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Franchisee Advice

Sidestepping Common Franchisee Mistakes

5 strategies for avoiding the most common franchisee mistakes.

Kyle Zagrodzky

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When people want to start their own business, franchising is an enticing option. It offers many of the perks of entrepreneurship, plus the safety net of operating a business based on proven concepts and systems. However, too many prospective franchisees start to think of buying into a franchise as a guarantee of success.

And, as many of us know, anything advertised as a ‘sure thing’ is always a myth in the business world.

Certainly, when franchising is operating the way it should, it will provide unit operators with a strong support network, great educational tools, sales templates, and initiatives and processes to guide every stage of the unit’s life. But no matter how fantastic a franchise concept seems, and no matter how many of its franchisees have made money, franchisees can’t forget that success ultimately depends on them.

Throughout my franchise development career, I’ve seen franchisees make the same handful of mistakes over and over again. Avoiding these errors seems simple enough in theory, yet they continue to hold back franchise entrepreneurs who otherwise have plenty of potential.

Related: Common Franchisor Mistakes… And How To Avoid Them

Here are five ways to avoid making these common mistakes.

1Develop a network with other unit owners

Part of the appeal of joining a franchise is the access it provides to a network of people who understand exactly what it’s like to run a business unit within that brand. Yet many franchisees still end up feeling disconnected and unsupported after their store opens.

That’s why franchisees should take advantage of the networking tools their franchise offers, because having a group of fellow franchisees to lean on can help everyone to grow and thrive.

A great franchise will give franchisees plenty of tools to keep in touch with one another, whether that means social media groups, weekly calls, regional directors who connect people and regular events where franchisees can meet in person.

2Accept total responsibility for your business unit

When things don’t go well in a franchise unit, often it’s because the franchisee isn’t prepared to take responsibility. It’s easy to play the blame game and make excuses, but that kind of attitude doesn’t go very far when it comes to actually fixing the problem.

Franchisees need to have realistic expectations and understand that not every unit will perform at its peak right away. But more than that, they need to accept that their business’s success or failure is ultimately on their own shoulders.

If things aren’t going as well as expected, franchisees should focus on the principles learned during their training and rely on the network of owners who may have been there, too.

The difference between a winning franchisee and one that needs improvement is the owner’s willingness to take responsibility for learning the systems and driving the numbers on the books.

Related: Avoid These 3 Simple Mistakes When Buying A Franchise

3Focus on daily goals and sales objectives first

daily-goals-and-sales-objectives

When a franchise isn’t performing, usually there is a root cause, and most of the time it traces back to the unit owner’s lack of focus on what really matters. So many franchisees get caught up in the day-to-day details of running a business and forget that their ultimate goal is simple: Prospect and sell.

If a franchisee suffers from tunnel vision and is too focused on unimportant tasks, we coaches help them zoom in on specifics that can help them grow.

Every day, the franchise owner’s main objective is to drive sales, and that’s where the bulk of his or her time should go. It’s the first goal that must be achieved.

4Stick to the marketing plan

Becoming part of a franchise doesn’t guarantee success; it means you have access to tools, templates and support that can lead to success — but only when you use those tools.

A franchise is designed to duplicate a single successful business model again and again, and the system works, but only when the franchisee follows that business model.

If he or she goes rogue and doesn’t use the concepts, sales tactics and branding the franchise is built on, things probably won’t work well.

Franchisees can’t believe that people will show up and buy their product or service just because the doors are open. You have to work to drive sales, and the system is there to streamline that process.

Related: Franchising Mistakes You Need To Avoid

5If a unit under-performs, be open to fixing the underlying cause of the problem

Franchises are made for franchisees to succeed based on an established system. So, if a unit isn’t making its weekly, monthly, and quarterly goals, there is generally a reason behind the slump. A lot of research, planning and investigation goes into choosing franchise locations, so the street address may not be the issue.

Similarly, the systems and processes have been vetted in other locations before, so those shouldn’t be the cause of sales distress, either. Instead, when a franchise unit isn’t going all the way, a smart franchisee will turn to the company’s leaders and guides — assuming they’re reliable — to step in and help figure out exactly what the solution is.

When outside resources see the reason for the dip in sales, that same smart franchisee will then listen to the advice offered and implement the changes suggested. Franchisees not open to outside perspectives on how to improve can’t expect anything to get better.

Kyle Zagrodzky is president of OsteoStrong, the health and wellness system that boosts bone and muscle strength in less than 10 minutes a week using scientifically proven osteogenic loading concepts. OsteoStrong introduced a new era in modern fitness and aging prevention two years ago and has since helped thousands of clients between ages 8 and 92 improve strength, balance, endurance and bone density. In 2014, the brand signed commitments with nine regional developers to launch 500 new locations across America.

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Franchisee Advice

5 S-Words Make Your Store Site Pay For Itself

Richard Mukheibir, CEO of Cash Converters recently addressed delegates at the FASA (Franchise Association of SA) conference on the topic of choosing the best location for their business. He spoke about the 5-S technique to assist business owners with deciding which premises is best suited for their business.

Richard Mukheibir

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The combination of continuing trading uncertainty in South Africa and the new financial year for many businesses can add up to carefully reviewing costs – including leases on premises. Choosing a site to set up or relocate your business can be just as stressful as deciding where to buy a house – and just as fundamental to its health, finances and sustainability, says Richard Mukheibir, CEO of Cash Converters.

This is not the time to snap up the property with the cheapest rental as that might turn out to be something you regret in the long run. Nor is it the time to be dazzled by the swankiest premises you can find. The potential for bragging rights could turn out to be poor value for money.

“This is a time for your head to rule your heart regardless of the industry you trade in.” he says.

The real-estate mantra of “location, location, location” works just as effectively in commercial as it does in private property but you will often be looking for rather different factors. Mukheibir shares his 5-S technique to help you begin narrowing down the areas where you will consider locating your business – first at the macro level, focus in further to the meso level, then look more closely at the micro level before you start weighing up specific sites.

1. Strategy

Remind yourself of the medium and long-term strategies you have developed for your business. Keep your understanding of your business’s customers, purpose and growth prospects top of mind when you are selecting the areas where you will start looking for sites.

Related: Effective Ways To Bring Customers To Your Door

2. Scope

Within those areas, redline any sections where you feel the competition from other businesses will detract from your potential to grow your market. Greenline areas where there are good synergies between the people who live or work there and the demographic that you have identified as your target market.

3. Synergy

Make sure there is clearly a good pool of potential customers for you – size definitely matters when it comes to ensuring that there are plenty of customers available to you. Look specifically for facilities that cater for the kind of customers you want to attract. Sports stores benefit from being close to schools and tertiary colleges, for example.

4. Sight

Although many businesses now have an online element, most still benefit from attracting customers to walk through the door. For your premises to be a good fit for your business, you should be located in plain sight and ensure that your ability to market yourself locally through signage and lamp-post posters is not restricted by local bylaws.

Related: FASA Establishes Industry Specific Food Franchise Forum

5. Security

You will attract and retain good customers and staff if they feel they’re secure in the area. This perception includes factors such as easy, safe parking and a welcoming environment.

“Making a success of your business is not just about the product or your branding,” says Mukheibir. “It can be as fundamental as finding a site that ends up paying for itself. To do this, it must offer you a well-calculated gap in the market where the strong demand for the product or service that your business offers ensures sales and profit. If you have considered all these steps carefully, you will never worry about making rent and wages payment again.”

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Franchisee Advice

6 Things You Need To Know About Profit And Cashflow

Why your business needs both and how to check.

Richard Mukheibir

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In the heat of the action as you build your business or launch a new line, it’s easy to hope some aspects will take care of themselves. It’s especially tempting to fall into that trap with your accounts if you don’t like dealing with figures.

Despite having a B. Comm degree, I’m happy to admit that I don’t really like accounts. I much prefer strategies, management and business development. Fortunately, my co-founder and our Chief Financial Officer Peter Forshaw tirelessly keeps us on track financially – and his message to our franchisees is always that in your own business, you must understand enough of the financial basics to know whether your business is swimming or sinking…

It’s so important that we include this as part of our franchisee training. To get you started, here’s what Engela van Loggerenberg, our Group Financial Manager, tells new franchisees:

  1. Cashflow and profit aren’t the same: You can’t track one and assume the other shows the same pattern. There is no natural correlation between the two – your cashflow can be positive and you can be making a loss or your cashflow can be negative but you’re making a profit.
  2. Cash keeps you going: It’s vital to have money available in your business so you need to be generating enough cash to pay operating expenses. Otherwise you could be making a profit but not be able to pay staff wages. If so, you will either have to put in some of your own money or take a loan to keep your cash flowing and your business afloat.
  3. Time for a checkup: Both cashflow and profit are important to a business – but you can’t do anything without cash which is why you have to manage your cashflow carefully. Check your profit monthly but your cashflow daily. This will alert you to problems in the making so you can head them off. You will see if your clients are overdue in paying their accounts with you, for example. If they fall behind, this could in turn squeeze your ability to pay your operating expenses, which is why cashflow monitoring is such an important tool to keep your business afloat.
  4. Different perspectives: Remember when you look at your figures that profit figures are a result of what has already happened and are usually reported with a time lag of a month. Cashflow is a snapshot of what is happening in your business now and will have an impact on profit figures in the months to come.
  5. Know what you’re looking for: What you need to know are your net, not gross, figures. For net cashflow that is your incoming cash less your outgoing cash for the period. So if you are receiving more than you are spending, you will be left with money in the bank to meet future expenses. Similarly, your total sales less direct costs make up your gross profit. Deduct all your operating expenses from the gross profit to calculate whether your business is making a net profit.
  6. Make the most of your cash: Take pressure off yourself by keeping spare cash for future expenses such as VAT and taxes in a good interest-bearing account such as a money market, call or investment account. Then set up reminders ahead of time to arrange to withdraw the sum required.

Remember that any system is only as good as the person operating it. So if like me, figures aren’t your thing, make sure that you have someone at your side who can manage them for you.

Read next: 4 Factors To Consider Before Converting Your Independent Business Into A Franchise

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Franchisee Advice

3 Ways To Ensure Your Loyalty Programme is Working Hard For You

Plastic cards are making way for app-based loyalty programmes. Is your franchise keeping up with the digitally savvy consumer?

Diana Albertyn

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The average consumer today is a member of at least five of the 100-plus loyalty programmes in South Africa, according to a 2017 study by Nielsen. As the loyalty playing field becomes more cluttered and competitive, what are you doing to ensure each one of your franchisees are catering to customer needs when it comes to loyalty?

Mobility. It’s not the newest buzzword, but it is useful for attracting customers who don’t want to lose loyalty points because their card is lost or not with them. Ailsa Wingfield, Nielsen’s Head of Emerging Markets: Thought Leadership, says that as adoption of non-traditional payment methods increases, loyalty programmes also need to introduce payment type flexibility.

“Mobile payment platforms will increasingly deliver an opportunity for loyalty-programme engagement with consumers, providing a convenient and personalised way for programme members and retailers to engage with one another all along the path to purchase.” – Ailsa Wingfield Nielsen Head of Emerging Markets Thought Leadership.

Related: 11 Ways To Double Your Customers In 4 Weeks

Have you considered what role tech could play in your current loyalty programme? Here are three ways to apply digital enhancements that appeal to present and potential customers: 

1. Offer differentiation through more options

Research has concluded that the loyalty programmes devised by retailers and franchises are not innovative enough to capture the attention of the youth – Millennials and Gen Z. it’s time to diversify your rewards offering. But how?

If your customer base is predominantly younger, being omni-present is key, according to the Truth Loyalty Whitepaper: “An omni-channel approach will not only meet the demands of the younger customer, it will also allow your business to combine intelligence on shopping, search and web behaviour history to assist you in identifying when to offer an in-store promotion, extend a seasonal offer or make a product recommendation through the appropriate channels.”

Implementing a digital loyalty campaign is also a smart way to reduce costs. Coffee shop franchise Mugg & Bean’s Generous Rewards App and partnership with Vitality Active Rewards, means members can earn cash-back rewards to spend on their favourites. Just downloading the app earns you a R25 voucher.

2. Use your tools to engage more

A crucial mistake most franchisors make is not communicating consistently with their loyalty programme members once they’ve signed up and increased numbers. They spend a lot of time recruiting customers to join, but expect them to prompt cashiers for points’ balances and produce their cards independently in their various locations.

“You have gained permission to talk to your customers and created the opportunity to collect enormous amounts of valuable data. Use this to your advantage by creating meaningful and relevant engagement initiatives and communications across your customers’ lifecycle,” advises Truth, a boutique consultancy business specialising in customer centricity and loyalty programme strategy and design.

When enhancing your engagement strategy, Accenture advises that you keep the following in mind:

  • 54% of South African consumers are loyal to brands that actively engage them to help design or co-create products or services.
  • 57% are loyal to organisations that present them with new experiences, products or services.
  • 47% are loyal to brands that engage them in ‘multi-sensory’ experiences, using new technologies such as virtual reality or augmented reality.

Related: 3 Ways To Stop Taking Your Most Loyal Customers For Granted

3. Keep the experience simple

Review your loyalty programme. Honestly. Then ask yourself if you’ve made your programme too complicated for the layman. If your answer is ‘no’ or even ‘maybe’, how can your target consumer ever reap the full rewards of this programme if they don’t understand the rewards on offer and how to redeem them?

Changing rules too often is the first complication to go. No matter which one of your stores they choose to shop at, the redemption and earning process should be simple enough to keep members interested and engaged in the programme. Make sure you keep your programme simple and transparent.

“Clicks made a simple but fundamental change to its redemption process – paper-vouchers were replaced with virtual points that can be redeemed as cash-back when you swipe your card at the till. While Clicks and Dis-Chem are among only a handful of brands that do this, it’s a sure-fire mechanism for increasing redemption,” said Amanda Cromhout, founder and CEO of Truth.

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