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Franchisors

The Importance of Proper Franchisee Selection

Granting a franchise is not the same as offering a business opportunity.

Mark Rose

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Whereas a business opportunity revolves around the product or service in question, a franchise is a blueprint to business success. Much depends on the correct implementation of this blueprint and this is what makes franchisee selection so important. This article examines the underlying considerations and explains how the selection process is usually carried out.

  • Introduction

Professional franchisors know that below-par performance by just one franchisee will damage the brand. This is in addition to the franchisee suffering severe financial losses. For these reasons, responsible franchisors are extremely selective. Expect them to ask lots of questions and investigate your background, abilities, likes and dislikes thoroughly before they award you a franchise.

Some prospective franchisees interpret this as arrogance, even take offence. Their thinking is that if they put up the money to establish a franchise, the franchisor has no business putting them through a selection process but this is short-sighted.

  • Why is a selection process necessary?

A successful franchisee needs to perform a balancing act between operating his/her own business while adhering to the franchisor’s rules. Not everyone is comfortable with that. Indeed, experience has shown that truly entrepreneurial individuals who want to do everything their way do not make good franchisees.

There is yet another issue to consider. It happens time and again that individuals are attracted to a brand for the wrong reasons. They only see what they want to see then happily sign the franchise agreement and make the necessary investment. It is only after they have taken possession of their franchise and are exposed to the realities of the daily grind that they realise their lack of passion for the business. If at that point they want to get out of the deal, they have only two options. They can:

  1. Attempt to sell the business. Because the business has just been established and doesn’t have a track record, this is almost certain to result in a substantial financial loss.
  2. Stay put. Because the passion is lacking, the franchisee will be miserable at least most of the time. It will not take long for customers and staff to notice the owner’s lack of passion for the business, and the business won’t develop as expected. This, too, could result in hefty financial losses.
  • The profile of the “ideal franchisee”

Drawing on experience garnered during piloting and by observing existing franchisees, responsible franchisors will have developed a profile of the “ideal franchisee”. Prospects are assessed against this profile and only those who match it closely will be accepted.

Should a prospect qualify overall but display specific shortcomings, these can be addressed. For example, the prospect can receive additional training in certain areas of business management, or may be encouraged to either take on a business partner or employ an individual with complementary skills.

Although a rejected prospect may not see it this way at first, the franchisor is actually doing him/her a favour – it prevents forcing a square peg into a round hole.

  • How is the selection process carried out?

The profile of the ideal franchisee is not a standard document but has been developed to match the needs of the specific franchise. Depending on the nature of the business, it may incorporate some or all of the following processes.

  1. One-on-one interviews conducted by several experienced members of the franchisor’s team.
  2. Thorough background check, including verification of the prospect’s professional and financial capabilities.
  3. A panel interview. The panel consists of experienced franchisor representatives; some brands include a franchisee representative as well.
  4. Psychometric testing. This is done by professionals with experience in franchisee selection and the results are evaluated by a qualified industrial psychologist. The test results are surprisingly accurate.
  5. The acid test – observation of the prospect in action. The franchisor invites a pre-qualified prospect to work for a few days at one of the brand’s outlets, usually a company-owned unit.
  6. By working in the different departments of the brand’s business, the prospect enjoys a unique opportunity to get a feel for what his/her daily life will be like. Any romantic notions the prospect may have harboured about the business will dissolve.
  7. At the same time, the franchisor has an opportunity to observe the prospect in action. It will become clear whether he/she has the right attitude and aptitude for the role of franchisee of this particular brand. This is an important step because it allows both sides ample opportunity to establish whether a good fit is likely to develop over time.
  • What role does finance play?

As a rule, franchisees own their franchised outlets outright and are expected to come up with the necessary finance. However, for reasons explained above, this should never override other criteria. It would be unwise to accept an unsuitable candidate into a franchise merely because he/she can support the necessary investment. By the same token, an outstanding candidate who is unable to come up with the full investment amount may be offered alternative forms of funding. This could be done by matching him/her with an investor or through a joint venture arrangement with the franchisor.

In the next article, we’ll examine how a professional franchisor should make its money. Should you wish to find out more about franchise finance in the interim, contact the Business Manager at the Nedbank Franchising Area Office in your area. For contact details visit www.nedbank.co.za or your nearest Nedbank branch.

Written by Mark Rose of Nedbank and Eric Parker of Franchising Plus.
Copyright rests with the authors

Mark Rose is the Head of New Business Development at Nedbank Business Banking. He holds a Masters in Business Administration (MBA) from the Oxford Brooks University, as well as various business qualifications from the Gordon Institute of Business Science (GIBS), the University of Stellenbosch Graduate School of Business, and the University of South Africa Graduate School of Business. Nedbank’s New Business Development unit develops customised industry specialised offerings to the medium sized business market, including Franchising, Agriculture, Professional – including Financial and Legal Practices, and the Medical Fraternity. This unit has also developed a unique Enterprise Development proposition. For specialist advice and more information on the Nedbank Franchising proposition visit the website or send an email to franchising@nedbank.co.za

Company Posts

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.

Muscle and Grill

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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.

About us

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.

Concept

muscle-and-grill

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.

Related: 3 Crucial Considerations For New Multi-unit Franchisees

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 info@muscleandgrill.co.za 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.

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Company Posts

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.

Nedbank

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  • 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.

Related: (Watch) Why Nando’s Is Clucking Its Way To The Top

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.

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Franchisors

Make Your Business A Good Neighbour

Take your business from invisible and struggling to a thriving neighbourhood landmark.

Richard Mukheibir

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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.

Related: Effective Ways To Bring Customers To Your Door

Here are six of his top tips:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. Adopt a cause: Identify a local charity and rally support for it.
  6. 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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