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Researching a Franchise

Checklist of Information to Secure From a Franchisor

Use this checklist when doing your own investigation and information gathering.

Tracy Lee Nicol

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Before you sign those franchise agreement documents – look at the below checklist for things you need to talk to your franchisor about:

  1. Is the franchisor a one-person company?
  2. Is the franchisor a corporation with an experienced management team that is well trained?
  3. Does the franchisor operate a business of the type being franchised?
  4. Is the franchisor involved in other business activities?
  5. Is the franchisor offering you an exclusive territory for the length of the franchise?
  6. Can the franchisor sell a second or third franchise in your market area?
  7. Do you have the right of first refusal to adjacent areas?
  8. Will the franchisor sub-let space to you?
  9. Will they assist in finding a location for your franchise operation?
  10. Must you lease fixtures, signs or equipment from the franchise? If so, are the prices reasonable?
  11. Does the franchisor provide financing? If so, what are the terms?
  12. Does the franchisor require any fees – other than those described in the offering circular – from the franchisee? If so, what are they?
  13. Has the franchisor given you information regarding actual, average or forecasted sales, profits and earnings?
  14. Will the franchisor provide you with the success rates of existing franchisees and provide you with their names and locations?
  15. Are there any restrictions on what items you may sell? If so, what are they?
  16. Does your prospective franchisor allow variances in the contracts of some of their other franchisees? What is the nature of the variances?
  17. In the event you sell your franchise back to your franchisor under the right of first refusal, will you be compensated for the goodwill you have built into the business?
  18. Does the franchisor have any registered trademarks, service marks, trade names, logotypes and  symbols?
  19. Are you, as a franchisee, entitled to use them without reservation?
  20. Are there restrictions, exceptions or conditions? If so, what are they?
  21. Does the franchisor have existing patents and copyrights on equipment you will use or items you will sell?
  22. Does the franchisor have endorsement agreements with any public figures for advertising purposes? If so, what are the terms?
  23. Has the franchisor investigated you carefully enough to assure that you can successfully operate the franchise at a profit both to them and to you?
  24. Has the franchisor complied with regulations specific to the industry in which your franchise business will operate? (Include any special licences or legal restriction on operations.)
  25. Does the franchisor have a reputation for honesty and fair dealing among the local firms holding their franchises?

We-recommend-tickRecommended: How Old are South African Franchisees?

Other questions you may not have considered are

  1. How many years has the firm offering you a franchise been in operation?
  2. What is a description of the franchise area offered to you?
  3. What is the total investment the franchisor requires from the franchisee?
  4. How does the franchisor use the initial franchise fees?
  5. What is the extent of the training the franchisor will provide for you?
  6. What are your obligations for purchasing or leasing goods or services from the franchisor or other designated sources?
  7. What are your obligations in relation to purchasing or leasing goods or services in accordance with the franchisor’s specifications?
  8. What are the terms of your agreement regarding termination, modification and renewal conditions of the franchise agreement?
  9. Under what circumstances can you terminate the franchise agreement? What will it cost to terminate?
  10. What are the background experience and achievement records of key head office personnel?
  11. What is the franchisor’s experience in relation to past litigation or prior bankruptcies?
  12. What is the quality of the financial statements the franchisor provides you?
  13. Exactly what can the franchisor do for you that you cannot do for yourself?

Tracy-Lee Nicol is an experienced business writer and magazine editor. She was awarded a Masters degree with distinction from Rhodes university in 2010, and in the time since has honed her business acumen and writing skills profiling some of South Africa's most successful entrepreneurs, CEOs, franchisees and franchisors.Find her on Google+.

Researching a Franchise

The Future Of Franchising Looks Smaller (And Fancier)

Franchises are adding smaller locations and reduced menu options, as niche markets emerge, to attract the customer of the future.

Diana Albertyn

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As the owner of a thriving franchise, you’re well aware of the fact that fluctuations in the world economy has both negative and positive effects on business. When it comes to your successful franchise, tough times could mean adopting new trends or seizing gaps, potentially resulting in a new franchise concept you wouldn’t have otherwise thought of.

“The buzz word in global franchising is ‘flexibility and adaptability’,” according to the Franchise Association of South Africa (FASA). “Whether a result of a need to inject some life into stagnant franchise brands or as a result of the new world order brought about by the recession, franchising is embracing alternative and options in a big way.”

Related: As Consumers’ Tastes Change Can Your Franchise Keep Up?

You can do this by either devising innovative areas to franchise or allowing more flexible ways for franchisees to operate to help with their bottom line. FASA has earmarked these as some of the biggest franchising trends in 2018 and beyond:

Smaller, more cost-effective franchise models

When franchisees don’t have high franchise fees and start-up costs to worry about, they can focus more on what customers want, and deliver. The added benefit of smaller spaces include having fewer employees and reasonable rental.

Among the new frontiers in franchising are the food court losing its legacy as the preferred setting for food franchises, as service stations increase in popularity in the industry. A number of brands – like Steers, Debonairs and Mugg & Bean On-the-Go outlets – are co-locating with major fuel retailers to create fully-integrated accessible centres.

Niche markets are offering one-of-a-kind franchises

“The opportunity to get in on the ground floor of a new franchise trend is also on the rise,” notes FASA. This could be offering a unique gourmet food experience in your outlets or a ‘green’ space of energy saving technology in your operations.

“Consumers have gained control of what they want,” says Morné Cronjé, head of franchising at FNB Business. “It is no longer about what you have on the menu, but how your product or service can be tailor-made to what a customer really wants.”

Founded just five years ago (2013), RocoMamas boasts over 60 franchise outlets, clearly responding to the essence of this trend –allowing consumers to build their own burgers without having to pay for items they’d rather leave out.

Related: Key Franchising Trends To Consider For 2018

Stay ahead of the game

For long-term success, franchisors who want to expand their business should start exploring beyond present circumstances and current predictions.

“2018 will no doubt bring its challenges, however for every challenge there is a window of opportunity to explore. We are advising franchisors to scrutinise these trends carefully, it can definitely give them a boost for 2018,” says Cronjé.

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Researching a Franchise

As Consumers’ Tastes Change Can Your Franchise Keep Up?

More of your customers are eating in, and if you’re not packaging, portioning and pricing your food accordingly, they’re heading to a retailer that does.

Diana Albertyn

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It’s generally believed that it’s cheaper to cook your own breakfast, lunch or supper than to go out and pay a much higher price for the same food in your fridge at home. But today’s consumer’s live fast-paced lifestyles – so food is becoming more about convenience.

31% of 6 022 middle-to-high income South African earners surveyed by BusinessTech, put eating out and entertainment at the top of their list of things they’re most willing to cut their spending on in 2018 to save money. Research by supermarket giant Pick n Pay correlates, reporting an increase in customers buying quality convenience food, not just to entertain at home, but for dining at home.

Related: Driving Your Business Growth Towards More Customers

Consumers are empowered by variety

You’ve heard about the ‘fast casual generation’, aka Millennials? They are demanding healthy, affordable eating experiences. But do you know how this affects the future of the food industry, and your business in particular – because they’re not the only ones adapting their lifestyles.

An increasing number of food brands and chefs are compelled to create complete ranges of new, convenient meal options that are not only packaged, portioned and precooked attractively, but affordable too.

The fastest growing sector of retail foodservice for the past four years has been the convenience store sector. Non-traditional avenues of distribution are growing, gobbling market share while establishing new patterns of consumption, price points, and customer loyalty.

Shoppers are becoming value-focused

A savvy franchise would acknowledge that although pre-packaged and pre-cooked convenience food isn’t a new trend among consumers and supermarkets, it is gaining popularity. “Some of the most notable trends in 2017 were an increasing shift to convenience foods as customers looked for both value and convenience,” says Pick ‘n Pay’s Head of Marketing, John Bradshaw.

Related: 5 Techniques To Leave Customers Grinning And Vowing To Return

Value for money and healthier food choices will continue to be top of the convenience food list for consumer in 2018, as more shoppers cut down on luxuries.

“We’ve seen significant growth in the number of customers looking for an easy way to enjoy a good meal without the cost of eating out,” says Bradshaw.

But he cautions that South African shoppers have always been value-focused, and while the most significant shift Pick ‘n Pay has seen is how all its shoppers, no matter what their income levels, are watching their budgets.

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Researching a Franchise

Maximise Your Social Media Reach This Holiday Season

Quick and cost-effective, social media is your best tool to reach target markets when it matters most – during the holidays.

Diana Albertyn

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It’s not just the end of the year that can be lucrative for businesses. School holidays and other major breaks during the year present consumers with more time to spend shopping. Why not ensure money is spent at your franchise by capitalising on the minimal cost and maximum exposure of social media?

You don’t have to create entirely new deals or promotions from what you may already have running on your store, but find a way to make it special for your social media followers, suggests Kelly Mason, marketer at Customer Paradigm.

Holiday campaigns on Twitter, benefitting from popular hashtags, streaming live content, and receiving information instead of just distributing it via social media are just some of the ways to stay ahead of the competition.

Related: Why Your Business’ Social Media Marketing Strategy Is Probably Wrong

Know your customers well

The first step to attracting customers and getting them to complete a sale is understanding their customer journey.

“Being able to document where they spend their time online, which social channels they use most, and what they’re reading or watching on those channels is a huge plus. Finding that crucial information is fairly easy to do, thanks to modern-day marketing tools and resources,” advises Paul Herman, ‎VP: Product and Solutions Enablement Group, at Sprinklr, a unified customer experience management platform for enterprises.

The better you understand your customers, the easier it is to reach them through a campaign optimised for their interests.

Master social listening

You could be using social media all wrong in the run up to all your holiday campaigns. Perhaps it’s time you used this platform to listen to your customers?

“Through social listening, marketers can identify major trends and product keywords in their industries,” says Herman. “For instance, knowing those keywords can help marketers identify which social platforms are more popular for a target audience. With that information, they can make smarter decisions about where to spend their money and which products or services to promote on each platform.”

Related: 10 Laws Of Social Media Marketing

Use the information gathered to determine what customers like about your product, what they dislike about it, and how you can improve upon it so they can buy more of it. The more of this data you collect, the better and more effective your interactions with customers will be.

Try something new

50% of consumers look for a video of the product they want to buy before going to an ecommerce store to buy it, according to a 2016 Google survey. “Video can be an extremely effective way to get your customers to take action – in this case, to make a purchase with your store,” adds Mason.

Video adverts are often used as an experimental tool in social marketing and switching it up on platforms such as Facebook Live, Instagram Live, Instagram Stories, or Snapchat – depending on your brand’s activity and your audiences’ interests – can help attract customers during seasonal periods.

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