International franchising expert, Jeff Elgin, answers some of the most common questions.
Q: How much freedom do franchisees have? What happens when I have better ideas than the franchisor? Am I able to have any sort of creative licence with a franchise?
Sometimes the price of freedom is higher than what you really want to pay and that’s the reason for the existence of business format franchises. In a good franchise you are going to have a franchisor tell you exactly what to do and how to operate the business but what you’ll get is a much lower chance that you’ll become a business failure statistic.
This is especially true in the beginning of your operation. Most franchise systems are focused on getting a new franchisee up and operating successfully as soon as they possibly can. They are not interested in your thoughts and ideas at that point. They want you to execute their proven systems as well as you can.
Franchisors are much more likely to talk about innovating and incorporating some of your ideas after your business is established and profitable. Some of the best ideas for improving franchise systems come from successful existing operators. The key is to have patience in this regard and focus first on guaranteeing that your survival is not at question before worrying about changing the system.
Q: Should I use personal funds to start a franchise?
Personal funds like savings, stocks, bonds and other assets can easily be turned into readily accessible cash. The biggest advantage to using these types of funds is that you don’t have debt service payments, you don’t have operating restrictions placed on you and you don’t have to give up a big chunk of the upside potential of the business to someone else.
The disadvantage is that if you use too much of your personal funds and then run into a situation where you need more money for the business, you may not be able to raise a loan or attract an investor at that point in time.
Q: What do I need to buy a franchise?
If you want to buy a franchise you’ll need to have three things. First, you’ll need to have the money to get the operation up and running successfully. You can use a combination of your own funds, equity you raise from other people and/or borrowed money to meet this requirement. In today’s market, borrowing is challenging so you should assume that more of the required money is going to have to come from you or your connections. Otherwise, you might have to wait until the credit markets return to a more normal position of lending.
Second, you need to have the management experience and skills that the franchise requires in order to be successful. By buying a franchise, you are contributing your time and talents to building that franchise business. Before you attempt to buy the franchise, you should make sure that your skills set matches up well with the requirements of the franchisees.
Third, you need to satisfy any other legal or regulatory requirements that are mandated by the business you have selected. Sometimes this can be as simple as acquiring a lease or getting permits for your build-out. Other times it can be more difficult because you may need to meet special licensing or educational requirements before you can begin operations. Your franchise company should be able to tell you about any of these sorts of requirements before you buy the franchise.
If you satisfy these three requirements then you are well on your way to being able to buy a franchise.
Q: How can I know if I’d be a good franchisee?
Anytime you’re investigating franchise businesses, you want to be looking at the factors that will reduce your risks and increase your chances for success. The most important of these are:
- Are you capable of owning a business?
- Can owning a business help you achieve your goals?
- Is a particular business you’re looking at going to be a good match for you?
The first step is to ask yourself whether or not you’re cut out for business ownership. Are you comfortable with being the boss? Are you comfortable with being ultimately responsible for everything that happens in your business? Are you willing to work long hours and endure anxiety during the early start-up months or years of a new business? Even though you’ve been out of the corporate world for a while, you need to make sure you’re thinking of getting a business because the characteristics are attractive to you, not just because you haven’t yet been able to find a job.
Assuming that this is the right step for you, you’ll need to decide what results you want to accomplish in your life through business ownership. What are your goals in terms of income, lifestyle and other considerations? You’ll want to have a clear idea of your end point so you can use that picture as a tool to evaluate opportunities you investigate. Can this business take you where you want to go?
Once you have a clear idea of what result you want, you can start looking at industries and then later at individual companies. Focus first on the franchisee role in any given industry to make sure it matches what you want to do. When you find roles that are interesting to you, take the time to look into the companies in more detail to see if you can achieve your ultimate dream through purchasing that business.
Q: Can I buy into a franchise with little experience and capital?
The first step for you is to take every opportunity to increase both your capital and your experience. Work as you have the opportunity to do so and save as much as you possibly can. You’ll be amazed at how much leverage you can get from a relatively small amount of capital when the right opportunity presents itself later, but it can be hard to leverage zero.
Experience is relatively easy to build. Seek every opportunity you can to gain experience in the workplace. Since you’re focused on franchising, start by getting part-time jobs at various franchise operations.
It may seem obvious to focus on fast food because those jobs are highly visible and readily available. I’d recommend against it. You’re not going to become the owner of a fast food franchise anytime soon, so working at one isn’t going to be the type of direct experience you can use toward your goal. Concentrate on the types of franchises (low investment, high return) that you have at least some chance of owning in the next few years.
Also, either initially or fairly soon after going to work, try to get a position that directly works with and/or supports the owner of the business. It’s not as important to know how to clean a toilet or make toast as it is to understand how to hire and manage employees, schedule jobs, recruit customers and other similar tasks. This is what the owner does and working directly with him or her is going to expose you to that type of work.
Q: How can I determine the success rate for a franchise?
Assuming you consider success to imply achieving both financial goals as well as personal goals, then you’ll have to visit with a number of the existing franchisees in the system to learn more about their life and experiences to get the information you’ll need.
There are many businesses that make money and don’t fail. Some might match up well with you so you’d be happy conducting the franchisee role in the business, while others might make you miserable in spite of your financial success. Think of it as a job – most people have had jobs that they succeeded in and made good money from but were not happy doing. This is the same dynamic.
Take the time to find out about a day in the life of the typical franchisee and make sure you’ll be interested and satisfied in the role they are describing. If that’s the case then you’ve found a franchise that can provide not only financial success but personal fulfilment as well.
Q: Do I need an attorney to purchase a franchise?
There is no hard and fast rule about needing an attorney in order to buy a franchise. There are three common sense questions you need to answer in order to determine if you need an attorney:
- Do you understand the franchise agreement? If you are confident that you understand what the agreement is saying then you’ll be more comfortable. If not then you may want to have legal advice from an attorney to make sure your understanding is complete and accurate.
- Is the franchise company willing to modify their contract or is it exactly the same for everyone? Many franchises will not amend their agreement for anyone. If their agreement is exactly the same for everyone and if you understand what it says, then you may think of the expense of an attorney as wasted money.
- How will you sleep at night if you don’t involve an attorney? If you are a worrier and you’ll fret about it a lot then of course it is a good use of money to involve an attorney no matter the answers to the other questions. Do it for the peace of mind and don’t worry about what it costs. Always ask for a fixed fee bid to review the documents because it may save you thousands of rands over using an attorney who racks up the hourly fees on non-critical issues.
Q: Is it risky to buy into a small franchise?
There is risk associated with any business start-up so the obvious answer to this question is yes. You’re looking at a franchise system that has only one operating unit and wondering if that is more risky than buying into a system that has hundreds of operating units. While there are many things you can do to mitigate or reduce the amount of risk you take when buying a franchise, it is far riskier to buy into an unproven franchise. You need to be much more careful evaluating such a purchase.
When any business starts franchising, the owner has usually proven that he or she can successfully run one or more units of the underlying business, and has ‘operator’ skills in this business. What they have not proven is whether or not they can take a new person (you in this example) and quickly teach him or her how to successfully operate a unit. That is a completely different skill set I’ll call ‘franchisor’ skills.
Most franchisors will readily admit that the first 10 to 20 franchisees in their systems were the ‘guinea pigs’ that they used to learn how to effectively bring someone new into their business and have them become successful. These pioneers helped the franchisor learn, often through trial and error, how to become good at their job of employing franchisor skills.
The challenge is that lots of pioneers end up buried beside the trail because they didn’t survive the journey. If you want to make sure you don’t end up with that fate, you’ll need to either find a different franchise or else wait until 10 or 20 others have become franchisees in the system you like. That way they can blaze the trail for you.
It’s not smart to be someone else’s guinea pig when your life savings are on the line.
Choose A Job You Love, And You Will Never Have To Work A Day In Your Life
Join Col’Cacchio’s 26-year-long love story.
- Joining fee: R125 000
- Monthly management fee: 6% of turnover
- Monthly marketing fee: 2% of turnover
- Total investment: approx. R2.5m to R4.2m (turnkey) Size: 140m2 to 350m2
- Unencumbered cash (before loan): 50% of total investment
(Above figures exclude VAT)
“Owning your own restaurant is like owning your own future.” – Dominic Dempers, Franchisee Durbanville, Belvedere & Meadowridge Cape Town
We’re looking for passionate franchisees who will love our brand as much as we do.
Why you should join this delicious success story
- Assistance with site selection & lease negotiation
- Store design & build
- Full training provided for management and staff
- Marketing & operational support
- Product innovation & menu development
- Efficiency in all systems
- Healthy margins.
“Our journey started with a single restaurant on the foreshore with the aim to serve the very best pizza around” – Greg Mommsen, Business Development Director
“Watching this brand grow and empowering people has been immensely rewarding. We have staff that have been with us for over 20 years. It’s like a family, we work hard, we laugh, we cry, we celebrate and of course, we eat a lot of pizza.” – Michael Terespolsky, Founder and Managing Director
“Becoming a franchisee is an amazing opportunity to join the family and become part of the Col’Cacchio success story. We’re 100% behind out franchises at every step, making sure that we all continue to learn and flourish” – Greg Mommsen, Business Development Director
“It has been filled with challenges along the way, but all the rewards have made every moment worth it.” – Michael Terespolsky, Founder and Managing Director
Visit www.colcacchio.co.za or call Tarryn Godley on 084 800 7264 and let’s get this adventure going.
Smoothie Franchise Opportunity: Puré Frooty Is A One-Of-A-Kind Smoothie Franchise Business
Looking for the next greatest franchise opportunity? Puré Frooty Smoothie is a highly perfected Australian business model launching in the South African market that doesn’t require extensive shop fitting or a large workforce.
- Brand: Puré Frooty
- Established: 2017
- Website: www.purefrooty.co.za
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.
An Innovative Franchising Concept
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.
The four values we pride ourselves in are:
- Customer Satisfaction.
Why Consider This Franchising Opportunity
Extensive research into the business model and market
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.
Simplified process for setting up a business
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:
- Free-standing machines: The business model revolves around a free-standing vending machine which needs to be visited to refill and maintenance.
- No shop-fitting required: 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.
- Minimal human resources needed: 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.
- Cashless business: 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.
- Easy tracking of stock and performance: 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.
- Efficient handling of maintenance: 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.
- Human error is eliminated: Everything is done with a computer which leaves little to no room for errors. It is self-order and very user friendly.
Related: SA Fast Food Franchising On The Rise
Why Will Customers Love It
Puré Frooty Smoothie offers a vending machine that 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.
Interested in Becoming A Franchisee?
Visit our Franchise Info Page for everything you need to know about how to become information a Puré Frooty Smoothie Franchisee owner.
You can also call or write to us:
Phone / 012-942 6360
Email / email@example.com
Want to know more about this franchise? Watch the video below for more.
4 Top Tips To Find Your Best Franchise Opportunity
The President’s recent Job Summit highlighted the critical need to reduce unemployment. The franchise sector employs 369 573 people, 93 percent employed by individual franchisees rather than franchisors.
Several years of strong sectoral growth combined with business opportunities that are often backed by an investor safety net is making franchising the top choice for many who want to own their own business. This assessment is based on the strong foundations of my own experience of establishing Cash Converters nearly a quarter century ago and the recent results of Franchise Association of South Africa (FASA) annual industry survey.
These figures show that the SA franchise industry has grown its turnover by 55 percent from R465 billion in 2014, when FASA conducted its first survey, to R721 billion in 2017. Alongside this, the sector’s contribution to South Africa’s GDP has expanded by 62 percent, from 9.7 percent in 2014 to 15.7 percent in 2017.
The President’s recent Job Summit highlighted the critical need to reduce unemployment and boost the national economy by growing business and stimulating job creation. The franchise sector employs 369 573 people, 93 percent employed by individual franchisees rather than franchisors.
Franchising can be a win-win for franchisees. It enables you to make your dream of running your own business come true as well as contributing to providing much-needed new jobs.
These factors make franchising a particularly attractive option for those wishing to start their own business. But with 865 different franchise systems active in the country last year, the huge range of choice can be confusing.
To prevent analysis paralysis and ensure you can get set to make the most of franchising, I can offer four top tips for selecting the best franchise opportunity for you:
1. Choose a credible brand
As you shortlist franchisors that appeal to you, go beyond what they tell you about themselves and find out about what people are saying about them. Do social media searches to find out how consumers are reacting to the product or service offered, pricing and customer service. Your franchise fee should buy you a halo effect thanks to your franchisor’s good reputation. Too much negativity around the brand will affect the potential success of your franchise, from your ability to attract customers and the turnover and profit you can hope to generate.
2. Look for a proven business model
A worthwhile franchise shares with franchisees the intellectual property it has developed over the years. It has created and grown this business model over time, knocking off rough edges and fine-tuning systems for mistakes as they become apparent. Check the brand’s news history online as well as its own sales material. Be wary of any franchise that claims to be perfect or invincible.
Nobody is – so either it has something to hide or it is fooling itself. Either way, such a brand is not keeping its eyes open to navigate the brand and its franchisees through the changing fortunes of business.
Related: Thinking Of Going Into Franchising?
3. Check the support systems
Getting relationships and systems right is vital in business success. They have become even more important since we founded Cash Converters nearly 25 years ago because the volume of legal compliance has mushroomed. Make sure that the franchises you shortlist offer you support in coping with this and that those running the brand are in touch with what happens on the ground in the franchisees’ stores. At Cash Converters, for example, our front-end support staff are in stores every day and the directors devote three days each month to visiting stores. This ensures that our expertise is available to guide the franchisees through any business issues they face.
4. Follow the recipe
When you sign up with a franchisor, you receive access to its business model, including the “recipe” for running your franchise. This forms a kind of safety net so you do not need to reinvent a wheel when setting up your business. But you cannot complain that the business model does not work if you do not implement it. This is one of those times when you must follow the recipe to bake the cake successfully. If you are not the kind of person who wants to do that, then think again about whether franchising is for you.
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