-unit franchisee has led to the choice to multiply your achievement. But do you know what it really takes to move from owner-operator, to multi-outlet operator?

Diana Albertyn

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Multi-unit franchise ownership is a brilliant way to grow your business portfolio, once you’re successfully running your single location. Once you get the hang of being franchise business owner, adding one or a few more units could be the next logical step.

“The risk with having one store is higher than if you have more than one store, as the stores support one another. When the one is down the other one is up,” says multi-unit Montagu franchise owner Pierre Lombard.

You’ve probably already realised this lucrative option and are getting acquainted with multi-unit franchising. As this is new territory, you may want to consider these methods to multiply your success.

1. Make more discerning recruitment choices

When you opened shop at your first location, you were probably warned against hiring a manager, because they may not be as invested in the success of your business as you are. Now that you growing, you have no choice, so you need to be selective in your decision of who’s going to run the show when you’re not around.

Related: 3 Employment Best Practices To Apply In Your Franchise

The best way to ensure consistency in service and quality in each location is to always put culture fit over ability. While a certain level of skill is required to carry out the tasks required of a manager, attitude trumps aptitude when selecting capability running your locations.

“Place one of your outstanding managers or staff from your current store in the new one and have them train up any new staff,” suggests Francesca Nicasio, Retail Expert at Vend.

“That way the practices and attitude that you’ve cultivated in your business will continue into your new store.”

2. You need tech to help you be everywhere

Not only are Cloud technologies enabling franchise owners to scale quickly, easily and more affordably compared to on-site solutions, but these advancements mean you can remotely optimise inventory across all your locations, get a more accurate assessment each store’s performance and better understand your business – all you need is an Internet connection.

With the variety of Cloud-based solutions available today, you’re also able to connect your sales, staff, and customer information to give customers a seamless experience at all locations. You’re also able to receive alerts on low stock levels and automatically have it.

3. Set and stick to a specific standard

As a franchisee, consistency is standard practice. But that’s easy done as a single-unit owner than when running multiple locations. To make your mini network more manageable, ensure all your store understand brand standards beyond the operation manual.

Related: Multi-Unit Franchising Growing In South Africa

“Naturally, you have your franchise systems’ operations manual and procedures but the way you personally want to stamp your mark on customer experience, for instance, needs to be documented too,” experts at Inside Franchise Business advise.

Doing this reduces the stress of continually keeping tabs on staff, and frees you up to collect and collate the data you need to make smarter decisions faster.

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Franchisee Advice

Effective Ways To Bring Customers To Your Door

Here are a few tips from Local Area Marketing Manager of Cash Converters, Juan Botha, to assist you in bringing customers to knock on your door.

Richard Mukheibir

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Retail, craft, artisan and service businesses can’t rely on only carrying on trade online – you also need people coming through the door and engaging with your product. But how do they find you? Are you the neighbourhood’s “best-kept secret” – and not in a good way?

Your premises, the surrounding area and the audience for your brand are a unique combination. Get to know both inside out so that you can hone your products and your marketing to appeal to potential local customers. With all the pressure to run a website, Facebook page or maintain other online presence, it’s easy to forget the basics and fail to reach your closest customers – those on your doorstep.

Our Local Area Marketing Manager, Juan Botha, previously worked in advertising with local and multinational brands and he taught us how each store needs to make sure its marketing lives up to the pointer, “Act global, think local”.

Related: How Your Fast Food Franchise Can Attract Quality-Conscious Consumers

Here are a few of his tips:

Position yourself

If customers know about you but can’t find you, they’re likely to get frustrated looking for you and give up. If they don’t even know you’re there to find, your chances of using your sales skills with them or getting them to fall in love with your product are zero.

Remember the times you’ve spent searching for a bar or a restaurant hidden in a maze of city streets or a B&B somewhere along a never-ending country road? Those businesses have forgotten that first-time customers can’t be sure where they are. Draw up directions to include on your website or online page. Make sure a friend who doesn’t know the area well test drives them.

Brand yourself

People won’t notice you until they need or want what you are offering so keep reminding them of your existence. Being visible is key. Your fascia signage is part of your marketing mission to attract and influence potential customers.

Nobody walking to work or taking their dog out should think, “I wonder what that new place is about?”

As well as giving your business’s name and contact details, your signage must succinctly indicate what your business offers. If you have a display window, use this second important opportunity to sum up your offering – keep it interesting and updated.

Be a customer magnet

If you wait to build a business on passing trade, you could wait forever. Get on the radar with potential customers in the neighbourhood so they all know you exist and where to find you. Each time they’re reminded that you exist and how to find you, they will be prompted to come and seek you out.

You can achieve this – and help new customers trying to find you – by making a modest investment in lamp-post signage. Check local regulations with your municipality and ensure this signage reflects your brand visually. This is a win-win, reinforcing your brand in a potential customer’s mind and helping them recognise your premises as they approach.

Related: Why Your Franchise Brand Should Be Culturally Relevant

Connect locally

Part of marketing is making people interested in and attracted to your business long before their first direct contact with you. Embed yourself in the community by forming alliances.

If security is an issue, bond with the local SAPS, Community Policing Forum and security companies by offering them free coffee. If you have a huge bargain order of toys to shift, offer a few prizes to the local Moms ‘n Tots group. Plug into local business networks and offer to host a speaker or sponsor the audio equipment for a forthcoming meeting.

You’ll be harnessing the incomparable power of word-of-mouth and setting your business growing in a great direction.

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