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What to Expect from Franchise Training

Here’s what to look for in a franchise training programme.

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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.

Continuing Education

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.

Basic Training

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.

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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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