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Researching a Franchise

3 Of The Biggest Misconceptions Of Entering Into A Franchise Agreement

Purchasing a franchise can be one of the best paths to owning a business – but don’t get lazy. Franchising isn’t any easier (or harder) than other types of business ventures.

Mike Wood

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Entering into a franchise agreement does not mean you are purchasing the ‘yellow brick road’ to profitability. Being a part of a franchise also does not relieve you of your duties as an entrepreneur. After all, a franchise is still a business, and all businesses require work to be successful.

Some people think that going the franchise route will make their job easy. I mean, the franchise does everything for you, right? Wrong! There are many mistaken beliefs people have when considering being a franchisee.

Related: Franchise Or Start-Up?

Here are three of the biggest franchise misconceptions I have come across in my career.

1. No need for additional marketing and advertising

One of the benefits of being a franchisee is the advertising. Most established franchises do advertising campaigns to help attract customers to your business. All you do is pay your royalties each month, and a percentage of those — as spelled out in your franchise agreement — go to running print, television and radio ads.

While this seems like a great benefit to you, it actually does more for the franchise branding than it does for you as a franchisee.

You are unlikely to have a say in any of the advertising campaigns. This means that anything you are doing on the local level will not be highlighted, unless you put forth your own advertising campaign.

You also need to take into consideration local targeting, such as social media marketing and website marketing. The franchisor probably has its own website, but what about you? Their Facebook page is going to be full of information about the company, but have little (if anything) about your store.

When considering a franchise, always budget for additional advertising and marketing outside of what is listed in the franchise agreement. This is extremely important when you are in an area saturated with similar franchises, as you want to make your location the one people want to visit.

Related: Should You Purchase An Existing Franchise?

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2. Success is guaranteed

A franchise is an established brand, and as such, people think they will automatically be successful as a franchisee. This is a huge misconception and can cause you to have unrealistic expectations. Franchise locations close all the time, the majority of which do so because of non-profitability.

A franchise may also not be as established as you think. If that is the case, your expectations (and what is stated in the franchise agreement) will not be met. This is why it is important to research a franchise thoroughly before entering into an agreement.

The worst place to do your research is on the company’s own website. The best place to look is with current and previous owners of the same franchise.

Just because you buy an established brand does not mean you are ‘buying profitability’. It takes hard work on the part of the franchisee, as well as the franchisor living up to their end of the agreement, in order to make it successful. Ultimately, success lies with the franchisee.

3. Leaving a franchise is easy

Closing up a business is more difficult than you think. And when it comes to franchising, there is a little bit extra that you need to consider. If you do decide to close up shop, simply walking away is not an option. Under most franchise agreements, you are still liable to pay royalties to the franchisor.

Related: How Risky Is That Franchise?

Don’t think because you aren’t making money that you won’t have to pay your percentage of revenue. Many franchise agreements require a minimum royalty payment regardless of revenue. So even if you close up shop, you are still obligated to pay the franchisor for the length of the agreement.

While going the franchise route may seem like a good route, you must consider that it is still a business. There are benefits and drawbacks to owning a franchise just like there are with starting your own business from scratch. You know the saying: If it was so easy, everyone would be doing it. And obviously not everyone is doing it.

Mike Wood is an online marketer, author and Wikipedia expert. He is the founder of legalmorning.com, an online marketing agency.

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How To Become A Hi-Q Franchisee

Are you looking at investing in a tyre replacement and service industry? Look no further than the Hi-Q franchise.

HI-Q

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Established in 1999, Hi-Q is a successful and diverse multi-product, multi-brand leader in the tyre replacement and service industry with a network of over 130 franchisees nationwide.

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With the support of international tyre giant Goodyear, Hi-Q has established a solid reputation of ‘the one you can trust’, and the Hi-Q approach and philosophy is embedded in this.  We have the trust of our customers, our network and our suppliers – that’s why you can trust us to take you and your business to the next level.

When you’re working with people’s safety, trust forms the most significant part of the equation

Hi-Q introduced the original and innovative TyreSurance initiative – the only aftermarket tyre damage guarantee product that backs the consumer no matter the brand of tyre.

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Related: We Want To Invite You To Join Us On The Hi-Q Journey And Become A Franchisee

Each Hi-Q Franchise offers a broad range of brands within the different product and service categories that customers know they can trust, and at prices they can afford. Product and services include tyres, exhausts, shocks, batteries or brakes, wheel alignment or balancing, and a 10-point safety check.

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We have identified areas of opportunity to extend our Franchise footprint growth.

If you are looking to join a new franchise and you share in our values and vision, we would like to hear from you.

For further information on how to become a franchisee, call us on +27 11 394 3150

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Researching a Franchise

Col’Cacchio – Benefits Of The Franchise Model

Six key benefits of the restaurant franchise model – and what to look out for when considering a franchise.

Russell Otty

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For investors looking to the restaurant industry and considering a franchise knowing it has a proven track record and is therefore possibly a lower risk, there are a few key things to be aware of about the benefits of the franchise model, which if investigated, can also point to a franchise that is not for you.

Russell Otty, Chief Operating Officer of the Col’Cacchio Group, shares some of these key benefits and indicators of whether a franchise is for you:

1. Making the cut as a franchisee gives you the confidence that you are making the right decision

You may think psychometric testing, three days in a restaurant following a franchisee around, and a panel interview with the senior management of the franchisor, is a bit over the top, but the franchisor that puts you through your paces and assesses your ability and commitment to running the business, is doing you a huge favour and may even help you see this is not for you. It goes both ways, and after an intense courtship, you should know if you want to try a long-term relationship.

Related: Col’ Cacchio: A Passion For Pizza

2. Assistance with location selection and negotiation of the terms of your lease

One thing you can do to limit your risk is to not open a restaurant in the first place if your rent is not going to be reasonable or you simply won’t get customers through the door. The franchisor will vet and approve the site – they will have extensive insight into what has worked or not worked location-wise for their brand, and can assist you to weigh up the area and it’s potential to attract customers.

The commercial terms of a lease is very important – you can’t be too ambitious about turnover targets, and having the backing of a franchisor can be beneficial if a landlord becomes unreasonable.

3. Staff training and development tools on hand

Consistency is important with restaurant franchises, as a customer visiting a brand anywhere in the country, goes there knowing exactly what they are going to get. This is best achieved with solid training, perhaps access to resources such as training videos, and regular visits from franchise managers.

You should check with your franchisor what level of training and franchise support you will have on an ongoing basis. Ask about the ratio of field trainers and operations managers to the number of franchisees in the group. You want the franchisor in your restaurant in some shape or form, two or three times a month, whether it be the training manager, the regional franchise manager or the national operations manager.

4. Access to supplier networks to manage your input costs

Negotiating basket pricing with distributors regionally and nationally, the franchisor will leverage their buying power on your behalf. They should assist to manage your suppliers and make sure deliveries happen on time, and ensure that product quality remains consistent. They can also negotiate to ensure your input costs do not increase before the next menu launch – so you can ensure your margins remain intact.

5. Brand loyalty and locality marketing

When you buy a restaurant franchise, you gain a group of customers who know who you are, the food you serve and the way you make them feel. The money you will pay towards marketing each month gives you insight into the broader restaurant market, the experience of what is working across a number of sites, and how best to keep the attention of new and existing customers.

Some franchisors offer locality marketing assistance – your site and area has specific needs that other outlets may not have, or there may be events in the area that can be leveraged to run special offers. Ask if the franchisor offers this as a service, as it can assist you greatly to have an advantage over other restaurants in your area.

Related: Beginners Guide To Digital Marketing In South Africa

6. Business development insights

The franchisor has access to insights gained across the group, and the systems that they have in place to track costs and increase profit margins, can be of huge assistance. If you are looking for business support, a franchise manager can be the one sitting with you telling you that you spent R2 000 too much on cleaning this month or saying you need to wait till next month to make that purchase. The level of business support you will have access to, is an important factor to consider, depending on the level of support you may require.

Recipe for success

Nine times out of ten, a restaurant franchise that fails, fails because the franchisee loses interest or lacks the commitment to make it work. Selecting the best franchise for you as the investor, or as a restaurant entrepreneur, is the most important first step you can take towards success, so do the homework.

Don’t assume that because you are buying into a successful brand that it will be a success – business is not an exact science – you need to do your own due diligence and take responsibility for your business, because it is after all your own investment.

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We Want To Invite You To Join Us On The Hi-Q Journey And Become A Franchisee

As the leader in the tyre replacement and service industry, we are invested in providing our network with the tools needed to thrive and grow in an ever-challenging market.

HI-Q

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This is an invitation to all innovative entrepreneurs who are seeking new and exciting opportunities – here’s your chance to become part of a winning team.

As the leader in the tyre replacement and service industry, we are invested in providing our network with the tools needed to thrive and grow in an ever-challenging market.

The Hi-Q Way

  • Hi-Q’s been voted the 1 tyre retailer by South African consumers in the Ask Africa Icon Brands Survey from 2010 – 2017.
  • Over the years Hi-Q has established itself as ‘the one you can trust’, with customers, the network and suppliers.
  • Hi-Q prides itself on first-class service, a multi-product/multi-brand offering as well as ground-breaking product innovations such as TyreSurance on all tyre brands.
  • Hi-Q has an extensive network of over 130 franchisees
  • Hi-Q has the support of the Goodyear value proposition.

If you are looking to join a new franchise and you share Hi-Q’s values and vision, please get in touch.

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