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Researching a Franchise

How Will I Find the Right Franchise?

A growing number of people are keen to take charge of their future but are unwilling to risk all by starting a business from scratch.

Mark Rose

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People believe that investing in a franchise is the safer option, and they are right. Franchisees operate under an established brand using a tried and tested business system. They also have access to extensive initial and ongoing support and a host of other benefits that are ordinarily available only to branches of large companies. Not all franchises, however, are the same and not everyone will be happy as a franchisee. This article outlines the recommended evaluation process.

Self-evaluation

This important first step is far too often overlooked. Any business makes significant demands on its owners and a franchise is no exception. Ask yourself the following questions:

  • Do I have the entrepreneurial gene?
    A franchise is a blueprint for the establishment and ongoing operation of a business. For good measure the franchisor will provide initial and ongoing support, but the responsibility for making the venture successful remains with you.
  • Can I accept the constraints a franchise imposes?
    As a franchisee you own the business, but you cannot do as you please. The franchise agreement will impose limitations regarding corporate image, product range and the way you operate the business. This is necessary because replication of a proven formula is the backbone of franchising success. Individuals who like to do things their own way will not be happy as franchisees.
  • Do I have sufficient capital?
    Franchised networks have an image to uphold. This means that the initial investment may be higher than if an entrepreneur started out independently and took short cuts. (On the upside, looking the part instils trust in consumers and generally reduces the time it takes to reach the all-important breakeven point.)

What franchise network should I choose?

The first step in selecting a franchise opportunity is to decide on the business sector. People often say that they don’t care as long as the business is profitable, but experience suggests that this approach doesn’t work too well. Operating a business involves long hours of hard work. Unless you enjoy what you are doing, success will almost certainly elude you.

Enjoying your work is important, but it wouldn’t make sense to start a business unless proven and sustainable demand for its offering existed. Select a sector you are interested in and investigate its potential in the medium to long term. Next, establish whether at least one but preferably several reputable brands offer franchises in this sector and whether you can support the required investment.

Making contact with several franchisors is the next logical step. At the outset you may have to sell yourself to the franchisors, but don’t let this stop you from keeping your eyes and ears open. And don’t worry about causing offence. It’s your money you are investing so you are entitled to ask the difficult questions; serious franchisors welcome that. For their part, they will also be looking at you, and this is how it should be.

You should also speak to a reasonable cross section of the network’s existing franchisees. Ask the franchisees to what extent the franchisor has delivered on promises made, and, if given a second chance, whether they would invest in the same franchise again.

As soon as you make a provisional commitment to one brand, you will receive a disclosure document and a copy of the franchise agreement. Study both these documents carefully, ask the franchisor to explain anything that isn’t clear to you and consult with recognised professional advisers in the fields of franchising and accountancy. This attracts fees but, given that you are about to invest your life’s savings and take on debt, it will be money well spent.

Where should my business be located?

Unless the franchisor has identified a site, you will need to start looking for premises. But even if the franchisor offers you a site, you should still do an indepth investigation. It is in order to enlist the franchisor’s help in drawing up a site selection checklist, but don’t accept a location on someone else’s recommendation alone. Check out the site with respect to size and affordability, access to utilities and security, proximity to your target market, visibility and availability of parking. The location of competitors is another important consideration.

One more tip: If at all possible, locate your business within the community where you are known – it helps with networking.

Closing the deal

I recommend that you follow these steps:

1. Compile the business plan.
Obtain input from the franchisor, but don’t delegate responsibility. This is your business plan, only you can bring it alive. Keep your projections realistic and make sure that your own unencumbered contribution is adequate. Remember that the business must be able to service the loan and you should make provision for the odd hiccup in cashflow.

2. Approach your bank for funding.
The next step is to visit your bank, preferably accompanied by a franchisor representative who can answer possible technical questions.

It is worth noting that Nedbank maintains a dedicated division for franchise funding. Its relationship officers are familiar with the franchise sector and can add real value to your funding request, but realism must prevail. No amount of funding expertise can eliminate the need for a reasonable own contribution plus adequate sureties to safeguard the loan.

3. Jump right in.
Rather than living on your rapidly dwindling savings, it is best to move ahead with speed. Start building your outlet and commence with the initial training as soon as possible.

4. The Grand Opening and beyond.
To ensure that your staff is trained and everything functions as it should, it is best to operate the business low-key for a short period. From the day of the Grand Opening onwards you will work hard, probably harder than you have ever worked before in your life, and focus on success. This can be a stressful period, remember to involve your family every step of the way.

5. Time to enjoy the fruits of your labour.
Provided that you have assessed the opportunity realistically, have followed the brand’s blueprint to the letter and have been working hard, you should be able to reap the rewards within a few short years. At that point you’ll have the satisfaction of looking back and saying to yourself, ‘I am my own boss, life is good, and joining the ranks of franchisees was the best decision I have ever made in my life’.

Written by Eric Parker (Franchising Plus) in association with Nedbank

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

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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Company Posts

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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Vital Stats

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.

visual-2-hi-q

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Puré Frooty Ready To Launch In South Africa

Puré Frooty Smoothie is a unique business model to the South African market. A delicious, fruit filled smoothie will be created at the touch of a few buttons.

Pure Frooty Smoothie

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Vital Stats

Puré Frooty Smoothie is a unique business model to the South African market. A delicious, fruit filled smoothie will be created at the touch of a few buttons.

This innovation in the healthy smoothie industry is ground breaking for South Africa. The machine is manufactured in Australia by a highly skilled team. It took six years to perfect this business model for the consumer market.

The vision of Puré Frooty Smoothie is to offer convenient on-the-go smoothies for anyone. The experience and quality will always be of the highest standard. We aim to be a staple convenience in malls, schools, office parks and hospitals. This is a platform that will allow for self-growth for passionate entrepreneurs.

Our mission is to create a unique customer experience. We want to satisfy the nutritional needs of customers by providing quality smoothies. Puré Frooty Smoothie will be packed with all the goodness a smoothie should offer.

Related: Why Your Franchise Should Adopt A Shared Value Business Model

The four values we pride ourselves in are:

  1. Convenience
  2. Consistency
  3. Quality
  4. Customer Satisfaction.

Puré Frooty Smoothie was an idea, researched widely, by people looking to simplify the business process for the consumer and business owner. There was a gap in the market for simplified customer service and a demand for a quicker turnaround time.

For an entrepreneur it can be very overwhelming to start or buy a new or existing business. There are so many crucial decisions that need to be made from the beginning and new concepts to adapt to. Puré Frooty Smoothie simplifies that drastically. The business model revolves around a free-standing vending machine which needs to be visited to refill and maintenance. There is no need for shop fittings or a large work force. All that is required is an inside space for the machine with a power supply. In terms of a work force, you could either do it yourself or have one person to assist you. There is also a part time involvement where refill station teams can refill and maintain the machine.

The business is completely cashless so there are no worries of a note jam, full cash canister or insufficient denomination rand values. More importantly the machines would do a higher turnover than an ordinary vending machine so safety of no cash is important. A cloud-based system is linked to the point of sale which allows you to monitor your performance and stock from the back-office platform at any given time.

With a live point of sale system, the business is linked to a software which monitors the operations of the machine. Should anything malfunction an immediate notification will be sent with a diagnostics report.

Related: SA Fast Food Franchising On The Rise

Everything is done with a computer which leaves little to no room for errors. It is self-order and very user friendly.

A vending machine which can produce a delicious smoothie in forty seconds. An informative touch screen ordering panel which displays all the nutritional information of the smoothie ordered and has the current news and weather. No time wasted for the consumer. In fact, it’s a learning session disguised as a waiting period. The machine has two wash cycles after every smoothie is made to be freshly prepared for the next smoothie, business hygiene is important.

Consumers live in the fast lane. We are looking for something quick and most times we would like to be healthier. With the hustle and bustle of today’s life every little bit helps. Puré Frooty Smoothie fills that gap in the market.

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