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Franchisee Advice

Finding Franchise Financing

All you have to do is go to the bank, right? Wrong. First you must explore all your financing options.

Jeff Elgin




Many new franchisees will be in a position where they don’t have enough money to start the franchise operation they want, and need to get financing for the balance. You may be wondering if you should go to the bank to get the money or if there’s a better method to use.

This is an important topic for just about anybody who wants to start a franchise business. It’s also a topic that’s frequently misunderstood. You should have a good working knowledge of the likely parameters of financing that apply to you and also the best sources of information about available programmes.

Most people think that getting a loan to start a business is just a matter of talking to a bank. After all, isn’t that what banks do — loan money to people who need it? Would-be entrepreneurs figure they’ll explain their reasons for wanting this particular business, outline the projections for how much money the business will make, and then the banker will loan the money based on those projections. The loan will be secured and then paid back from all the assets and profits of the new business. Problem is, there is zero chance this scenario will work.

You Need Collateral

If you walk into any bank and tell them that you want a loan to start a new business, you won’t get any money unless you can completely collateralise the loan through your own personal assets. In other words, if you have cash, stocks, home equity and other semi-liquid assets that could easily repay the loan if the business defaults, the bank will probably lend you the money. On the other hand, if this is the situation, you don’t really need a business loan.

If you have sufficient personal collateral to secure a loan for the amount you need – especially if it is in your home equity – the easiest and cheapest way to get that loan is to establish a line of credit at the bank for the amount you need. Don’t even discuss a business start-up with the banker. Whenever a banker hears that you’re going to start a new business, it raises multiple red flags and creates issues that will just slow you down and cost you more money.


Let’s assume you’re not financially strong enough to take this approach. You’re going to need help. The other options potentially available to you include government-sponsored programmes, non-banking loan sources and lease options. Each has many variations, but the common denominator is that they’ll be willing to take more risk, so your chances of getting money will be better.

To offset the increased risk, the money you get from these sources can be more expensive (in terms of fees or interest rates).

As a general rule of thumb, you’ll need to have your own cash available for at least 30% of the total investment required for the franchise business. You can also expect that any lending source will probably require personal guarantees that will effectively pledge all your assets to protect any loan.

Speak to the Franchisor

The best source of information about options that might be available to you is the franchisor you’re interested in joining. The franchisor should be familiar with the costs associated with each option and the likelihood of you being able to obtain financing from any particular source. Many franchisors have already set up programmes with selected financial sources to facilitate rapid funding of their franchisees.

In this case, the franchisor should be able to walk you through the process with a minimum of hassle for you. The first thing you should do – once you’re fairly certain you’ve found the franchise that is right for you – is to request this information from the franchisor and start looking into your options.

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.


Franchisee Advice

What To Know About Franchising Your Business

For many businesses, franchising is an excellent route to growth, opening up new opportunities and markets. Laurette Pienaar, National Franchise Manager at Nedbank, unpacks why it’s worth considering this route.

Nadine Todd




Vital Stats

  • Player: Laurette Pienaar
  • Position: National Franchise Manager
  • Company: Nedbank Limited
  • Visit:

What type of business is ideally suited to the franchise model?

Franchising has been proven successful across all industries, including the automotive, food, entertainment and retail industries. However, several key qualities ultimately determine a concept’s ability to successfully become a franchise.

Firstly, the business model must be scalable and able to be repeated in several locations. Secondly, there must be demand for the products sold and, thirdly, the franchise model must be proven as profitable.

Related: (Infographic) 7 Digital Marketing Strategies For Franchises

Why is franchising a good growth option?

Franchising is often used as a cost-effective growth strategy for businesses. A key benefit of this strategy is that no capital layout is required for a new franchised store as opposed to corporate-owned stores.

Franchised stores are also proven to be more successful than corporate-owned stores. This is mainly due to the fact that the franchise owners have a vested interest in the store, whereas corporate stores are supervised by a manager. Franchising is therefore also a great way to build your brand.

What should business owners focus on?

Franchisors should set up good infrastructure to support their franchisees, including good upfront and ongoing training to both the franchisees and their staff, the correct legal advice and assistance, and a strong operational team to assist franchisees daily.

Many successful franchisors provide support by expanding through vertical integration, which provides franchisees with logistics, supply chain security and product consistency.

Several franchisors advocate a structure with both franchisee and corporate-owned stores. This enables a franchisor to keep in touch with the daily challenges franchisees experience and new products and solutions can be tested at a corporate store before being rolled out to the franchise network.

How can franchising consultants assist business owners?

Franchise consultants provide daily operational support to franchisees. They are responsible for daily store visits to assist with quality checks, process flows, supplier relationships and, often, financial assessments. They are a helpful soundboard on any improvements to be made in the business model and can convey suggestions to the franchisor.

Related: The Secret Sauce To Great Franchise Leadership

What challenges should business owners be aware of?

Businesses looking to franchise need to ensure that their business is teachable to others. Overcomplicated products and systems may deter franchisees from investing in your brand.

Franchisors have to do ongoing introspection regarding their company culture. For example, does the culture promote innovation and inspire franchisees and consumers, which ultimately is a culture worth investing in?

New franchisors’ selection criteria for franchisees are often not sufficiently thorough and comprehensive. For a new franchisor, it is important to choose good quality franchisees and to have strict selection criteria to ensure that your brand remains reputable and stable during fast-expanding cycles.

What lessons can be learnt from SA’s successful franchises?

Businesses looking to expand through franchising should consider setting up several corporate-owned stores first. This assures potential investors that your business is based on a proven model with a track record and supportive infrastructure.

There is not always a one-size-fits-all model. Many franchisors have created custom models to accommodate and adjust to the need of a specific property or consumer market. A great example of this would be the food industry where many franchisors offer shopping centre concepts, drive thrus and kiosk or express concepts. Consider this when developing your model.

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Franchisee Advice

Develop Digital Marketing Competency In 3 Simple Steps

Conquering the digital revolution needn’t be daunting. Polish up your tech skills and watch your digital marketing prowess increase throughout your franchise.

Diana Albertyn




As a franchisor, digital marketing may be proving to be a challenge due to the unique structuring of the business.

“The very nature of franchises is ‘structured’, however, when it comes to marketing, that structure often lacks,” says Marcela De Vivo, Founder and CEO of Gryffin Media.

Franchisors and franchisees often struggle to reach common ground when looking to achieve different marketing goals. While the franchisor needs to control the brand in its entirety, the franchisee wants to market their business using particular strategies suited to their location.

Research has found that smartphones are the biggest influencers of 82% of users when they make their in-store purchase decisions while. It’s for this reason that the importance of digital marketing for franchises has increased.

Here’s how to harness its power of influence, amplify foot traffic and solidify brand loyalty:

1. Recruit digital natives and early adopters

As much as you’re the leader of your franchise network, there are franchisees in your chain you could learn from. The global increase in millennial franchise owners means it is highly likely that you’ll be able to identify early digital adopters within your franchise network.

“The best people to learn from are those who have been in your shoes before,” says Matt Forman of the Franchise Centre at Griffith University.

“Encourage and support their efforts and use them as case studies to demonstrate to the rest of your franchisees the value of digital marketing, and how to do it right.”

2. Invest in training your team

“Each digital competency level requires more education and resources in order to integrate digital marketing with your physical stores,” says Forman. For this reason, regularly investing in continuous training for your team so as to ensure they keep abreast of any new and emerging trends.

Proactivity and adapting to the constantly evolving digital landscape led KFC to open a LinkedIn account for its founder and mascot Colonel Sanders. KFC’s out of the box tactic is a fresh approach to what has long been considered a B2B platform, under-utilised as a B2C platform.

3. Apply custom targeting techniques

The discovery of new and small businesses is being fuelled by Google searches, social media and online reviews, making these platforms a goldmine of invaluable tools.

Leveraging certain custom targeting techniques like easily searchable keywords and exposure on other reputable and high-traffic websites, gives your franchise’s digital marketing efforts a boost. This results in an effective campaign, favourable reviews and meaningful and lasting interactions with consumers “whether it’s a reply to a Facebook comment or a retweet,” says Entrepreneur’s Emily Conklin.

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Franchisee Advice

How To Hire Skilled Workers For Your Franchise

Your staff run your business – you just have to show them how. This is why employing the best people for the job is essential.

Diana Albertyn




According to the Franchise Association of South Africa (FASA) 2017 Franchisor Survey, one of the main challenges facing franchisees is finding the right staff.

“Staffing your franchise can be one of the most challenging parts of running a successful business. Without a great team of employees, you cannot run your business effectively,” says Saxon Marsden-Huggins, founder of WebRover.

These three tips could help you find the best employees for your franchise outlet:

1. Don’t hire in haste

While you may be rearing to go and keen to fill gaps to speed up profitability, research your candidates thoroughly.

Related: Insights On Recruitment That Could Affect Franchise Performance

As the job applications keep flowing into your inbox, keep in mind that not all of them qualify for the positions available – it may even be a small percent who are actually viable candidates. This is why your hiring process should include:

  • Taking the time to thoroughly screen CVs to develop a short list
  • Creating a carefully crafted list of interview questions
  • Setting aside adequate time for thorough interviews
  • Getting to know the candidates through a second round of interviews to confirm your choice.

Giving the hiring process dedication and attention will ensure you get the cream of the crop, contributing to the long-term success of your franchise.

2. Demonstrate support in the workplace

While you can instil the necessary skills into new recruits, it’s difficult to train for culture. This is why choosing the right employees from the beginning will make the rest of your franchise management system will run more smoothly.

“The manner by which you run the franchise will influence employee perceptions of the brand as well,” says Hireology’s Erin Borgerson. “Your staff must become ambassadors of your franchise system to attract the target consumer market.”

The best way to do this is encouraging staff to give you their honest feedback. Your commitment to creating and upholding a positive culture will result in increased loyalty from your current staff and a superior pool of applicants.

Related: 3 Things You Should Consider Before Buying Your First Franchise

3. Offer appealing incentives

When advancement opportunities are clearly communicated, staff is keen to hear how they can get there, as they have career goals of their own. Encouraging this ambition will draw good employees to your franchise.

“Helping employees understand the steps to advancement helps them to view their current job as an important part of a career with an upward path, not just a pay cheque for this week,” say financial reporting technology experts at Qvinci.

Performance bonuses and employee benefits incentivise staff’s efforts, therefore increasing their income alongside the profit of the business. “This serves to make employees a part of the business and not merely people ‘who work there’,” they explain.

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