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Franchisee Advice

Pay Attention To The Small Print

Here are seven critical clauses (and the associated legal risks) that you should consider before signing on the dotted line.

Monisha Prem




The franchise agreement governs the relationship between the franchisor and franchisee and includes critical provisions relating to obligations of parties and prevention of conflict, dispute and financial loss. It is essential for a franchisee to understand his rights, obligation, general provisions and risks in terms of the agreement.

Seven critical clauses in the franchise agreement:

1. Consumer Protection Act acknowledgment

In terms of the Consumer Protection Act 68 of 2008 the following provisions are to be acknowledged or included in the franchise agreement:

A franchisee is entitled to cancel a franchise agreement without cost or penalty within 10 business days after signing the agreement, by giving written notice to the franchisor.

The franchisor is not entitled to direct or indirect compensation from suppliers, its franchisees or franchise systems, unless this is disclosed in writing with an explanation of how it will be applied. The franchisor must supply the franchisee with a disclosure document, pre-agreement certificate and current list of franchisees.

Related: The Perils Of The Franchise Agreement

2. Grant clause

An important clause relates to granting the franchisee a licence to operate the franchised business and use the franchisor’s intellectual property rights such as brand names, confidential information and copyright.

This clause will designate the territory in which the franchisee may operate and whether or not the franchisee has exclusivity rights. Where a franchisee is given exclusive rights to use the franchisor’s intellectual property in a certain area, for example, the franchisee will be entitled to exclude all others, including other franchisees and the franchisor, from operating in that area.

A franchisee can alternatively be granted the sole but non-exclusive right to operate the franchised business in a certain area. This means that the franchisor will not grant a licence to other franchisees in the area, however, it does not exclude the franchisor from opening one or more outlets and competing with the franchisee in that area.

A franchisee may be granted a non-exclusive licence, giving it the right to use the franchisor’s intellectual property without any exclusive or sole rights.

3. Payment clause

The franchisee is usually required to pay an initial lump sum, which is paid to obtain the licence to operate the franchised business. The breakdown of this amount may include the costs of setting up the franchise, equipment, advice, assistance and training by the franchisor, and an amount for goodwill.

Once the franchised business is operational, the franchisee is required to pay royalties to the franchisor monthly, quarterly or annually. These royalties may be fixed or calculated as a percentage of turnover, and are payment for ongoing use of the franchisor’s intellectual property.

In most instances, the franchisee will also be required to contribute a regular amount towards the marketing of the franchise. Such contributions are paid into an independently managed fund and the franchisor and its associated businesses may not enjoy any direct or indirect benefit from such contributions not afforded to independent franchisees.

Related: 3 Of The Biggest Misconceptions Of Entering Into A Franchise Agreement


4. Obligations of parties

The franchisor’s initial obligations include assisting the franchisee with setting up the franchise, furnishing the franchisee with the operating manual, disclosing the franchise system and training the franchisee. Ongoing obligations include additional training, assisting with resolving problems, assisting with management and providing guidance.

The obligations of the franchisee are fairly wide-ranging and include paying all sums due to the franchisor timeously, operating the franchised business in accordance with the franchise system as set out in the operating manual to protect the intellectual property, goodwill and reputation of the franchisor, keeping records and books of account, and marketing the franchise.

5. Termination

The termination clause should deal with timeous payment and provide the franchisor the right to terminate should the franchisee fail to comply with the operating manual, or challenge the intellectual property rights of the franchisor, or commit an act or omission that will damage the brand of the franchise system.

6. Resale rights

Franchisees are usually only permitted to sell their franchise with prior consent of the franchisor, and provided that the purchaser enters into a new franchise agreement with the franchisor on acceptable terms.

Many franchisors include a right of first refusal, which allows the franchisor to buy back the franchise at a rate determined by them, or to match any potential purchaser’s offer.

Related: Assemble Your Franchise Team Like A Pro 

7. Restraint of trade

It is advisable to include a restraint of trade provision to protect the franchise system, which should be reasonable with regard to the area, nature of activity and period in order for it to be enforceable.

Monisha is a corporate advisor, admitted attorney at M. Prem Inc, and author with over 14 years deal-making experience. Monisha litigated for several years before joining an investment banking firm specialising in mergers and acquisitions. Monisha has owned and operated several businesses, is passionate about business development, commercial and corporate law.


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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Franchisee Advice

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.

Diana Albertyn




“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.

Related: 3 Core Strategies For Building Successful Franchise Organisations

“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.

Related: How To Write An Operations Manual For Your Franchise

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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