Before you research any franchises, you should set three- and five-year goals. Goals must be both financial and ‘quality of life’ (or non-financial) in nature. Financial goals should take into account cash flow, savings, net worth, equity build-up and spendable income. Quality of life goals should consider lifestyle issues that are important to you, like having dinner at home three nights a week, being able to take vacations, attend soccer games, make a difference in the community, and so on.
Don’t overlook quality of life goals or you’re setting yourself up for dissatisfaction. Quality of life goals are more important than financial goals. Why? Because many people who invest in a franchise have already made a decent living in the past. Aside from earning a pay cheque however, they couldn’t find a compelling reason to go to work in the morning. Money alone wasn’t enough to keep them going, and money will not hold your interest long either. While you will have some minimum threshold of earnings which you won’t dare to venture below, once that threshold is exceeded, you will find that quality of life becomes the driver.
Virtually all franchisors have key performance criteria that help you and the franchisor to determine whether or not your business is winning. You will be taught how to track sales, labour costs, cost of sales, and other statistical measures. Franchisors design their business and support systems to help you structure your business to achieve these measures and monitor results.
Following the Money
However, we know of no franchisor who measures how many meals you’ve eaten with your children or how many of the kids’ soccer games you’ve attended. Franchisors measure your success by their definition, not yours. Most franchisors have no clue as to whether or not their ‘successful’ franchisees are living the life they originally desired when they invested in a franchise. Franchisors follow the money. And as we’ve already stated, money won’t hold your interest long.
Additionally, in order to secure loans, bank financing, financial support from your family, or other forms of financing, chances are you will need to write and submit a business plan or cash-flow projections to the parties from whom you’re seeking financing. In your plan you will detail the tactics and strategies you will execute to drive the sales, contain the costs, maximise the cash flow of your business, and repay your loan. To succeed in business, you have to generate money.
Imagine that you’re in business, money is tight and you are two months late on loan payments. The loan officer calls you to see what happened. You tell the loan officer that while you don’t have the money to pay the two instalments, you did attend all your kid’s soccer games this month. Most likely the loan officer will sarcastically reply, “Congratulations. I’m nominating you for parent of the year.
Where is my money?
Like banks, franchisors also want their money on time. They are as focused on achieving their own financial goals as you are on achieving your complete and total definition of success. We’re not saying this is right or wrong, it’s just the way it is. If you were to list and prioritise the many reasons you’re looking to start a franchise, where does ‘helping the franchisor exceed its corporate objectives’ show up on the list? So you want yours, the franchisor wants theirs, the bank wants theirs, and the world turns.
Defining Your Goals
It’s solely your responsibility to create a clear definition of the goals that define what winning looks like for you. Use your definition of winning as your criteria to compare various franchise opportunities. The franchise where you have the highest probability of attaining both your financial and quality of life goals is the franchise you make an investment in.
It’s easy to lose sight of your goals. Prospective franchisees often get caught up in their perceptions of the problems and challenges of the business rather than whether or not the franchise can help them achieve their objectives with a high degree of probability.
For instance, you may be investigating a residential home-cleaning business and from talking to franchisees you hear there is a high employee turnover. Afraid that you might get stuck cleaning houses, you think, “I didn’t go to college so I can clean toilets and vacuum carpets.” Your knee-jerk reaction is to dismiss the opportunity. However, whether or not there’s employee turnover isn’t the real issue at hand. Given employee turnover, your focal point should be whether or not you can still achieve your goals with a high degree of probability.
Goal-focused prospective franchisees will dig deeper and ask questions such as:
- What are the franchisor’s hiring and retention strategies?
- What is the impact of turnover on the business?
- How long does it take to find replacement help?
- What training programmes are in place to train replacement labour?
- How long does it take a new hire to become productive?
Every franchise has its unique challenges to overcome. Franchisors either have proven systems and a demonstrated track record for overcoming these challenges or they don’t. Dismiss those who don’t. Investigate those who do by asking questions like the ones above.
Creating Your Goals
Clear goals, whether financial or quality of life in nature, must pass the SMART test.
Goals need to be clearly articulated and written down. ‘Making a lot of money’ isn’t specific. Making R800 000 is specific. ‘Having more control over time’ is not specific. ‘Going to ten of my son’s soccer games and ten of my daughter’s dance recitals this year’ is specific.
You have to be able to create a tracking system; a method of keeping score. This lets you know whether or not you are on track and whether you’ve achieved your goals. If your goal is to make R800 000 by the end of the year, on 30 June, you should have earned R400 000 or you may not be on track. On 31 December, you’ve either hit your income goals or you haven’t. It isn’t open to opinion or speculation.
Using the previous example, if you attend 11 soccer games, you’ve won. If you only went to six, you fell short. It isn’t open to interpretation or opinion.
Goals must be considered both possible and worthwhile pursuits, or you won’t be motivated to achieve them. For instance, you may say your goal is to make R4 million a year, but if you have never made more than R400 000 a year, you may not really see this goal as possible and may not take aggressive steps toward achieving it. As a franchisee you may experience a 20% increase in sales, but if you think it’s going to take working 90 to 100 hours a week to achieve that goal, you may not consider it a worthwhile pursuit. And you won’t be motivated to hit this goal.
Goals have to have a deadline, a ‘by when’ date. Goals without a deadline don’t inspire commitment. It’s human nature not to take action on anything you wish to achieve some day. Think of how long you have thought about starting a franchise. Have you set a deadline as to when you will open? If not, other more urgent activities will take precedence and your dream will be pushed further and further back.
If you don’t have a deadline as to when you are going to start, then you may have a good intention, but you don’t have a plan or a goal. A wise man once said, ‘The road to hell is paved with good intentions.’ Good intentions don’t make a difference; committed action does. You will never be called forward into committed action without a specific, measurable, attainable, and time-limited goal that’s worthy of being achieved. Activities with deadlines attached to them grab your attention and create a sense of urgency and action. For instance, you know you have to get your taxes done by 15 April. If your goal is to get your taxes done on time, 14 April will be a very productive day for you!
Goals with deadlines that are too far out also don’t inspire action. Think about something in your life that you wish will occur within the next 20 years. Are you taking action now? Think about when you bought your home. Did you think, ‘here is where I’m going to live for the next 30 years!’ or did you think, ‘this home is ideal for now.’ You aren’t wired to think more than three to seven years out. Goals with extended timelines are as useless as goals that you want to achieve ‘some day’ because they don’t inspire action. Consider setting long-term goals with a three- to five-year time limit. l
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.
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