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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

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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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