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.
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.
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.
6 Top Tips For Reading Management Accounts
There is a golden key that reveals the secret of whether your business will survive and thrive. It is keeping tabs on the figures that summarise the strength of your business – your monthly management accounts.
There is a golden key that reveals the secret of whether your business will survive and thrive. It is not the brilliance of your business concept. It is not your talent for talking clients to sign on the dotted line. It is keeping tabs on the figures that summarise the strength of your business – your monthly management accounts.
Many entrepreneurs are usually more interested in operations and find product development or sales much more enjoyable than catching up on accounts. I sympathise – I’m one of them! So if you feel the same way, my top tip is always to make sure that you partner with or employ someone who can oversee the finances for you.
But that does not mean you can let the figure boffins and the finances take care of themselves. To function properly in your business, you need to know the outcome of your sales and development strategies – and the story of that is told in your management accounts.
If you never look at your management accounts, it is like blinding yourself in one eye. It means you risk being literally blindsided by a big surprise, whether it is heading for a significant loss or being confronted by an unexpected provisional tax payment.
Here is how Engela van Loggerenberg, our Group Financial Manager, puts management accounts in perspective for our new franchisees. She urges them to focus on six key areas:
- Priorities: Management accounts can help you pinpoint areas that you need to prioritise, whether to capitalise on growth or because they are not performing as well as you hoped.
- Strength: All businesses aim to grow their assets over time and the balance sheet in your management accounts will reflect whether and how you are achieving that.
- Control: A strong balance sheet is one that shows you have your business liabilities well controlled. The key marker here is your current liquidity ratio, which results from dividing your current assets by your current liabilities. To keep your business healthy, always aim to keep this ratio at least 2:1.
- Revenue: Ideally, you want to see your revenue grow month by month. Check your income statement both for the trend in actual revenue and also for actual against budgeted revenue to check how well your strategies are delivering results.
- Profitability: Of course, revenue is not the same as profitability. You need to know your gross profit – the basic figure of your sales less the cost of those goods – and net profit, which also deducts a range of other expenses including taxes. Track the percentage of these two profit figures as well as the actual cash amount they represent to keep a check on whether your costs are creeping up too high.
- Finance: Most businesses at some point want to finance their growth by borrowing from a bank. A set of well-regulated management accounts is a prerequisite to obtaining finance.
Your management accounts do not have to be particularly complicated to give you these vital pointers – and if you are figure-shy, the more straightforward the better.
The important thing, though, is that you do not allow yourself to be too scared to ask if there is something which is not clear to you. That is the way to keep control of this key to your business fortunes and to keep building your business from strength to strength.
A Three-Pronged Approach To Franchise Success
Danie Nel, head of business development for Cash Crusaders franchising, says the brand’s success over the past 22 years is attributed to the sentiment that “a profitable franchisee is a happy franchisee.”
What is your current footprint?
220 Stores. We’re looking to increase that number by another 20 stores for the 2018 financial year, which will then bring us to a total of 240 stores. Depending on the economy, we’re looking to grow our footprint even more to around 300 to 350 stores nationwide in the near future.
What are some of your brand’s biggest achievements that other franchises can learn from?
Our ability to read the retail market and innovate to stay ahead of times. We have recently launched an online platform where customers can sell their goods or borrow money — all online. This was a first for online retailing. One other achievement that I would wish to highlight is the launch of our mobile phone range, Doogee, exclusive to Cash Crusaders. Personally, having the honour of opening our 200th store was a tremendous achievement.
Franchisor involvement has also played a big role in the success of the organisation. Our CEO Sean Stegmann and other senior managers are as much involved in the business as any other operations manager or operator.
There is simply no ‘ivory tower’ management in our business and it makes a huge difference.
What are some of the challenges you’ve encountered and how have you overcome these?
Some of our daily challenges include securing a premises at a favourable rental and securing a franchisee with sufficient unencumbered capital, who is credit- worthy. Once the store is open, cash flow management and stock procurement is key.
In addition to this, it’s a challenge to achieve profitability immediately and to meet franchisee expectations. It’s also vital to ensure superb customer service and to retain those customers in the current retail and economic climate. I would say that our single biggest challenge is to retain and to build our customer base.
What attracts franchisees to Cash Crusaders?
Our unique retail model that allows for multiple streams of income through one business. These three profit centres include: New goods (variety of imported quality goods), second-hand goods (which we buy directly from the public, either through customers coming directly to our stores, or via our house-buy system offered by some of our stores) and secured lending (a financial service where customers can borrow money against valuables, determined at store level, and the loan is repaid within 30 days — or the contract is renewed for another 30 days with interest and service fees charged).
Why is it important for successful franchises such as yours to have a strong banking partner and how does it benefit both the franchisor and the franchisee?
Gone are the days where you just got a deposit book or cheque book and a little business loan from your bank. Banking has become more sophisticated and the technology that the bank offers is as important as its service, making life for both the franchisee and the franchisor easier on a day-to-day basis.
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.
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.
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.
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.
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.
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.
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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