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Researching a Franchise

Don’t Choose A Franchise Until You’ve Talked To People Who Already Own It

Some lessons you shouldn’t learn the hard way, like how a company treats the owners of its franchises.

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Incorrect expectation is the chief reason for disappointment in life… and business. With so many franchise concepts in so many industries, searching for a franchise can be a daunting task.

Aside from finding something that is a good fit for you, your skills, your future and the community in which you will operate, how do you even know if the company itself is worthy of your time, effort and money? What should you expect from your investment?

The good news is that investigating a franchise is great because it’s an investment vehicle that allows you to actually talk with people who have made the investment already. This way you are not just reading spread sheets, brochures or listening to testimonials from people who may be paid actors.

Once you engage in conversations with the franchise representative of the company you’re considering, you will receive a plethora of information boasting about the greatness of the company.

Related: The Perils Of The Franchise Agreement

They’ll probably also say why they happen to be the best in their industry and why this is the perfect time to get involved with them. They will probably even throw in a comment about being recession resistant, too.

Full(ish) disclosure

The voluminous, detailed manuscript about the franchise you’re considering is called the franchise disclosure document (FDD). If you have not heard of this item yet, you certainly will as you plunge into your franchise search.

Although the FDD looks like an overbearing prospectus from a public company, it is really a document that makes the company transparent for the prospective buyer. It is your best friend during the due-diligence process.

You must understand the information given in the FDD. The best thing about the document is that is provides the contact information for every franchise owner in the company at the time of printing, including a list of units that have closed their doors or sold.

However, after distilling and digesting all the information disseminated by the franchise company, the very best way to gain clarity on the franchise and correctly set your expectations, is by talking to their franchisees.

This process of validating the franchise is the single most important thing you can do in your franchise search and it may save you from franchise failure.

Moreover, you’re permitted and encouraged to contact existing franchisees. Great franchise companies want franchise owners to come in educated and with eyes wide open, so there are no surprises.

I have some tips to help with making these calls and face-to-face visits. You need to plan on calling and, when possible, visiting a number of the existing franchisees. Talk with a sufficient number of the existing franchisees to ensure you have a sense of the prevailing attitudes of the group.

You should begin making these calls after the sales person from the company gives the go ahead. (Remember the franchise company is evaluating you on how you follow systems so please follow their process for investigation.)

Related: 3 Of The Biggest Misconceptions Of Entering Into A Franchise Agreement

Find unhappy people

unhappy-franchisees

Though you want to find the overwhelming majority of franchisees to be happy and supportive of the franchisor, it is important to try to find an unhappy franchisee during your investigation. When you do, not only listen to the complaints but also try to determine what makes this franchisee different from the rest.

If you find that you identify with the positive ones, and feel the negative franchisees are not at all like you — that’s a good sign.

Remember, evaluating franchise owners is similar to assessing a sports team. The players span a bell curve, meaning that 20% of the players will be the top of the heap, superstars. Next, 60% will be average and doing just fine. Then the other 20% will be under par and sitting on the bench.

You want to emulate the superstars but also know why the under-par performers are not pulling their weight. This will help you define if the franchise is right for you or not.

When you make the call, introduce yourself as a potential franchisee. State the name of the sales person you are working with so that they know you are not the competition spying on the company.

Also, franchisees with businesses very close to your area of interest might have future plans to expand into your area, so often they will attempt to taint the success of the franchise.

I suggest to first talk to franchisees who are far away from where you plan on opening, in order to get a real sense of the company, then talk to local franchisees to see what’s happening in your local market.

If the local owner has some negative things to say, you can hold that up against the other information that you’ve gathered to understand the real, average situation within that franchise company.

A good way to approach this is to begin by calling franchisees with as much history as possible. We want to know early if your financial goals can be achieved. Then call owners with one to two year’s history and focus on break-even expectations. Finally, call a few owners who have just started, as they’ve received the most recent training, and have had recent interactions with the corporate office.

Related: How Do You Know That You’ve Found The Right Franchise?

Please note, franchisees from systems that are undergoing significant growth may get inundated with calls from potential owners. It may take a while to connect with these owners. This is a good sign — it means they are out building their businesses and not sitting at home watching daytime TV soaps. Don’t get discouraged, be persistent.

I highly encourage you to make the most of these phone calls. This process may save you lots of time, money and heartache in the long run. I have a list of 39 questions to ask existing franchise owners. Email me for a free copy or go to my website to download the questions.

Enthusiastically following the system I’ve outlined in this article will save you from incorrect business expectations and disappointment in the long run — you’ll thank me later.

Tom Scarda consulted with FranChoice in 2000 and purchased a Maui Wowi Fresh Hawaiian Blends franchise and quickly expanded his operation to three locations. In 2003, Tom took on the role of director of regional support for the greater New York area. He sold his Maui franchise in 2004 and now shares his knowledge and expertise of franchising with people like you who are in search of making a lifestyle change and taking back control of their lives. Tom is Amazon bestselling author of Franchise Savvy and can be reached at 866-545-6191 or Tom@TomScarda.com.

Company Posts

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

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

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Vital Stats

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.

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. 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.

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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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

Be In The Property Business For Yourself, Not By Yourself

Why property franchising makes good business sense in today’s market.

Keith Broadfoote-Brown

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Opening a real estate franchise has been a thriving and successful business model in South Africa for decades. Despite the challenges currently facing the South African economy, property will continue to prosper and provide entrepreneurs with an opportunity to own their own successful businesses and become leading members of their local business communities.

“The residential property market is a dynamic, thriving industry offering substantial career opportunities.

Joining a property franchise business gives entrepreneurs the opportunity to align themselves with reputable, established businesses with a national footprint who have invested in their brands and have access to international networks,” says Russell Berkman, Franchise Director at Jawitz Properties.

While the property industry is competitive there is still great potential for growth. Worldwide, franchising has proven to be one of the most successful business models with failure rates well below those of starting a business from scratch.

Related: How to Become a Property Franchisee

For the franchisee, it is one of the most intelligent ways of starting and growing a business and by combining the proven business formula of the franchisor with the entrepreneurial drive of the owner-franchisee, the likelihood of a successful business venture for both parties is increased significantly.

According to Keith Broadfoote-Brown, the owner and Principal of the Jawitz Properties Ballito franchise in KwaZulu-Natal, property franchise still makes good business sense in today’s market.

The benefits of being a property franchise owner

Becoming a property franchisee gives a businessperson unlimited potential to succeed in the property industry as the success achieved is a direct result of the effort, commitment and drive put in. It means being self-employed within an organisational structure and offers the same structure and benefits to sales and rental consultants.

“It gives you the opportunity to leverage your business’ success off the intellectual capital, brand, expertise and know-how of an established business that has a proven business model, IT platforms, marketing expertise, training and self-development programmes as well as having access to years of experience in these fields.  My mantra is ‘be in business for yourself, not by yourself’,” says Brown.

Skills needed to succeed as a property franchisee

The most important competencies would be to have an entrepreneurial character and business skills such as financial literacy, HR/people skills and marketing acumen; a people’s person with a resilient and driven personality. Experience in real estate is always beneficial but not required as it is all about using business skills, marketing acumen and entrepreneurial tenacity to make your mark.

Related: How Brigid Prinsloo Made (A Lot Of) Money On Airbnb

Brown explains, “Absolute professionalism and integrity and a fierce determination to exceed your client’s service expectations are essential. And you must be able to develop a highly competent sales team, explore new opportunities for your business and operate as a team player within a franchise structure”.

Current state of the property market

The property market in SA currently reflects the economy and is weighted in favour of buyers, so sellers need to be very realistic with their price expectations. Buyers are buying where they perceive good value and value is indeed the key driver in the market today.

The opportunities are strong for buyers to invest in this ‘down’ market and conditions are also ideal to upgrade one’s home. In every region and in every suburb there are homes offering good value and these are selling well, despite the tougher trading conditions.

Opportunities outweigh the challenges

“The opportunity for real estate professionals is to find and secure the well-priced, good value, properties as they are selling!

It is also an opportune time to enter the market as a franchisee or new agent/intern as I am firmly of the view that great estate agents learn their profession well in a tough market and when the market improves, as it surely will, these sales professionals will have a solid grounding and strong foundation on which to build their real estate careers.

Challenges are to manage costs in these tough trading conditions. To keep motivated and continue to consistently drive the very basic activities needed to succeed in real estate,” says Brown.

Top 3 things to consider before entering the industry

According to Brown, his top 3 considerations are as follows:   

  1. You need sufficient start-up capital as the initial investment in starting the business and the monthly expenses to run the business can be substantial. The income from sales and rentals may be slow in the early years, hence the need for good planning and sufficient start-up funds.
  2. Owning one’s own business means the buck stops with you! A well thought out and well implemented business plan is key. The first 2-3 years consist of long hours and could potentially be financially strained, as in any start-up business, but the rewards of owning your franchise and being ‘master of your own destiny’ are worth it!
  3. This is a tough business for tough-minded people. Having an initial mindset of ‘it is harder than I think’ rather than ‘it will be smooth sailing’ is a better approach and will prepare the franchisee for the hiccups that will surely come along.

Property franchising makes good business sense

The end result of being a successful property franchisee is financial security. Owning a brand office assures the owner of having an asset and the credibility, back-up and brand promise assures clients they are in safe and professional hands.

“I would definitely recommend being part of a major brand rather than a being a small real estate entity, especially in this competitive industry. Property is a challenging industry that, like everything else, goes through cycles, influenced by factors like inflation and interest rates, among others.

Drive, initiative and resilience are therefore essential qualities for a successful property franchisee. Absolute professionalism and integrity and a fierce determination to exceed your client’s service expectations are essential,” Brown concludes.

Related: Want To Start A Property Business That Buys Property And Rents It Out?

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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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