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Researching a Franchise

Buyer Beware: Franchise Warning Signs

What to look out for when researching a franchise opportunity.

Joe Matthews

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Buying into a franchise concept can be an attractive way for some people to become business owners. Ideally, a franchise company has a proven business model, saving new business owners the time, energy and money.

Franchises can still be a good opportunity, but doing more than just glancing under the bonnet is essential.

Red Flags

As a consultant helping people find franchise opportunities, I’ve spotted a number of warning signs over the years:

  • Half the franchisees aren’t making the kind of money you want to make.
    The franchise disclosure document explains how much money a prospective franchisee could make from the franchise opportunity. Hopefully, the franchise company breaks down the range of what franchisees are earning from their operations: top third, middle third, bottom third. If the middle-third franchisees aren’t making what you would need to meet financial objectives, walk away.
  • Franchisors blaming the franchisees.
  • Don’t let a franchise company explain away the performance of the middle and bottom by saying the franchisees don’t understand the system. So what if the existing franchisees are lousy? If the franchise company can’t recruit correctly, what makes you think its operating system is any good?
  • The model is in a perpetual state of flux.
    If the franchise company is constantly tinkering with the concept, you need to be asking why. The model simply may not work.
  • Compliance is more important than results.
    Does the franchise company run a collaborative environment in which its employees listen to franchisee concerns, or is it a bureaucratic nightmare demonstrating low concern for franchisee results and relationships? The franchise company doesn’t get to answer this question. You need to seek out a number of franchisees and hear what they have to say about the relationship.
  • Keeping it in the family.
    Sometimes franchise companies can be too cosy, and turn into benevolent dictatorships where there is high concern for relationships and low concern for results. Look out for franchisors laced with a lot of family. Too often, I see franchise companies where owners choose relatives for positions, ignoring the best people for the jobs. A good franchise company needs highly skilled and seasoned management.

Strengths

Here is what can make a franchise company stand out from the crowd:

  • The executives have integrity.
    Do the franchisees say they trust the people running the company? I would look for franchise companies with a sense of purpose and inspiration. When push comes to shove, what motivates these people? Whatever company you’re looking to buy into, do web searches on the names of the owners. Do you find links to their charitable work – or rip-off reports?
  • The business model is unique and timeless.
    If a franchise company is making money today, pay attention but don’t become enamoured. Will it make money seven years from now? Unless you’re open five to ten years, you’re not going to make a return on your investment. I remember a franchise company that helped design business’s first websites back when the Internet was still a new thing. The idea worked for a time but wasn’t sustainable.
  • The company respects its franchisees.
    McDonald’s is tops when it comes to collaboration with franchisees. Most multimillion-rand McDonald’s ideas came from franchisees. Much of the company’s success has come from recruiting gifted franchisees who know what they’re talking about. McDonald’s has a reputation for respecting and listening to them, too.

Also make sure that the franchise company is the best fit for you. Just because it’s a good business doesn’t mean it’s a good business for you. Not everybody’s wired to run and manage every business.

Pay careful attention to what a typical franchisee does in the business every day. Make sure you have the skills it takes to win, and that you find the work to be meaningful and enjoyable.

Joe Mathews has 20 years' experience in franchising, including management roles with Subway, Blimpie, Motophoto, The Entrepreneur’s Source and other national chains. He is co-author of Street Smart Franchising with Don Debolt and Deb Percival, from Entrepreneur Press. He is based in Litchfield, Conn. Follow him on Twitter: @joematty.

Company Posts

With Hundreds Of Franchise Options Out There, Choose The One You Can Trust

If you’re looking to invest in a business venture that offers you years of experience in the industry, the trust and loyalty of its customers, and franchise support from an expert team – then Hi-Q is the one for you.

HI-Q

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What you’ll become a part of

Since opening their doors in 1999, Hi-Q has gone from strength to strength, growing a humble three store enterprise into an extensive 130-store franchise network with a unique multi-product and multi-services automotive offering.

Hi-Q’s approach to business is centred around being ‘the one you can trust’ to their customers, their suppliers and their franchisees.

“That has always been the key driver in everything we do,” says Sean Harrison, Hi-Q’s Managing Director. “For example, when it comes to our customers, they need to know they can rely on us to put their safety first.

Related: Don’t Tread On Toes – Why Investing In A HIQ Franchise Will Offer You More Opportunities

That we’ll always strive to offer them expert, friendly service and top of the range products, while also keeping up-to-date with the latest technologies and advancements in our field.”

An acclaimed and awarded brand

Hi-Q has again and again proven themselves to be a leader in the industry.

They’ve been voted South Africa’s No.1 tyre retailer for eight consecutive years (2010 – 2017) by consumers in the Ask Africa Icon Brands Survey, the biggest of its kind in Africa – a clear indication that they are respected and trusted by their customers.

Business support

Hi-Q Franchisees all have the support of an expert and knowledgeable team with years of experience in the industry, who are available to guide them on their business venture. This includes areas of business such as marketing/promotional, commercial, organisational structure, tools and equipment, sales and more.

Franchisees also have access to various skills training opportunities for members of their team.
Hi-Q is invested in providing their network with the tools needed to thrive and grow in an ever-challenging market.

Relationship with Goodyear

Hi-Q has the support and backing of international tyre of multinational premium tyre manufacturer, Goodyear, and its full value proposition. This means access to incredible promotional and marketing opportunities in partnership with the brand.

Franchising opportunities

Hi-Q has embarked on an extensive expansion plan and have identified areas of opportunity to extend their Franchise footprint growth countrywide.

You’ll find more information on our website www.hiq.co.za We’d like to invite those who are interested to become part of our team to contact 011 663 2431 or bernie_andrews@goodyear.co.za

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

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Researching a Franchise

The Digital Headaches Of A Franchise Marketing Team

Here are my top 5 tools that can help control and regulate franchisees marketing with minimum friction.

JG Bezuidenhout

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Franchise marketing teams already know that managing campaigns for a business with multiple locations and/or stores is a time-consuming job.

When it comes to online marketing, many franchisees are frustrated with the mother brands’ national campaign strategy, as it may not suit their immediate needs. This often means they embark down the dangerous route of “rogue” or unapproved campaigns.

This is a huge risk for any brand as there is limited to no control over the message and quality of creative, often resulting in brand CI and best practices not being followed.

Rogue advertising can be totally avoided by a franchises’ marketing team by employing tools that allow them to set up a managed process where franchisees can advertise through. With a managed approval process (preferably automated) it is easier to manage “rouge” content.

Here are my top 5 tools that can help control and regulate franchisees marketing with minimum friction.

1. Create a consistent Facebook content experience whilst still allowing your franchisees to post to their own page

Facebook location pages makes it possible to, as an alternative, allow every store to open a Facebook page, each with different versions of your logo as their profile picture, as well as incomplete profile data or even old or past promotions as their cover image. You as a brand manager can set up each store as a location page on the brand’s main FB page.

The pages can all be linked to the main page and if you change the profile image or cover art, it will automatically update all the other pages. There are also a number of other marketing advantages to this, but most importantly for me was the ability to manage them all from a single interface and clean up all the old and abandoned pages that just confused customers.

2. Manage social media content

Gain is extremely simple to use and connected to all the popular social media platforms such as Facebook, Twitter, LinkedIn etc. As a user, you can create posts or ads and schedule them all from the same window. Once said posts are scheduled, the marketing team can preview the content and approve it for publication or request changes all within a matter of seconds.  Best of all, nothing will get posted without your approval.

3. Free professional looking content in a template

Pablo is an old favourite of mine! It supplies predefined size templates where a user can use free professional stock photos and quickly overlay text. The feature I love most on this tool is the “insert logo” feature, which with the click of a button can overlay a banner or brand element that creates consistent content experiences. Once done, you can export the image and post it to gain for approval. Simple right!

4. Create email alerts for when your brand is found online

Talk Walker alerts is a nifty tool and acts like your personal internet detective who constantly crawls the internet for keywords that you define. I like to use my clients’ brand names and sometimes even my competitors just to keep tabs on their activity. Once set up, you receive daily emails with links to the content in question.

5. Pre-approved marketing creatives and targeting with machine learning optimisation

Lead Gener8or tool can define a bespoke target audience per store and lock advertising geographical areas to prevent any cannibalisation. Once completed, franchisees can execute pre-approved marketing campaigns as and when they wish on any of the integrated channels (SMS, Email, Facebook, Google and Youtube), without any further involvement required from the marketing team.

Powered by big-data machine learning, campaigns are automatically optimised while in flight. Marketing teams can monitor all campaigns in real time. This tool really is a game changer for franchise marketing teams and brand managers.

With these tools correctly implemented into your business, the digital headache of your franchise’s marketing team can subside and focus on what you do best, delivering results!

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Company Posts

Choose A Job You Love, And You Will Never Have To Work A Day In Your Life

Join Col’Cacchio’s 26-year-long love story.

Col'Cacchio

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Vital Stats

  • Joining fee: R125 000
  • Monthly management fee: 6% of turnover
  • Monthly marketing fee: 2% of turnover
  • Total investment: approx. R2.5m to R4.2m (turnkey) Size: 140m2 to 350m2
  • Unencumbered cash (before loan): 50% of total investment

(Above figures exclude VAT) 

“Owning your own restaurant is like owning your own future.” – Dominic Dempers, Franchisee Durbanville, Belvedere & Meadowridge Cape Town

We’re looking for passionate franchisees who will love our brand as much as we do.

Why you should join this delicious success story

colcacchio-pizza-franchise-dessert

  • Assistance with site selection & lease negotiation
  • Store design & build
  • Full training provided for management and staff
  • Marketing & operational support
  • Product innovation & menu development
  • Efficiency in all systems
  • Healthy margins.

Related: 300 Business Ideas To Inspire You Into Entrepreneurship

#FoodwithaStory

“Our journey started with a single restaurant on the foreshore with the aim to serve the very best pizza around” – Greg Mommsen, Business Development Director

“Watching this brand grow and empowering people has been immensely rewarding. We have staff that have been with us for over 20 years. It’s like a family, we work hard, we laugh, we cry, we celebrate and of course, we eat a lot of pizza.” – Michael Terespolsky, Founder and Managing Director

“Becoming a franchisee is an amazing opportunity to join the family and become part of the Col’Cacchio success story. We’re 100% behind out franchises at every step, making sure that we all continue to learn and flourish” – Greg Mommsen, Business Development Director

“It has been filled with challenges along the way, but all the rewards have made every moment worth it.” – Michael Terespolsky, Founder and Managing Director

Related: Got An Awesome New Business Idea? Here’s What To Do Next

Visit www.colcacchio.co.za or call Tarryn Godley on 084 800 7264 and let’s get this adventure going.

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