When prospective franchisees begin to compare one franchise opportunity with another, one of the items they need to examine closely is the training the system will provide them.
Running any business is a complex undertaking. Besides having to know how to prepare your products or deliver your services to your customers, you need to understand how to manage the business, hire and fire employees, advertise, do the books, make deposits plus a thousand other details. As a franchisee, you’ll also have to do everything in compliance with the consistency standards of the franchisor. But not all franchisors provide the same level of training to their franchisees or prepare their franchisees for success.
When it comes to training, many franchisors look alike. On average, they provide between one and five weeks of training, but what if those five weeks of training consist of no more than working in an existing operation? Who trains your management team and your line staff? What happens when new products are launched or some of your management team quits and you need to replace and train your other personnel?
You should always meet with your future franchisor and plan to spend considerable time with its training department before you sign the contract. Some of the questions you should be concerned with are:
- Where does the training take place? How long is the initial training programme and what, if any, additional training costs must you pay in addition to your franchise fee?
- Who is required to attend training? Are there criteria established for ensuring you’re prepared to operate the business once training is completed? Simply spending time in the franchisor’s training programme may not be sufficient for everyone. The best person to tell you if you’re ready for the challenge of operating the franchise is the franchisor.
- Can you bring your managers and initial staff to training? If they aren’t on board with you yet (which is fairly typical), can they attend training classes after they’re hired? How much will this additional training cost you?
- What’s in the training curriculum? How much of your time will be spent in the franchisor’s classroom training and how much time will be spent in an operating location? What subjects are covered and in what depth? Will you only learn how to make the product or deliver the service, or is the programme comprehensive enough to teach you the financial, marketing and operational aspects of the business? How much management training will you receive?
- Who conducts the training? Are they line personnel brought in for the day or week, or have they been trained to be teachers? Remember, the goal of training is not for you to be impressed by the trainers; the goal is for the trainers to provide you with knowledge. To do this, they must know how to teach. Find out the background of the training team and their qualifications.
- How comprehensive is the training material? If you’ll be expected to train your own staff before your business opens, what tools and training techniques does the franchisor provide so you can accomplish this task?
These are just some of the questions you should focus on when evaluating a franchisor and comparing franchise training programmes. Don’t forget that the business will change over time. New products and services will be added or modified. Is your franchisor prepared to provide you and your team with additional training as the system changes? How will they do it and at what cost to you?
And remember, just because one franchisor has a longer training programme than another doesn’t mean its training is better.
Getting Good Training
You can tell the difference between great franchisors dedicated to your success and the ones only interested in selling you a franchise, by their dedication to training.
Great franchisors make certain that before the first customer comes through your door, not only are you prepared, but so are your manager, assistant managers and your entire staff. Equally important to the great franchisors is that as the system changes and new products and services are added, they make sure you and your team have the new skills required to be a success.
Open For Business
But what happens once the business is ready to open? Franchisors dedicated to training understand there’s a difference between classroom training, working in a training facility and actually operating your own business with your own customers. During the initial days or weeks after your franchise is open, they’ll have a training team working with you and your staff, honing your skills, reminding you of the lessons you learned at franchise headquarters and, most important, teaching you the tricks of the trade they learned in actually operating businesses like yours. It’s an invaluable extension of the initial training programme because there’s nothing more valuable than learning the business in the real world.
Now comes your first crisis. A crew person quits. You have an operating business, and customers coming through the door, and a warm replacement body just won’t do it. How is the new replacement staff going to be trained to the standards you need?
Most franchise systems expect you to train your new staff. But the good ones, in addition to providing you with training techniques to ensure you have the necessary training skills, provide you with training tools.
Training doesn’t end there. It’s continual for you, your management team and your crew. Great franchisors regularly hold advanced training programmes for management, giving them skills that can only be learned once they have real world experience. They provide regional and system-wide training programmes when new products or services are introduced. They expect their field consultants to observe your staff during their periodic visits to your location and help you assess the quality of your employees and, when necessary, help you improve their performance.
Training is the hallmark of great franchise systems. It’s ongoing, thorough and measured. Hopefully, as a franchisee, you found a system that dedicates its resources to training. But as a franchisee, it’s also your responsibility to take advantage of the training provided by the franchisor, look for training programmes outside of the system that will benefit you and, most important, make sure your staff is trained, too.
Most franchisors today require that everyone involved in managing the business – the franchisee and his or her manager – attend and complete the initial training classes. The really good ones also invite you to bring additional staff to training so they’re also prepared. Better still, if you own multiple locations, the franchisor has a training programme for all your general managers and other support personnel. If you think about it, when the franchisor provides training to your entire staff, they reduce their costs in providing support services later on because your staff, once trained, has less need to continually ask questions that were covered during the initial training.
Your initial training programme should be geared to teach you more than simply how to prepare products or deliver services. Expect to cover:
- Real estate selection and site development
- Standards and procedures contained in the system’s operating manuals
- Technical information on products and services you’ll provide under the brand
- Food safety and CPR (for food franchisors)
- Leadership and business management
- Problem solving
- Training the trainer-techniques for ensuring your staff is trained
- Managing the customer experience and brand positioning
- Marketing, advertising and communications
- Merchandising and pricing methods
- Safety, security, cleaning and maintenance
- Labour management (recruiting, hiring, firing, supervision and motivation)
- Supplier relations (purchasing, receiving, stocking and inventory management)
- Financial management and the use of the company’s point-of-sale and management information systems.
The goal isn’t only to provide you with information on how to run your business to the system’s standards but to provide you with an understanding of the system’s philosophy so you’ll intuitively know what’s right and what’s wrong.
Most systems will provide you with classroom and hands-on training. However, simply watching others do it isn’t sufficient. Franchisors dedicated to training have personnel who aren’t only proficient in operating skills but are also skilled in teaching you what they know.
5 Tips For Franchise Agreements
Below are 5 tips to ensure that your franchise agreement complies with the CPA.
South Africa has some great homegrown franchises – Mugg and Bean, Steers, Debonairs and Nandos, to name a few. South Africa is also no stranger to international franchise groups, such as McDonalds, KFC, Wimpy and SPAR, although there has been an increase in the number of international franchises investing in South Africa in recent years.
The Consumer Protection Act, No 68 of 2008 (“CPA“) is the first piece of legislation in South Africa that specifically regulates franchise agreements. The CPA prescribes certain minimum requirements for franchise agreements, as well as certain information that must be disclosed prior to a franchise agreement being signed. It is important that all franchise agreements comply with the CPA as provisions in franchise agreements may be declared to be void for non-compliance.
Below are 5 tips to ensure that your franchise agreement complies with the CPA:
1. Make sure you meet the minimum requirements
The CPA prescribes “minimum requirements” for franchise agreements. These requirements, which are set out in the Regulations to the CPA, set out mandatory terms (i.e. terms which must be included) and prohibited terms (i.e. terms which must not be included). They also prescribe that franchise agreements must be drafted in simple and plain language so as to be easily understood. Legal jargon must be avoided unless absolutely necessary.
2. Include prescribed minimum information
The CPA prescribes minimum information that must be included in a franchise agreement. Most of this minimum prescribed information is fairly general in nature and would be contained in the franchise agreement in the ordinary course (for example, name and description of the types of goods or services that the franchise relates to, the obligations of the franchisor and franchisee, and any territorial rights).
There are, however, certain more unusual requirements in relation to prescribed information, which information would not necessarily be contained in a franchise agreement in the ordinary course (for example, the qualifications of the franchisor’s directors, and details of the members/shareholders of the franchisor). These more unusual requirements must be kept in mind when preparing a franchise agreement.
3. Prepare a disclosure document
The CPA requires the franchisor to provide certain minimum prescribed information to the franchisee in a disclosure document delivered to the franchisee prior to the signature of the franchise agreement (including a list of current franchisees, if any, and of outlets owned by the franchisor; the direct contact details of the existing franchisees; an organogram depicting the support system in place for franchisees; and an auditors certificate confirming that that the franchisor’s audited annual financial statements are in order).
This information is intended to provide the franchisee with enough information about the franchise, its financial viability and potential business success so as to enable the franchisee to make an informed decision as to whether or not he/she wishes to “acquire” the particular franchise.
4. Prepare a non-disclosure agreement
It is important to ensure the protection of confidential information which may be disclosed to the prospective franchisee during the preliminary stages of negotiating and concluding a franchise agreement.
This may include, for example, the growth of the franchisor’s turnover, and written projections in respect of levels of potential sales, income and profit. Although not a requirement under the CPA, it is advisable for a franchisor to ensure that a prospective franchisee executes an appropriate confidentiality agreement prior to being sent the disclosure document.
5. Beware the “cooling-off” period
It is important to bear in mind that a franchisee has an entitlement under the CPA to cancel a franchise agreement without cost or penalty within 10 business days after signing such agreement, by giving written notice to the franchisor.
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.
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