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Researching a Franchise

Is It the Right Fit?

Before you make that all important investment, there are some important questions you may have.

Jeff Elgin

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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:

  1. Are you capable of owning a business?
  2. Can owning a business help you achieve your goals?
  3. 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:

  1. 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.
  2. 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.
  3. 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.

Bottom line:

It’s not smart to be someone else’s guinea pig when your life savings are on the line.

Jeff Elgin has developed a consulting system that matches pre-screened, high-quality prospective franchisees with the franchise opportunities that best fit their personal profile.

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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.

HI-Q

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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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