So how can you make a lot of money as a franchisee? At the risk of sounding trite, the easiest way is to start by selecting a franchise opportunity that is capable of making a lot of money.
Actually, there are a number of things you can do to increase your chances of making good money as a franchisee. Though picking the right opportunity where others are making a lot of money is a good start, it’s no guarantee you’ll do the same. The key secrets to making as much money as possible include:
1. Starting with the right definition
This goal begs the question, “What is a lot of money?” Many people think of this answer first in absolute terms such as making a fixed amount like R400 000 per year. I think it’s wiser to define ‘a lot of money’ in terms of return on investment. If you can invest R20 000 and get a return of R100 000 per year, I’d contend you’re making a lot of money on that investment by any reasonable standard of measure.
2. Starting with the right opportunity
It’s essential to select an opportunity that matches up well with you, in which you are willing and capable of performing the primary role of the franchisee. As just one example, I know of a franchise that cleans public restrooms. This can be an intensely profitable business with a great return on investment, but many people simply wouldn’t want to be involved in such a business.
Their reluctance would probably mean they wouldn’t make a lot of money, because they couldn’t project the excitement and enthusiasm necessary to sell a prospective customer on the value of a sparkling urinal.
3. Keeping the investment size reasonable
A host of franchises can produce a great return on investment. Make sure you focus on ones where the per-unit investment is reasonable, given your net worth and the liquid capital you have available to invest. Remember what your mom told you about not putting all your eggs in one basket.
4. Reinvesting to achieve your absolute goal
If you find an opportunity that fits well for you and has a great return on investment, and you’ve got your first unit up and making a lot of money, you can reach your absolute number goal by acquiring additional units. This can either be done through further out-of-pocket investment or through the reinvestment of the profits you’re making into growing the business.
I have a good friend who owns more than 40 haircutting franchises. The return on investment in each unit is great, but the absolute rands in any one unit don’t meet his overall total income goal. He found that by adding additional units over time through the reinvestment of profits, he could realise a total income far in excess of what his absolute goals were when he started the business.
In the example mentioned in the first point, if you want to make R400 000 per year, make four of the R20 000 investments and you’re there.
5. Following the system
The biggest reason to get a franchise, rather than start an independent business, is to acquire the rights to use a proven system to achieve predictable results. A good franchise company has developed its systems through extensive trial and error and should be able to tell a new franchisee exactly what to do to make a lot of money.
All you should have to do is execute the system well to achieve the success you want. If you want to make a lot of money, don’t be an innovator – just pick a great system and execute it well, and you’ll get your wish.
6. Capitalising your business properly
This is a corollary point to the one about making sure the size of the investment for each unit is reasonable for you. There are many ways to capitalise your new business, including using all cash, or using some portion of your cash combined with loans or leases, to come up with the total investment.
Most franchisees use a combination approach. When you’re evaluating how to capitalise your business, keep in mind that the service costs of loans or leases will reduce the amount of money you’ll have for other purposes. Too much leverage can be very dangerous and get in the way of making a lot of money.
7. Working with a good accountant
One of the hard lessons of life is that there can be a big difference between the money you make and the money you have. The difference is taxes, and they take many forms. One of the most important steps to making money that stays in your pocket is to use a good accountant.
They help you structure your business entity and ongoing activities in a manner that reduces the tax bite whenever possible.
In terms of your business activities, some techniques can be as simple as the timing of investments and major purchases, or the type of capital structure you use. It’s typically well worth paying some accounting fees to ensure you’re minimising the tax bite if your goal is to make a lot of money in your franchise.
Finally, keep in mind that in any successful franchise system, many people have travelled the path before you. Whether they are other franchisees or the franchisor, take advantage of their experience by asking for advice whenever you have doubts or your results aren’t what you expected, especially when you’re first starting out. They’ll be happy to help you, and you can return the favour to other new franchisees in the future.
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.
3 Ways Communication Helps You Run Your Franchise Better
Managing your business as an independent owner may have been challenging at the beginning, but – as you’ve come to realise – the successful operation of a franchise network requires an extended set of skills.
“When it comes to a multi-location business such as a franchise, effective communication is vital,” says Dani Peleva, Managing Director at online marketing agency Local Fame. “So what happens when you’re struggling to connect with the franchise network you have in place?”
It may be time to upgrade your franchise management skills, because the success of your franchise network has a direct correlation to how you integrate feedback systems into your management processes.
Have a clear comprehension of the challenges your franchise encounters, keep an open chain of communication between yourself, franchisees and managers, and maintain regular interactions between everyone in the network. These are some of the most crucial aspects of successful franchise management:
1. Understand the challenges you face
A thorough understanding of your business requires dedication to regular and consistent groundwork for first-hand experience on how the day-to-day operations of the business are conducted.
“Seeing and talking to the people that make your business will help you understand the challenges that franchisees face and the systems they need to drive higher profitability and growth,” says Rosie Niblock, Marketing and Communications Manager at Proactive Marketing.
“That way you can work more effectively to make improvements to franchise management systems logically and within the financial grasp of all franchisees.”
2. Get personal through regular visits
You never want your franchises to feel neglected. It’ll demoralise them and possibly drop sales, profits and their ability to keep the business running as you intended. Maintaining regular contact and sharing as much information as possible – when you can – fosters strong relations with your franchisees.
Empowerment through information and communication makes a difference in the business and helps franchisees make decisions in favour of the business and to make sure that they all pull in the same direction in terms of customer satisfaction, says Alan van der Westhuizen, executive manager of new business sales at Fournews, a 20-year-old franchise holding company for News Café, Krispy Kreme, Moyo, Brooklyn Brothers, Smooch, Cafe Fino and Go! outlets.
Ensure your response to these concerns is swift. “If not discussed they could fester ad create undesirable rumours,” says Niblock.
3. Create events for network collaboration
One of the most important aspects of managing your franchise is meeting with all your franchisees, at least annually. “Franchise conventions are almost certainly the biggest tool when it comes to building profitable engagement,” says Peleva. “They’re one of the most important things to focus on when you’re considering how to lead your franchise network.” According to her, a successfully attended and executed convention will let you:
- Boost your network-wide productivity
- Hugely increase your profitability
- Drive passion for your brand
Communicating with your franchisees is the best way to identify problems, work towards solving them, and building a pleasant and fruitful relationship with your owners.
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