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Franchisee Advice

What it Takes to Make it in Franchising

Janine Allis, founder of the international franchise, Boost Juice, recently visited South Africa and shared her views on what it takes to make it as a franchisee.

Chana Boucher

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Franchisee-Success

Q: What in your opinion makes a franchise business successful?

We believe it is the ‘Ps’ – people, product and position. People need to have a desire for what they do, that’s what is needed to grow a business. Our product has made the business transferable to other countries. We always look at what is available in the country before we launch. Having the best position is critical. The Boost Juice franchise is very much a walk-by concept so it is essential to find a location with high traffic. Apart from those three aspects, it is also important to market yourself properly. Whenever we open a new branch we have a big launch so that people can see us and taste the products. One other aspect is getting feedback from people. It is good to get this so that you can find ways to turn a disgruntled customer into a fan.

Q: What do you look for in a franchisee?

We look for like-minded people. We are not just interested in selling franchises, we want to find the right people with the right attitude. They need to have some business experience but the most successful franchisees have passion and an attitude to succeed. If you think franchising is going to be nice and easy then don’t get into the business. It takes a lot of blood, sweat and tears before you get the flexibility of being your own boss.

Q: So you do think there is flexibility in owning a franchise?

For the first two years you have to be involved in the business to run it. Retail is detail and you have to manage cash flow and expenses tightly.

Q: What are some of the most important qualities a franchisee should possess?

In a franchisee interview I look for the right attitude. Also I favour a husband and wife team as one will usually work on the business while the other still earns an income. This means there is less financial pressure in the early stages and they will usually have different skills that can complement each other. If the franchisee has no business experience, I recommend doing a few short courses, it is particularly important to have a basic understanding of accounting. Boost will teach you how to run the franchise, deal with customers, use the technology and improve sales but we don’t teach accountancy.

Q: What about getting outside help from a bookeeper?

It is a big mistake to hire a bookeeper; instead you should find an expert on software like Quickbooks. They can teach you how to do the basics so that you are handling every invoice and paying everyone. The products are amazing for small businesses. If you do your own accounts you will pick up mistakes that quite possibly a bookeeper wouldn’t. It is vital to take the time to learn. Don’t just say that you are too busy in the store, if you are not doing your own accounts you are losing at least 20% of your profits.

Q: How important is it for a franchisee to be an owner manager rather than employing a manager to run the store?

Many franchisees can be owner managers of one or two stores, but a good owner manager is one who can leave their store to go on holiday and it continues to run efficiently. To do this you need to hire the right people. I’m a firm believer in hiring the right people. A great manager is a leader. By having the right people, systems and processes in place, they give themselves options after two years. This could be buying another store or having a significant amount of flexibility. But some people don’t ever get there because they are unable to lead or hire the right people.

Q: Why do you think it is better to be part of a franchise than opening an independent business?

The international statistics are positive. Only one out of five independent businesses survives, while four out of five franchise businesses survive. Apart from that, by being a franchisee you are part of a network which has better buying power. You also contribute to a marketing fund, which means you get more bang for your buck, and you are part of a group of people on the same journey – you get head office support but also interact with people in the same situation as you. You should get to know the other franchisees so that you can get together and help each other out. As a franchisee, you have other people thinking about product development, using resources you couldn’t afford if you were to open ‘Joe’s Juice’.

Q: How can a franchisee ensure they are choosing the right franchise for them?

They need to look within and think ‘What am I passionate about?’ We find that our franchisees are usually interested in health and fitness and have a sparkle in their eyes. Once you have identified what you are passionate about, you need to look at what’s available, and then at the franchise itself. How long have they been around, how many company-owned stores are there, the structure, do you like the people and can you find solutions with them?

Q: How important is it to invest your own money in a franchise?

Whether you are investing your money or money from a bank, it’s still your responsibility. The best option is to borrow the least possible as paying off a loan adds to your monthly expenses. Using your own money takes a bit of the pressure off.

Q: What advice can you give franchisees?

You need to have the right attitude. We have a saying, ‘Don’t be a VERB, rather SOAR’. VERB stands for Victim Entitled Rescue Blame and SOAR, Solutions Ownership of problems, Accountability for outcomes, Responsible for your own success. The outcome from this response is more positive. Being accountable for your own business is powerful. Saying it is my fault when something goes wrong gives you incredible power. I hate the word ‘try’ – you have no option but to do it.

Q: How much research should a franchisee do before buying a franchise?

They need to do an enormous amount of research but should beware of ‘analysis paralysis’. I know of some people who spend up to five years researching a franchise, and never get around to actually buying it. You need to look at financials, the brand, the business and do your own site research – you can sit at the site and do headcounts for a few hours.

Make sure that you meet with the franchisor and talk to them face-to-face as well as other franchisees who will give you the ‘warts and all’ information.

Q: What would you say is the biggest challenge for franchisees?

Staffing is a big challenge. Don’t settle for mediocrity, find people who are bubbly and hard working. Always do a reference check, but if this is their first job determine whether or not they are confident, and have numbers acumen. You may get it wrong sometimes, but be sure to fix it quickly.

Q: What are some of the most common mistakes franchisees make?

Thinking that it is easier than it actually is, not doing their own accounts, mismanaging their expenses and holding on to staff who should have moved on. One other mistake for female franchise owners is not replacing themselves when they have a baby. If you don’t find a replacement you can expect your business to go down by at least 20%.

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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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retail-franchise

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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