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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

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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Researching a Franchise

Selling Your First Franchise? Consider These Key Pointers

You’re ready to franchise your business, but who do you sell to and how? Your first few franchisees may be the hardest to acquire, but the process will be smoother if you get some basics right.

Diana Albertyn

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Business experience gained running your independent brand will come in handy, but looking for franchisees is a different ballgame. “We have to attract the right people in enough numbers to make the difference; and, the key to more leads is to have a multi-prong strategy to marketing,” says franchise strategist and expansion expert Lizette Pirtle.

Using media (social, or otherwise), trained experts in franchise sales, and keeping in mind that whoever you sell to will become an extension of your brand, are important considerations before selling your to first franchisee:

1. Use (all) media wisely

Website marketing, print advertising and social media are just some of the many different ways to attract potential owners to your franchise. But the most cost-effect of the three may be a ‘tweet’ or ‘post’ away, says former Director of Marketing at the International Franchise Association and owner of Burris Branding and Marketing, Jack Burris.

Related: To Buy Into A Franchise Or Purchase A Licence? 3 Factors To Consider

“Three out of four people using the Internet are either on Facebook or LinkedIn or Twitter or all of them. Take advantage of social media,” he says.

“There’s typically no cost to play in the space except for the time that you need to invest to build your brand with a social media presence.”

2. Seek out franchise coaches or brokers

While this is a more traditional method of making reliable franchise sales, it’s a great way to form lasting associations that will take you beyond your first few sales. “Using broker networks is a great way to supplement your own efforts. However, you must spend time developing relationships with these people if you want to get results,” advises Pirtle. “Don’t think that just listing your opportunity with them is sufficient.”

Franchise coaches and brokers have multiple options for potential franchisees, so to put yourself high on their list of consideration when prospects enquire, you have to form memorable relationships.

Related: 3 Factors To Focus On When Opening Your First Franchise

3. Always consider the bigger picture

Out of all the people your marketing efforts attract, always keep in mind that few will check all the boxes and compromising could cost you in the long run.

“The franchise relationship is a long-term one. If you’re going to be successful as a franchisor, you should start with the attitude that every franchisee will be someone who you’ll have to live with for years to come. And nowhere is this philosophy more important than when awarding your first franchise,” says Mark Siebert, CEO of the iFranchise Group, a franchise consulting organisation.

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Researching a Franchise

3 Factors To Focus On When Opening Your First Franchise

To become a successful franchisee, there’s lots more to learn. Take notes and this will be an adventure still with its challenges, but less stress.

Diana Albertyn

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Experts and those who’ve gone through the launching, managing and successful running of a franchise will tell you that owning a franchise can be just as risky as owning an independent small business – and it doesn’t get easier after signing on the dotted line. But that doesn’t mean it isn’t worth giving franchising a shot.

“The hardest part of being a franchisee is learning and adopting all the processes that exist in the brand you’re buying into. But it’s important that a customer can walk into any franchisee’s property across the country and have the exact same experience,” says Jeff Chew, Pizza Factory franchisee.

With that in mind, remember the financial, emotional and physical investment you’ve made in this new venture and let it fuel your success, from before you even serve your first customer

1. Financial and intellectual wealth

Don’t buy into a franchise where you might be undercapitalised, advises Paul Durant, a Junk King franchisee.

Related: Expansion Funding Options For Your Growing Business

Keep in mind that running a new business isn’t challenging only mentally strenuous, but financially too, because you’re not always immediately profitable. Ensure you have enough runway for a few years at a loss or minimal profit.

“I did not do a thorough job in my initial research and discovery calls. I used a lot of my own assumptions and luckily they were fairly close,” recalls Durant.

“I would, however, suggest that you ask very detailed questions during the discovery process and listen carefully to the responses. Often what is not said is equally as important as what is said.”

2. Remember the purpose of the manual

The point of buying into the concept you’ve chosen is to ensure success based on a roadmap that’s already been drawn out for you. Straying from this plan unnecessarily is a shortcut to failure. This doesn’t mean you cannot make changes, but always ensure your growth is where it needs to be by following the system completely.

Franchisee Mark Arduino thought he was taking the advice he’d been given countless times: Just follow the system. But he quickly realised he wasn’t when all the franchise-specific training he’d been through was forgotten in favour of easier shortcuts.

“Then I realised my mistake. I came to see that it’s very user friendly. I’m sorry I didn’t use it from the start!” he says.

Related: How To Choose The Right Finance For Your Business Or Property Portfolio Expansion

If you think you have a better way of doing something detailed in the franchisee manual, do your research. Your decision should follow a discussion with your franchisor, then align to the business plan.

3. Learn at every opportunity

It’s great that you have previous experience in business. It’s a huge bonus that could put you ahead of other franchisees in your network. But, always be willing to learn and put your hand up or open a book if you’re not sure. A vast business background doesn’t guarantee automatic success as a franchisee, so be open to learning from others.

“I have learned more from two of the franchisees in my area than I could ever have imagined and I owe my early success in large part to their willingness to help,” says Jeff Steele, a CMIT Solutions franchisee.

It may sometimes seem like you can do it all on your own, but even when you feel you can do anything, you cannot do everything. That’s why you joined a franchise that (hopefully) offers good support structure.

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