Every month, I receive several hundred inquiries from companies that think they ‘have the next McDonald’s.’ And while most have successful businesses, only a handful will have what it takes to make it as a successful franchisor.
So what sets these few apart? And, if you are just starting a business with the hopes of franchising, what do you need to do to get there?
First, Your Most Valuable Asset
The single biggest mistake new franchisors make is failing to protect their trademark. When a potential franchisee looks to purchase a franchise, a large part of that value proposition is the brand. And the bigger the company, the more important the brand becomes. Yet many companies overlook this vital and inexpensive first step. The end result: They may invest heavily in promoting a brand they cannot protect or even keep. When these companies decide to franchise, the choices are limited and often difficult: change the name, buy it from the trademark owner or go home.
To avoid these problems, your first step should be to develop a name that can be protected with a trademark. You may find that the process of coming up with a great name is harder than it looks. Generic or descriptive names are difficult to protect. Once you have several names you like and believe you may be able to protect, engage the services of an experienced trademark attorney who can complete the registration process.
You do not need to have a registered trademark to franchise. Your rights to that trademark vest on the date you file your trademark application. With this in mind, many of our clients begin franchising before this process is completed.
Next, The ‘Value Proposition’
To be a successful franchisor, you must first sell franchises. And to do this, you must create a business that people will want to buy, own and operate. Called a variety of things – from marketability to sex appeal – a franchise should have some quality that makes it appealing to the potential buyer. Value proposition is created by marketing campaigns, the look of an operation or rapid growth of the market. It can be based on the nature of the work involved, the taste of a recipe at a restaurant or pure return on investment. Often, it’s created by the nature of the prospective franchisee. But regardless of how you create it, you must develop a business that people want to purchase.
To have an adequate value proposition, a business must also be well-differentiated from its major franchised competitors. This can be achieved by a differentiated product or service, a reduced investment cost, a unique marketing strategy or different target markets.
Success is Not Enough
The next factor to take into account is the unique financial characteristics of franchised businesses. If you are going to be successful as a franchisor, the business model must have a high level of profitability because a franchise must allow enough profit for the franchisee to earn an adequate return on their investment, even after deducting its royalties and fees.
Profitability is relative. It must be measured against the capital invested to provide a meaningful number. In this way, the franchise investment can be measured against other investments of comparable risk that compete for the franchisee’s money. To be competitive, aim for the franchisee to achieve a return on investment (ROI) of at least 15% to 20% by the second to third year of operation. This return must be calculated after deducting a market-related salary for the owner-operator franchisee.
All other things being equal, the future franchisor will want to focus on lower start-up costs. At the same time, by focusing on ROI, the franchisor can have the greatest impact on franchisee returns. Future franchisors with physical operations should generally avoid expensive materials and custom design work, and instead commission a designer to create unit operations that will be duplicable at a low cost with readily available materials. But bear in mind that your physical unit will act as a ‘showroom’ for franchise prospects.
The Cloning Factor
The final, and perhaps most critical element for the future franchisor is the ability to duplicate the success you achieved in your first business. If a business only succeeds because of your unique skill set, a one-of-a-kind location or another factor that is impossible to replicate, it is unlikely that you will be able to franchise it.
Assuming that the business can be cloned, you must focus on making the process as simple as possible. Start by documenting everything – the factors that went into your site selection process, unit build-out requirements, key suppliers, advertising. Develop systems and forms that help you track your own internal performance. Know your numbers – including every key driver of unit profitability. All this information is essential when transferring your formula for success to your future franchisee.
The bottom line is that the best franchisors have the strongest value propositions. Just as your job as an entrepreneur is to create value for your customers, your job as a franchisor will be to create value for your franchisees. And while some of that value will come from the support you provide as a franchisor, much of it is designed into the franchise from day one.
Muscle And Grill Is Your Daily Chef. We Provide Fresh, Nutritional Food At Affordable Prices
It isn’t always easy to stay in tune with both body and mind. We do all the prepping for you so that you can keep up your pursuit of greatness.
- Brand: Muscle and Grill
- Established: 2018
- Website: www.muscleandgrill.co.za
Muscle and Grill is a healthy fast food establishment based in South Africa. In the face of modern South Africa, lives spent on the go require a fuel to match their aspirations while maintaining a delicious, fast and fresh service.
As our lives swirl into life’s vast depths of opportunity, our bodies are often the product of poor health habits, while trying to keep on the move to achieve our goals. Muscle and Grill challenges this. We want to be able to support the South Africa of tomorrow by offering the food your body needs to keep reaching new heights – to keep pushing the boundaries of accomplishment with health food convenience.
At Muscle and Grill we’ve got you covered. We provide nutritional fast food that is fresh and affordable. We have your health at heart. You could start your day off with some free-range scrambled eggs or fresh oats – for lunch a mixed bowl of rice, protein and fresh vegetables – or to round off your day, replenish your mind and body with a hearty health-infused burger and all its wholesome goodness. We have not forgotten that home constitutes a hungry family who have all been active, so grab a lean beef pasta salad with some greens on the side to go.
Related: SA Fast Food Franchising On The Rise
It isn’t always easy to stay in tune with both body and mind. We do all the prepping for you so that you can keep up your pursuit of greatness.
It was once said that great ideas are born from ones’ frustrations. That is exactly how Muscle and Grill came about. Having no real on-the-go option to stay healthy, or having the time to prepare to be healthy, became a huge frustration for us. We struggled to find enough hours in the day to keep up with a busy lifestyle and still eat healthy while on the move. Our work came first and our lifestyles suffered.
The vision for Muscle and Grill is to make it possible to stay healthy on the go. We want healthy food to be easily accessible for all walks of life.
Our mission is to provide quality, healthy fast-food. The food we provide is delicious and will keep you coming back for more.
Muscle and Grill works on an almost self-service basis. The point of sale system is customer operated where you can select what meal you would like to have. Once payment has been processed electronically the kitchen staff will receive the order and prepare it to spec. Muscle and Grill will be a completely cashless business, making it super-efficient for consumers and business owners.
The concept of Muscle and Grill is partnered with Puré Frooty. Puré Frooty is a self-service smoothie bar which prepares smoothies for you at the touch of a button. You can have a store with or without a machine – the choice is yours. Both concepts look to promote the idea of healthy living on the go.
We’ve looked to compliment our values by looking after that which grounds us. Our packaging and utensils are all eco-friendly, as we believe ‘going-green’ is not just a choice of eating but of the environment too.
So, when you are ready to join the next revolution in the fast food industry contact Muscle and Grill at email@example.com or visit the website at www.muscleandgrill.co.za to inquire on our franchise options today. Achieve your goals, stay on the move and look after yourself through Muscle and Grill.
Nando’s Is Firing Up The East
Carlos Duarte has been part of the Nando’s brand since inception. When his brother Fernando co-founded the flamed grilled chicken brand in 1987, Carlos soon participated in its success and today owns four highly successful franchises in Johannesburg — three in the east and one in the south. Here’s how it all began.
- Player: Carlos Duarte
- Franchise: Nando’s
- Position: Franchisee
- Visit: www.nandos.co.za
What were you doing before becoming a franchisee?
I was in the audio visual technology field, as an employee. Then I joined Nando’s as an assistant manager in the Savoy and Rosettenville corporate stores. Franchising was my first experience of entrepreneurship.
Why did you decide to become a franchisee?
When my brother, Fernando Duarte, launched Nando’s in 1987, I noticed its quick growth and wanted in on the action. Being assistant store manager prepared me for when the opportunity to run my own store came along soon after.
What prompted you to partner with Nando’s?
I joined Nando’s in 1991 as a joint venture partner. At the time, Nando’s hadn’t yet franchised its operations, and the JV partnership meant the brand owned 51% of the business, while I owned 49%. My first franchise store was in Edenglen in 2001.
Describe some of the challenges of running not one, but four franchise locations
At the Edenglen store, we initially battled with sales and getting feet into the store. To be honest, I think the area was overtraded at the time, so it wasn’t the best location. Since acquiring the store in Lambton, Germiston, another in Greenstone and a third in Comaro, I’ve learnt to be cleverer in how I do things — and how I handle some of the same challenges — and learn every day from the brand itself.
Name some of the benefits you’ve experienced as a Nando’s franchisee
Nando’s is 31 years old this year. We’re in 30-odd countries worldwide with thousands of stores across the globe. As franchisees, we leverage off the dynamism of an operational business that’s known for its marketing — customers talk about our ads and they love our food.
What kind of support do you receive from Nando’s as a multi-unit franchisee?
Besides the popular marketing campaigns that attract customers, Nando’s has an extensive training manual along with a skills development training consultant who comes to the store for two days to help staff understand and implement it. The training is really effective — it has to be as this industry involves a very high turnover of staff and new skills need to be taught often.
Why is it important for a franchisee to have a good banking partner?
As a franchisee, your bank should understand your business — from operating costs, to overdraft needs and revamping expenses — so it has cash available for loans that can be approved quickly, with minimal hassle. On the technical side, a reliable mPOS device is imperative, especially for us, because 30% of our sales volumes are from home and office deliveries. It’s a fundamental method of payment every bank should provide its customers of a similar nature.
What advice do you have for budding franchisees on seeking out a good franchise brand and banking partner for their business?
- Do your research to ensure you’re partnering with a brand that is established, well-known and expect to pay a fair price for that franchise.
- Be aware of how the franchise brand is perceived in the market and what location opportunities are available to you as a franchisee.
- Choose a banking facility that always has the funds available to grow your business.
- Ensure the bank understands the brand’s business model and where you’re falling short.
Make Your Business A Good Neighbour
Take your business from invisible and struggling to a thriving neighbourhood landmark.
Is your business invisible to your customers? You may have fewer customers than you would like because your business does not seem relevant to those in your neighbourhood. This is an even bigger mistake than not being able to reach beyond your direct trading area.
To appeal to people – customers – you should also present your business as a group of people who help other people. This can be helping supply them with goods they need to buy, helping provide them with loans or simply being a reassuring and consistent presence in your neighbourhood.
As our Local Area Marketing Manager, Juan Botha, tells Cash Converters’ franchisees, this is about blending and fitting in like a neighbour. It is about give and take. And all of that adds up to community engagement.
Here are six of his top tips:
- Introduce the family: Cultivate a friendly, welcoming atmosphere in your shop or office. Introduce new staff to regular customers. Make sure that new customers can get to know staff through your in-store welcome boards and name badges.
- Find your partners: Identify the gatekeepers in your community and create partnerships with them. Think about approaching sports clubs, schools, church groups, sewing circles and book clubs.
- Snatch some selfies: If you have local celebrities as customers, take a selfie and post it on your social media: “Guess who came to say hello today . . .” Build relationships with local heroes and you will be able to call on them to host your in-house fun day or charity drive.
- Give back to business: Be involved in local business chambers and groupings as more than a participant. Show you are a good business neighbour by facilitating speed networking, hosting a speaker or sponsoring a sound system or catering for the next meeting.
- Adopt a cause: Identify a local charity and rally support for it.
- Help the community: Launch or participate in a community project – anything from an area clean-up or helping repaint school classrooms to planting trees or a community vegetable garden.
Building relationships helps you build your business’s reputation. That is because you can make people start to feel a certain way about your business and influence them positively towards you. Then, when they need something that you supply, you will be top of mind.
That neighbourhood warmth creates a sense of ownership. These prospective customers will already know how you can benefit their lives and so are more likely to become your regular customers.
They will be acting on the fact that people remember you for the experience you give them. As top American writer Maya Angelou said, their memories will be shaped by how you make them feel – not how or what you make them think. Relationships may be intangible but they can bring real value to your business.
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