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Franchisee Advice

You’re The Boss, So Be The Boss

Do you sit in the back office, hoping your staff will do right by the business, or do you lead by example?

Basil O’Hagan

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The best way to run a successful franchise is to lead by example. Don’t sit in the back office, hoping staff will remember their training and see to the customers.

Get out there onto the floor and manage staff, help customers, oversee some deliveries. Or just have a regular wander around the office having a friendly check of what your team is up to. And then make sure your managers approach their leadership roles in the same way.

Keep this in mind when you manage your managers. When we first get into a management position we often suffer from what psychologists call the ‘imposter syndrome’.

We feel like we don’t deserve to be there. Remind your managers that they’re in that position for a reason. You have chosen them from a dozen or so possible candidates to lead your team.

Maybe you’re suffering from imposter syndrome. Then you need to remind yourself that you’ve raised funds to finance your own business, mapped out a vision and taken the plunge in launching it into the market. Of course you deserve to be there! So don’t be embarrassed about it. Lead the team. Live the values of your business.

At the Brazen Head, we always said we can either be spectators or players.

Related: Sizing Up Your Franchisor

Spectators sit in the stands and watch the game. Players are down on the field, taking the knocks and making it happen. The team captain should still play the game.

Empower Your Team

empowering-employee-team

In the current South African business environment, there’s a lot of talk about empowerment. The type of empowerment I’m talking about here has nothing do with multi-million rand BEE deals, but rather is about giving staff the confidence, and the authority to serve customers.

This means giving them some real power, beyond asking, “How can I help you?” and processing transactions.

If you’re the owner or manager of a Harvey World Travel franchise and you’ve got some leave owing over the Easter break, you should actually take your leave. Place your assistant manager in charge of the store for a week. Go to Southbroom.

Sure, it’ll be a little nerve-wracking for you and for her. And rest assured, she will make a few small mistakes. But the boost in confidence that she will gain by being empowered will be invaluable. The confidence you have shown in her will grow her own self-confidence. And next time, you’ll know you can trust her to manage your business.

Spread the Love

Management can be a lonely experience if you end up chained to your desk, locked in your corner office, occasionally asking your PA to “Bring me the figures from last year.” It’s easy for this to happen, because you’re under a lot of stress and you have to deliver results.

But the best way to deliver results is through the people in your organisation. Try not to get trapped in your office. Get out into your business. Interact with your colleagues. I’ve heard this called MBWA — Managing By Walking Around!

Related: What the Franchisor Can Do

Many of the people working for you are specialists, highly skilled in their fields. So don’t think you need to go around telling them how to do their job. Rather, ask them for advice on how things could be better.

Ask your team questions like the following:

  • Can you explain to me what you’re doing here?
  • Have you ever thought there’s a better way for us to do it?
  • Do the customers like our methods?
  • How could we make things more customer friendly?
  • What is our customers’ main complaint?
  • What do our customers love?
  • How do you think we could do more business?
  • How do you think you could be more productive?

‘We Don’t Need An Office’

A former colleague and business partner of mine is Sean O’Connor. With him on my team we built much of O’Hagan’s and the Brazen Head pub and restaurant chain.

He has always been a massive believer in managers not being cloistered in the office. Whenever we were building a new store, he would be adamant that we didn’t need an office.

“The manager should be out on the floor until the customers leave,” was his philosophy. I would eventually convince him that we did need some kind of office. But even today, if you visit a Brazen Head or an O’Hagan’s you’ll see that the offices of our store managers are tiny!

Positive Roles For Your Colleagues

We speak elsewhere about positive names for your customers. But it’s equally important to have positive, motivational terms for the people you work with.

I remember once working with a keen, ambitious and highly talented young woman. She was new in the industry and thus a little inexperienced, but management chose to saddle her with a job title that was something like ‘Junior Sales Executive’.

After a few months of good service, she begged us, “Please can you just change my job title? Being called junior is undermining clients’ confidence in me.” We dropped the junior and her performance went from good to exceptional.

Related: Be On Good Terms with Your Franchisor

It made me realise the importance of names, and language in general. Why give someone a job title that undermines their own confidence and that of their clients. Likewise, I don’t see any need for hierarchy thinking in management. Don’t refer to the store manager as ‘my manager’. He’s the store manager. And the company staff are your colleagues, team members. No need to call them your subordinates, especially to their faces. This isn’t the French army and we’re not in a court martial.

A famous story from the Rolling Stones rock ‘n’ roll band concerns the time singer Mick Jagger phoned up to drummer Charlie Watts’s hotel room and asked, “Where’s my drummer?”

Charlie promptly walked down to the lobby and punched Mick in the mouth. “I’m not your anything,” was the implication. “I’m the drummer for the Rolling Stones.”

Basil O’Hagan is the founder of both O’Hagan’s and The Brazen Head. Today, he runs Basil O’Hagan Marketing, which serves chains, independent operations and small family businesses, pinpointing and overcoming problems through proven neighbourhood marketing solutions.

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Franchisee Advice

5 Tips For Franchise Agreements

Below are 5 tips to ensure that your franchise agreement complies with the CPA.

Justine Krige

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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.

Related: The Perils Of The Franchise Agreement

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.

Related: What Constitutes a Fair and Balanced Franchise Agreement?

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.

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Franchisee Advice

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.

Richard Mukheibir

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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.

Related: 6 Things You Need To Know About Profit And Cashflow

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.

Related: 7 Things Every Entrepreneur Should Know About Managing Cash In The Business

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Company Posts

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.”

Nedbank Franchising

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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.

Related: How Sorbet Franchisee Kate Holahan Is Nailing Success By Following Her Dream

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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