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Franchisee Advice

The Basics Of Multi-Location And Franchise Marketing

Owning a business that is part of a franchise or that has multiple locations can be a positive business venture when done correctly. That said, there are a lot of things to consider before purchasing a business that is part of a larger corporation.

Scott Langdon

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The last thing you want to do is invest in a company where the marketing has been handled irresponsibly. If you’re in charge of your own marketing, don’t go in blind not knowing how to advertise. This will cause your investment to tank, and all your hard work and money will go down the drain.

In other words, it’s important to make sure you do your homework and understand all that goes into owning a franchise or a multi-location business before making a purchase. And if you decide to invest, take the time to learn how to market correctly.

This article will explain the basics of what you need to know in order to protect your investment.

The before

A recent study found that franchise marketing can be a tricky venture. Any time a large group of people get together and have to agree on how to handle money, there are risks.

There will be different opinions about how the money should be spent, with each person thinking about the best interests of their own business, and not necessarily the corporation as a whole.

On the flip side, franchise marketing can also be a huge bonus for businesses because it gives access to a large pool of money that can potentially be used to improve marketing for everyone involved. Here are some things to consider before purchasing a franchise.

You need to understand what franchising is

This may sound obvious, but it’s important to understand exactly what franchising is before getting into it. Many people think franchising is its own industry. It’s not. It’s more of a way of doing business. It’s a hybrid business plan that combines working for yourself and working for somebody else.

This is why it’s a good fit for many people, but not for everybody. You won’t have complete autonomy over your business, but there will also not be someone higher up telling you what to do every minute. It’s a team effort.

You must be willing to be part of the team

Franchising means working for yourself, but not by yourself. This means that everyone involved has the responsibility to operate their own successful businesses long term, and that the success of the brand as a whole depends on each team member’s individual successes.

You have to be willing to operate as a whole group with the brand’s needs at the forefront. If everyone is only thinking of their individual businesses, the brand as a whole will suffer, and everyone will lose.

This may mean coming together to create and decide on a shared marketing plan that will positively affect all the businesses involved.

It takes money to make money

This is a concept that is hard for some people to swallow. Franchise fees range from a few thousand rands to tens of thousands. Royalties typically range from 5% to 8%, with the marketing and advertising cost an additional 1% to 3%.

Despite the steep fees, many people still choose to invest because they realise the potential for them to make more money in the long run as part of a franchise than they would just working on their own.

Again, this goes back to being willing to work as part of a team even though you are still responsible for your own business. A company-wide marketing fund means you won’t have complete autonomy over how your business is advertised and what exactly happens to that large fund to which you have to contribute. You will be able to voice your opinion, so it’s important to understand the basics of franchise and multi-location marketing.

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The after

If, after you’ve done all the necessary research, you still want to buy into a franchise or expand your business into multiple locations, your work isn’t done. In fact, it’s just started because now you need to understand the intricacies of marketing for more than one location and how to optimise your results so that your investment continues to be a positive one.

Here are some marketing tips:

Keep customers at the forefront

In the end, customers are what will keep your business thriving, and so it makes sense that they should be considered at the top of your marketing plan. Don’t be afraid to try something new — just make sure to evaluate whether or not your strategy is bringing more customers through the door. If the answer is no, move on and think of something else.

Be prepared to debate strategies with the other members of the team. It’s okay to argue, as long as everyone is keeping the customer’s wants and needs in mind. Ultimately, this is the only thing that’s going to make everyone’s businesses successful.

Consider customer reviews

This is something that is often forgotten at the corporation level — make sure you don’t forget! The unfortunate truth is that most reviews are left by unhappy customers who feel the need to voice their opinions. Happy customers tend to stay quiet. This paints an unfavourable (and often unfair) picture of the business online.

Don’t be afraid to get out there and ask your loyal customers to leave reviews. It’s the only way that your business has a chance to accurately portray its reputation.

In addition, encourage these customers to utilise your Google ‘My Business’ page. And don’t forget about citations that allow reviews. Citations often show up first in search results listings that target your keywords, so it’s important that those reviews are favourable as well.

Create a quality website

Your business website should be at the centre of your marketing campaign. It’s where your customers go to find out information about your product, as well as where, when and how to reach you. It’s ultimately what will bring customers through your front door.

Make sure each store has an individual locations page that is optimised and can be indexed by Google. These locations pages should be up-to-date with accurate information about your business — address, operating hours, contact information, etc.

Finally, make sure the site is well run overall. It should be optimised, run quickly, be clear and uncluttered, have a quality mobile version and provide well-written content that customers are looking for.

Input from franchisees

Although the franchisor ultimately has the last say in how marketing money is spent, you should be part of a corporation that asks for the opinions of the franchisees. Some businesses have an elected board of franchisees that meet with the franchisor regularly to discuss the wants and needs of the whole group.

Regardless of how this is done, the individual franchisees should have the opportunity to contribute their opinions into the overall marketing plan. After all, they’re the ones who deal with the customers directly. A good franchisor will recognise this and seek out opinions from franchisees.

Proper money allocation

Typically, a large company marketing fund gets distributed into three different areas — the costs of administering the marketing effort, the cost of the advertising materials themselves and the media purchases to place the advertisements.

A good multi-location/ franchise marketing plan will dispense funds equally into these three areas. Be wary of any plans that seem to tip the scale in favour of one area over another. All three of these departments directly impact each other, so they should be treated with equal importance.

Two common types of advertisements are brand building versus customer attraction. Both are good for business and should be used when creating a marketing plan. One should not be deemed better than the other.

Don’t forget about SEO, especially local

While local searches tend to benefit local, single location businesses tremendously, they don’t always have the same effect on multi-location or franchise businesses. Because of the nature of local searches, it’s difficult for the latter to rank as well as single location companies, but it’s not impossible as long as you pay attention to the rules of SEO.

Don’t ignore local SEO principles. As I said before, each location should have an individual local landing page. You should also take time to make sure you have clear, positive citations.

Evaluate whether or not the marketing plan is working

Last but not least, remember that any marketing plan can look good on paper. That doesn’t mean it will be successful when put into practice. It’s important to analyse your results and determine if your efforts are, in fact, increasing brand awareness and bringing more customers through your doors. Consult your team for their opinions and to find out how the plan is working for them.

Remember, two heads are better than one, and ultimately it needs to have positive results for everyone, or the brand as a whole will suffer. In the end, it’s your livelihood that will suffer if the marketing plan doesn’t work, so put in the necessary effort and due diligence to evaluate its effectiveness and make changes when necessary.

Scott Langdon is an entrepreneur with over 13 years of internet marketing experience, and currently serves as a managing partner of the nationally-recognized SEO firm HigherVisibility. Langdon and the HigherVisibility team work with clients of all sizes from across the country to offer a full range of interactive marketing services. He resides in Memphis, Tennessee.

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Franchisee Advice

Types Of Funding Available For Franchisees

If you’re interested in investing in a franchise, there are a number of funding routes available to you.

Darlene Menzies

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In South Africa, a franchise is considered a separate, specialised field of business and from a financing perspective is viewed differently to an existing business. It’s typically easier to get funding for a franchise as franchises have a proven product and they vet potential franchisees and offer support to new business owners. This support can include extensive training on running the franchise, branding and marketing, operational policies and procedures and a highly-tuned supplier network.

The reputation of the franchise will, to a large extent, dictate which finance options you choose and how easy it will be to raise the required funds.

It’s important to understand the cost of purchasing the business and the expected operating costs to work out how much finance you’ll need until the business starts to generate profits. Be clear about the upfront costs, including access to the brand, the market structure, start-up support and the set-up fee, which usually includes construction, equipment, stock and other necessary resources.

Related: 6 Great Tips For A Successful Shark Tank Pitch

Consider the operating costs, which must include management service fees and franchise marketing and advertising levies. The franchisor will advise you on the time it should take for the franchise to start generating profits. Upfront costs plus operating costs are the total amount of finance required to purchase, set up and run the franchise.

What’s available for prospective franchisees?

Franchisor Funding

Many of the large franchisors have their own funding mechanisms. These can range from their own established finance arm to funding assistance through partnerships with external lenders. Franchisors seldom fund 100% of the purchase costs; the amount of funding varies according to the size and reputation of the franchise and usually ranges from 25% to 75% of the costs.

Once a franchisor approves you as a franchisee, your chances of being approved for funding are significantly stronger. Some franchisors go a step further and suggest a business partnership with another potential franchisee who has good financial resources but less experience. Pairing experience with finance can be a useful option, but needs to be explored properly as it is a long-term partnership that must work for both parties.

Tandem Funding and Specialised Franchise Funders

South Africa’s B-BBEE legislation has led to a new option for franchise funding. It’s a particularly innovative way of quickly upskilling inexperienced potential franchisees. The franchisor funds the new franchise and retains ownership of the majority of shares in the business.

The franchisee initially purchases a small number of shares and is then mentored by the franchisor to set up and run the franchise. Profits are used to buy more shares until the franchisee has purchased all the franchise’s shares.

Specialist franchise funders are also a useful option. They typically consider a wider variety of franchises than banks and have in-depth knowledge of the industry. However, like other funders, their primary concern is to be sure that the loan will be repaid within the required period.

Related: Expansion Funding Options For Your Growing Business

Franchise Funding from Banks

franchise-funding-from-banksAll of the large banks have specialised franchise funding departments. Their approval rate for funding franchises is generally higher than for independent businesses.

Banks will expect you to provide a sizable contribution toward the purchase of the franchise and funding is dependent on proof that the business will be able to repay the loan.

Other factors they consider are the location of the business and its proximity to competitors and catchment markets, your level of business experience, your credit record and the amount and type of support offered by the franchisor. The higher the level of support, the less the risk to the funder of the business under-performing.

If the franchisor is willing to enter into a joint venture with you to partially fund the purchase, the bank will consider this positively as it means the franchisor has a vested interest in helping you to succeed.

Government Franchise Funding

All of the government funding agencies offer franchise funding primarily to encourage black entrepreneurs to enter into the franchise business. For example, the National Empowerment Fund considers funding based on a minimum of 50,1% black shareholding, provided that the black shareholders are actively involved in managing the business.

They prefer to fund well-established franchises, fund up to R10 million and expect to exit within seven years, so you’ll need detailed projections to show that the loan can be repaid within that period. Ithala Bank considers funding for KZN-based approved franchisees who do not have collateral.

Related: Should You Purchase An Existing Franchise?

What funders expect from you

Lenders expect you to provide detailed information that will enable them to assess the risks of lending to the franchise. This means they require a detailed business plan, comprehensive and well- substantiated financial projections and full details of the franchise, its agreement terms and the levels of support they will provide. They will also need details of start-up costs; for example, construction, set-up costs, equipment and other resources required to establish the franchise.

Franchise lenders expect you to have concluded discussions with the franchisor and want to know that you have been approved. This pre-approval means that there is less risk to them. You’ll also be expected to provide feasibility studies from the franchisor.

The purchase of a franchise requires an injection of your own cash and if you are borrowing money, you’ll probably need to provide collateral. You’ll need a statement of personal assets and liabilities for each of the directors, a good credit record and detailed CVs of the owners to show the required business experience.

Choose wisely

The more well-known the franchise, the higher the price, so do your homework before applying for finance. Understand the full cost of starting and running the business to make sure you aren’t in for future surprises. In particular, work out your current liquidity status.

Keep a small contingency fund available for unexpected expenses, so don’t invest all available capital in the venture.

Shop around. Compare finance institutions’ offerings to make sure you get the best deal. In the case of less expensive franchises, consider working with a couple of lenders; for example, an asset funder to fund equipment needs and a franchise funder for the start-up and working capital costs.

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Franchisee Advice

Factors To Consider Before Signing Up As A Franchisee

Franchising is a brilliant way to get into business with not many entrepreneurial skills as it comes with a roadmap to follow for success.

Diana Albertyn

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You’ve been considering entrepreneurship for a while, and now that you’ve finally raised some money and been approved for a loan, you’re ready to quit your 9-5 job to run your own business. You may even already have your eye on a particular franchise, but while franchising is considered an easier and more low risk way to get into business, are you suited to being a franchisee?

“The question is not ‘is franchising right for you’, but rather, are you right for franchising? Because if you don’t have the right attitude and skill set, it can be a very expensive mistake,” says small business expert and author Steve Strauss.

Franchising may seem like an easy way into entrepreneurship, but along with an established name and proven systems, come rules, regulations and little room for creativity. If you’re not ready to become a franchisee, but want to go into business for yourself, you may find yourself struggling to operate within the system’s blueprint.

Ask yourself these three questions before proceeding with the process of franchising:

1. Will you be able to follow the directions of the franchisor?

You’re buying into an existing and proven concept so it’s safe to assume that the franchisor knows best, and so you have to be open to learning and following guidelines for business success. If, for example, you have experience in advertising and think you have an improved technique of marketing the franchise, you may want to change the advertising material provided by the franchisor – don’t.

Related: 3 Ways You Can Innovate And Improve As A Franchisee

“Being a franchisee means following the directions of the franchisor, even when you think you know a better way,” advise experts from strategic and tactical advisory firm MSA Worldwide.

“In addition to initial training, you need to be prepared to accept coaching and advice from the franchisor on how you operate or market your location.”

2. Do you have the need to experiment?

Lou Groen may have had success in launching a new menu item that McDonald’s approved of in 1962, but not all franchisees are that lucky. Stick to the plan and limit deviations to the menu or anything that involves the customer experience.

If the franchisor’s concept doesn’t involve deliveries, offering them to your customers may cause issues for others within the franchise system. “If it’s not part of the franchisor’s concept, you’re deviating from the concept and therefore, no longer running your store as a franchise,” according to MSA. Franchising arguably limits innovation opportunities, so if you’re prone to implementing creative ideas and evolving business offerings based on said ideas, rather start your own independent business.

Related: 3 Pricing Tactics To Recession-Proof Your Franchise

3. Are you a team player?

These first two questions you address should already lead to the realisation that everything you do affects everyone in the franchise chain. One bad experience at your establishment and suddenly, all the stores are affected by bad press or unsavoury social media attention.

“Other franchisees are relying upon you to offer to the consumer a consistent level of service, product quality, and brand message. You are going to have to work with others in the system in making decisions,” advise experts.

Remember that as part of a chain of other business owners, you may have to accept that majority rules when it comes to decisions where franchises do have a say.

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Franchisee Advice

3 Ways You Can Innovate And Improve As A Franchisee

Although your role as a franchisee isn’t really to innovate, there’s room for creativity if you go about it the right way.

Diana Albertyn

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When you signed on the dotted line after reading and agreeing with the franchise agreement, you knew that you were buying into a proven system where everything has already been thought out for you, and all you have to do is follow the formula for success.

But you’re a franchisee longing to put your own imprint on your business, and it may be frustrating to feel boxed in by a formula, while you’re bursting with new ideas.

“Franchising, by its nature, discourages innovation on the part of franchisees, who are required by their franchisors to follow very specific policies and procedures on exactly what they will sell, how they will make or deliver it,” notes Randy Myers, contributing editor for CFO and Corporate Board Member magazines.

Related: Types Of Funding Available For Franchisees

This doesn’t mean your ideas will never see the light of day though. But before you approach your franchisor with your brilliant insight, consider the following steps that may well lead you down an innovative path:

1. Get the basics right first

Franchisors know that customers like consistency as it makes them comfortable and trust every location of their franchise they choose to visit. But, even the strictest franchisors get hungry for new ideas. It’s the timing that’s vital for your idea to even be considered.

“Most good systems don’t want new franchisees to even think about innovations until they learn the existing system inside out and prove that they can execute it like a star,” said Jeff Elgin, CEO of FranChoice, a network of franchise referral consultants. “At that point, they have become successful, their base is secure, and they have earned the right to consider innovations.”

It’s wise to ensure you’ve learned your franchisor’s existing business model before you suggest any improvements.

2. Do your homework

So, you’re doing well and you’re sure your idea will be welcomed as a crucial innovation to the franchise system – but research your proposal, suggests Kim Stevens, VP of Regional Development and Director of Franchise Awarding at Woodhouse Day Spas. “Especially if you’re suggesting something that would impact all franchisees, create a business plan before approaching your franchisor,’ she says.

Related: To Buy Into A Franchise Or Purchase A Licence? 3 Factors To Consider

It’s also good to have another look at the franchisor’s policy for accepting new ideas to ensure you’re prepared for tough questions before you propose your idea.

3. Speak to the right people

Elgin recommends you first identify the person at the franchisor’s head office who’s responsible for receiving new ideas. “Many of the ideas a franchisee comes up with will already have been proposed by another franchisee,” notes Elgin.

To avoid wasting your time, no matter how great you think the idea is, present it as early as possible before spending anything developing the idea.

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