It seems funny to think about selling your business before you even start, doesn’t it? But having a vision of how you would like to conclude your business ownership before getting started is no different from knowing your destination before you start a trip.
When I talk to prospective franchisees early in their discovery process, I always ask the same question: “When you look back at your first year in business, what would you like to have accomplished?” More than 75% of the time, I am met with a blank stare. When they finally do respond with an answer, I usually follow up with, “So, when the day comes to eventually leave the business, how do you foresee that happening?” That’s the guaranteed deer-in-the-headlights question.
Where to Start
Do you think if I had asked Donald Trump or Michael Phelps when they started out what they hoped to accomplish that they’d have that same look? Nope, not even close. These competitors know how they want to finish what they start – and how to build the plan to achieve it.
So how does an aspiring entrepreneur envision the conclusion of their business endeavour before they get too far into it? Often franchisees are first-time business owners, and it’s a huge step for them. It can seem inconceivable to discuss exit strategy before even celebrating the grand opening, but doing so has tremendous value for both the franchisee and the franchisor.
Why? First of all, it gives you a sense of motivation. The fear of losing a job or the sting of having already lost one is encouraging more people to own their own business. With the economic downturn, aspiring entrepreneurs are really struggling to fund their dreams of self-employment.
And once the funding is there, they still have to battle through the inherent fear of such a big decision. The best antidote to fear is knowledge! Knowing you have options and control over your future is empowering.
Think ‘What If’
In talking with other franchisors, I’m somewhat surprised at how few of them engage in the ‘what if’ business transfer discussion with prospective franchisees. In some cases, by not bringing eventuality, they fall short of extolling the many virtues of franchise ownership. Perhaps they fear extinguishing the excitement of the launch.
But I believe this is an ideal time to discuss the end-game, because in today’s uncertain world, it’s comforting to know you’ll have options when the time comes to exit your business. It takes planning and hard work to make sure you maximise the value of your efforts.
For example, one franchisor I talked to had a 70-year-old, highly successful franchisee who was thinking about passing on his franchise to a family member. But that family member didn’t have the same experience or appreciation for the franchisor and only saw the individual work their father had invested in building the business.
When the time came to prepare the owner’s exit, the franchisor reached out to both members of the family and worked with them to smoothly and profitably transition the business to the next generation.
Does this story make you wonder what would have happened if the business in question had not been a franchise? I can answer that from personal experience; my family’s landscaping business was a case study for exit strategies (both good and bad).
Exit Strategy in Practice
My father had a 10-year plan in mind the day he purchased seven acres to house the building and nursery of Lindenmayer Landscapes. At the time he was 55, and the thought of digging holes and carting around wheelbarrows into his late 60s was pretty far back in his mind. As the business’s 10th year began, my parents obviously planned to pass it on to my brother and me.
Unfortunately, his divorce and my lack of funds kept us from being able to carry the torch. My dad sold the equipment and a few accounts to a budding entrepreneur and the land was eventually sold in two parcels.
Lindenmayer Landscapes ceased to exist.
My family’s story is not uncommon among entrepreneurs who try to transfer their businesses to family members. Unfortunately, reports show that two-thirds of businesses passed on to the next generation fail.
I’m not saying a franchised business can’t fail upon a transfer, too, but a franchise system is designed to survive the individual, and a successful brand is something that has a life of its own.
A business doesn’t have to be a household name to have value at the end of one owner’s life-cycle; however you must have someone vested in the transition. By its nature, a franchise system must ensure the success of its franchisees and work diligently to provide training, support and ongoing inspiration to whoever’s at the helm.
Given the tightening of the credit markets and the transient nature of today’s society, don’t you want the peace of mind of knowing that your business is nearly as mobile as you are? Make sure you understand the options you’ll have down the road if and when the day comes to move on, and you may find that some of the anxiety of starting your journey into franchise ownership subsides. L
Keep in Mind
- Here are a couple of things to consider long before your grand opening:
- What’s the market for your business today? What’s it likely to be in five, 10, 20 years?
- Are there any barriers to you selling your business – certifications, the name of the business, personal relationships that can’t transfer beyond you, etc.?
- If passing the business on to family is a consideration, how will you prepare them to take over? Is that going to be an option for both you and them financially?
- Will your cash management allow you to properly value the business? What actions do you need to take to make sure you show accurate numbers to a potential buyer or investor?
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.
- Player: Laurette Pienaar
- Position: National Franchise Manager
- Company: Nedbank Limited
- Visit: nedbank.co.za
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.
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.
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.
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.
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.
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.
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.
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.
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.
Snapshots8 years ago
Habari Media: Adrian Hewlett
Start-up Industry Specific5 months ago
How Do I Start A Transport Or Logistics Business?
Snapshots10 months ago
27 Of The Richest People In South Africa
Types of Businesses to Start9 months ago
11 Uniquely South African Business Ideas
Entrepreneur Profiles5 months ago
10 SA Entrepreneurs Who Built Their Businesses From Nothing
Types of Businesses to Start6 months ago
10 Business Ideas Ready To Launch!
Lessons Learnt2 years ago
6 Of The Most Profitable Small Businesses In South Africa
Types of Businesses to Start7 months ago
The 10 Best New-Age Business Ideas You Haven’t Heard About Yet