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How Cash Converters Grew Through Franchising

Franchising can provide quick access to capital, which is great if you’re looking to grow your business. But the franchising system isn’t without its challenges. Cash Converters MD Richard Mukheibir offers some advice for those looking to expand through franchising.

GG van Rooyen

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Vital stats

  • Player: Richard Mukheibir
  • Position: Managing Director
  • Company: Cash Converters
  • Retail Turnover: R500 million+
  • Visit: www.cashconverters.co.za

In 1993, a business partner showed Richard Mukheibir a promotional video for Cash Converters, a company that was then showing quick growth in its home market of Australia.

“I was in IT, so I never really pictured myself becoming a second-hand retailer,” laughs Mukheibir. “But the more I thought about it, the more it made sense. This was just before the political changes of 1994, so we felt fairly sure that there would be a big expansion of the middle class. We would see much more upward mobility, which could be great for a brand like Cash Converters.”

Before long, Mukheibir was on his way to Australia. He liked what he saw and signed a contract to receive a master licence for South Africa. Two months of training followed.

Related: Cash In On South Africa’s Burgeoning Second-Hand Goods Market

Buying into a brand

“I’m often asked why we didn’t simply replicate what Cash Converters was doing in Australia. Why spend so much money on buying into an overseas franchise?” says Mukheibir. “There were two reasons for this.

“Firstly, even though the brand wasn’t known in South Africa yet, we liked the idea of bringing in an established and respected brand. At the time, second-hand retail didn’t have a great image. It was seen as dingy and somewhat unsavoury. Cash Converters had reinvented the concept and brought it into the modern age. We wanted to be a part of that.

“Secondly, I had an IT background, so I knew very little about the retail environment. It was important to buy into a franchise that would provide the training and expertise needed to set Cash Converters up in South Africa and run it successfully. To me, that is the whole point of a franchise system — it offers a proven business model that you can replicate. If a franchise doesn’t offer that, you have to question what the value is. Thankfully, that wasn’t the case with Cash Converters.”

When money isn’t a problem

Another great advantage of franchising is the ability to expand your business without having to bankroll that expansion yourself. In South Africa, Cash Converters embraced the franchising system and has managed to grow very successfully because of it. The business currently boasts 80 stores with another 20 in the works.

“The franchise model allows you to grow relatively quickly, since franchisees help to fund your growth. So, while access to capital is usually one of the biggest barriers to growth, it isn’t really the case with franchises,” says Mukheibir.

“But it brings with it some other challenges. When money isn’t a problem, for instance, you can be tempted to grow too quickly. Just because you have the money to grow, doesn’t mean that you should grow.

Related: Cash Converters Franchise Listing 

“There have been many instances where we’ve decided to slow the company’s growth, simply because we felt that the timing wasn’t right. We’re interested in long-term success, both for ourselves and our franchisees. We want multi-unit franchisees who stay in the business for decades.

“If you grow quickly through franchising, you might raise a lot of capital in the short term, but it could damage the company in the long run. It’s not just about the number of stores you have, you also need the structures in place to support your franchisees.”

Finding the right people

Cash Converters

According to Mukheibir, the biggest barrier to growth for a franchise company like Cash Converters lies in the finding of promising new franchisees.

“Finding great franchisees is our biggest challenge,” says Mukheibir. “We are very particular about the people that we allow to join the brand. It’s not just about the money, it’s also about the skills and energy that a person will bring to Cash Converters. For instance, some level of business acumen is very important to us. We want people who know how to run a business.

“Even more importantly, though, are the values that potential franchisees have. It all starts with values. Skills can be acquired, but you can’t force your values onto someone else. So, we start off by looking for people who share our values — who will act with integrity and always treat employees and customers with respect.”

People who can make the business model work

And how does Cash Converters go about finding these people? The most obvious way is to simply sell franchises to existing franchisees. By setting up multi-unit franchisees, the company knows that it’s dealing with people who can make the business model work, and to whom they would need to provide less training and support.

When it comes to new franchisees, Mukheibir and his team treat every interaction with a potential franchisee as a sort-of ‘interview’.

“We pay close attention to how prospective franchisees conduct themselves. If someone promises to send through a document the next day, does he or she actually do it, or does the paperwork arrive a week later? We try to find out if people are as good as their word. Once again, it’s all about values.”

Treating franchisees like partners

Cash Converters spends a lot of time finding the right franchisees, because it views them as partners.

“The success of your business depends on your franchisees. If they’re not making money, your entire business can collapse. Treating your franchisees like a revenue stream is a sure way to failure,” says Mukheibir.

“So, we treat franchisees like partners in the business. We visit stores regularly, and spend at least a day in each one. We also hold conferences where we explain the strategy of the brand and ask for input from franchisees. It’s important to us that franchisees feel as if they are part of a bigger organisation. We also believe that the brand is stronger when everyone involved is moving towards a common goal.”

Related: Jean-Pierre Seger Gives His Franchisor Perspective

Stay in touch with company-owned stores

To better understand the challenges of franchisees, Cash Converters also operates company-owned stores.

“These stores are a great place to test new ideas. So, we run pilot programmes in our stores, and then roll them out across our network, says Mukheibir.

“We also need to understand what challenges our franchisees face daily. Franchises fail when franchisors lose touch with what’s actually happening on the ground, which is why we operate our own stores.”

GG van Rooyen is the deputy editor for Entrepreneur Magazine South Africa. Follow him on Twitter.

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Franchisors

3 Core Strategies For Building Successful Franchise Organisations

How to attract potential franchisees to invest in your business.

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The most common questions I hear from franchisors are usually related to growth strategy. In other words, what are the core strategies that differentiate the successful from the mediocre?

Strong leadership determines the overall success of the organisation, but how can this be defined or broken down to actionable strategies? People often ask me how we created a franchise growth strategy that enabled us to grow to 150 units in less than three years. This is the secret sauce! When I coach my franchise executive clients, we begin with three core strategies.

As I described in my book, Franchise Bible 8th Edition, The Upside Down Pyramid strategy sets the pace for everything since it is a core belief. This will get the company moving in the right direction and keep the focus strong as franchise owners are added to the community. The Three Decision Lens Philosophy then kicks in to make sure the company stays on track and makes good solid decisions that will benefit the franchisees and the overall growth of the organisation. Lastly, the Franchise Glue creates a strategy for long-term maintenance that inspires aggressive growth and peak performance.

Related: Selling Your First Franchise? Consider These Key Pointers

The following are the core leadership strategies that I identified in Entrepreneur Magazine’s Franchise Bible 8th Edition.

The Upside Down Pyramid

This strategy is a paradigm shift from the common corporate organizational structure. Typically, you see the leader at the top of the pyramid governing over the team members, which trickles down to the employees and eventually the customers.

Franchising is a very unique business model and is very different from a traditional corporation. The primary difference is that the franchise owners are independent business operators, not employees. The Upside Down Pyramid strategy flips that model on its head by placing the leader(s) at the bottom, bearing the weight of the company infrastructure on their shoulders. Franchise owners then are viewed more like the customer and supported accordingly.

The Three Decision Lens

Every decision a franchisor makes has Legal, Practical and Political implications, so these three factors have to be considered whenever a decision is made. Making good decisions is mission critical to the successful growth of a franchise organisation. Many franchisors have stumbled or even failed because of poor decisions that negatively impacted their franchisees.

The Three Decision Lens Philosophy is tool that enables a franchisor to consider the total impact of their choices before the decision is made.

The Franchise Glue

Franchise Glue is everything a franchisor does that sticks the franchisees to them. Ongoing support and training, buying power, technology tools, innovation, events and other programmes and systems that endear the franchise owners to the brand. These are the reasons that franchise owners stay with the brand and have no problem paying ongoing royalties.

Once these three strategies are implemented and the leadership spoke is in place, we can build the remaining spokes which are marketing, operations, finance and technology to head for the “hockey stick” growth of 100 units and beyond.

Related: 3 Ways You Can Innovate And Improve As A Franchisee

Like any other business strategy, the most important factor is your willingness to buy in and execute. The best game plan in the world is useless if it is not put in to action. Building a healthy and thriving franchise organisation is much like exercise. Long term and consistent exercise programmes generally lead to a healthy person.

I will be posting a series of articles that will break these three strategies down in more detail including real world examples and tips for implementation. This will allow you and your team to focus on one strategy at a time and work on implementation steps. Stay tuned over the next several weeks and try working these strategies in to your franchise business model and see how it impacts your franchise community.

This article was originally posted here on Entrepreneur.com.

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Franchisors

The Secret Sauce To Great Franchise Leadership

The upside down pyramid puts the franchisee at the center of everyone’s effort. Success follows.

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I am often asked to share the secrets of franchise success with my clients and audiences of franchise executives as I travel the country spreading the Franchise Bible strategies.

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The most critical of the three core strategies is what I call the upside down pyramid strategy. This is more than a catch phrase or slogan. It must become a true belief in order for this strategy to affect a franchise organization for the better. Lets start with some basic facts to clarify.

What it is                              

The upside down pyramid is a servant leadership model that makes sure that franchise owners always come first. This must be genuine for all members of your team.

Related: 3 Challenges To Establishing A Franchise System And How To Overcome Them

Franchising is different than any other business model in this way. A franchise organisation simply cannot thrive unless the entire corporate team is on board with this commitment. If it’s not, it would be like a medical team where some members simply did not care about healing the patient. It is a non-negotiable.

What it is not

This strategy is not a hand-holding philosophy that rewards lazy or non-compliant franchisees. One of the exciting outcomes from this system is seeing the franchise owners step up and go above and beyond the call of duty when they feel truly appreciated, valued and respected by the franchisor. I have seen amazing things happen from franchise communities that felt connected and part of the bigger picture.

The challenge

Many franchise organisation executives have a lot of experience as traditional employers so they tend to try to “manage” their franchise owners as though they are employees. In most cases this is the beginning of the most common problem that I call the traditional pyramid model with the boss on top.

The key to remember at this point is the reality that the franchise owners are not employees of the company. In fact, the exact opposite is actually the case. The franchisees invested their hard earned money into the franchise company and pay an ongoing royalty as well. This means that they are the customers of the franchisor and the franchisor should value them as such.

How do you implement this strategy?

I have seen the good, the bad and the ugly in the franchise world. I can usually sense the company culture pretty quickly when I am among the franchise executive and support team. It is no surprise that the most successful franchise brands have a pretty solid grasp on this strategy. Here are some tips to get you started:

  • Train: Introduce this strategy to your executive and support team and give them the opportunity to ask questions and learn. Remember that this may be a bit of a paradigm shift for some, so they may need time to get it down.
  • Reinforce: Use ongoing reminders during your meetings, training sessions and conferences to keep the ball rolling. Your system must be based on things that you and your team will do consistently for a long period of time. A short burst of change followed by a return to the former status quo doesn’t work, so make sure you can commit and stick with it.
  • Insist on buy-in: Everyone on your executive, training and support teams must buy in to this commitment for it to work. You have heard that one bad apple spoils the whole bunch. This is very true within a franchise organisation. You may have to replace team members if they refuse to genuinely commit.

Related: Col’ Cacchio: A Passion For Pizza

Leadership tip

You have also heard the saying that the fish starts to rot at the head. The common denominator that I see in failing franchise organisations is almost always due to poor leadership. I often say that a decent business model with great leadership will usually thrive and a great business model with lousy leadership will usually fail.

Don’t feel bad if you are not the best leader for your business. I have seen business founders step aside and hire in leadership experts to run with their creation. Knowing that someone else is a better leader than you for your franchise organisation is a sign of great discernment and wisdom. If you are not sure just ask your franchise owners to give you a grade as the leader. I asked a franchise CEO recently if he would get an A from his franchisees and he said, “Probably not.” I advised him to get back to work and make sure that he can earn that A.

This article was originally posted here on Entrepreneur.com.

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Franchisors

Get Your Franchise Running Smoothly – Even When You’re Not There

Does the thought of taking time off from your franchise outlet make you nervous? Then you have to learn to run your business instead of letting it run you.

Diana Albertyn

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“A sign of a successful business is one that can operate without your physical presence 24/7,” says Brad Sugars, start-up expert, author and founder of ActionCOACH. While your franchise systems and operations are designed to run smoothly and consistently, is your staff trained to be productive in your absence?

“Franchises are already by nature systematised operations, so it boils down to how you as a business owner hire and train people to get the necessary jobs done,” says Sugars.

If you know a sick day will cause havoc in your store, an assessment of how you’re running your business is needed. Are you really running a successful franchise if things fall about without your supervision? Take a step back and consider the following steps to manage your franchise without it controlling your life. Pretty soon you could book that vacation.

Determine your role in the franchise

Are you managing the franchise, taking orders, doing admin and handling every other aspect of the business? Then you’re not hiring the right people, because those roles should be filled by people who can be left to carry them out unsupervised.

Related: How To Write An Operations Manual For Your Franchise

“And if you don’t have the right people for the job then it might be time to start hiring, so you can free up your franchise’s most valuable resource – you,” says Pieter Scholtz, co-Master Licensee for ActionCOACH in Southern Africa.

“You need to get an idea of how you can hire people to take repetitive or administrative tasks away from you. Ask yourself: ‘Do I really need to be doing this?’” says Sugars. Your business cannot run optimally if you’re the single most-knowledgeable and capable person there.

Lead with clarity

You have long-term goals for your business, perhaps even acquiring more locations and running multiple units. While growth is good, you need to share the load and ensure everyone employed in your business is working towards the same goals, otherwise, it’ll be difficult to get there. Sugars suggests asking yourself the following:

  • How will you make your vision a reality?
  • What makes you different from other franchisees and business owners?
  • What kind of team do you want to recruit and create?
  • How does all of this deliver value to your customer?

Conveying your vision can help ensure employees know how to get to the end-goal faster and more efficiently.

Related: 3 Steps To Ensure Your Franchisees Flourish Your Support System

Plan for long-term cash flow

Loyal customers ensure a constant flow of cash through the franchise and this requires exceptional service and the building of strong relationships. “Target your top-spending customers and establish a good relationship with them for long-term cash flow,” Sugars suggests.

Although the broader campaigns are covered by the marketing fee you’re paying to your franchisor, it’s wise to focus on your local’s tastes and suggestions when looking to deliver an experience worth returning for.

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