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Researching a Franchise

Researching a Franchise Opportunity

There are myriad franchise opportunities available. How do you go about finding one that is right for you and your pocket?

Monique Verduyn

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Many people dream of owning their own business. Buying a franchise is one way to get there; some even say it’s the easiest way. Follow our 12-point franchise evaluation plan to find one that’s right for you.

1. Collect information.

Do your own research. No one is going to be as interested in the process as you are and if you want to become involved in the business you need to develop as much first-hand knowledge as you can anyway. One of the best ways to find out about the types of franchises available is to attend expos such as the Franchise & Business Opportunities Expo and International Franchise & Entrepreneurs Exhibition. Attending one of these shows is well worth your time. You can see what is available, ask lots of questions and collect information. The Internet is also an excellent source of information. Once you have decided which franchise you are interested in, you can move to step two.

2. Evaluate the industry.

First off, look at the industry in which the franchise operates. What are the other franchises in that sector? Is it a growing industry? What do the trends tell you? How does the franchise compare with its competitors? What do the trade magazines say?

3. Assess the brand.

If it’s a print shop say, or a laundromat, what differentiates it from its competitors – why would customers choose to go there as opposed to the competitor around the corner? This really goes to the core of the brand and the values and culture of the organisation and its positioning in the market. Look at how the brand is applied in terms of signage, logos, colour, uniforms and shop fitting.

Is the brand contemporary? In the US fast food restaurants only have to re-image about once every 20 years. In South Africa it’s once every five to eight years. People here like change and they like to try out new things.

4. Research the franchise organisation.

A big part of the challenge of looking into a franchise is getting your hands on information. Get access to information about the franchisor, the investment itself, the franchise system, and the rights and obligations of both the franchisor and the franchisee. A franchise idea is not worth pursuing unless the franchisor is willing to give you the investment information you need. Ask for the franchise’s disclosure document.

FASA prescribes that the disclosure document must be updated annually, or more frequently, should material changes within the franchisor’s business take place.

Read this document carefully and make sure you understand it. If you are in doubt about anything, or something in the document is unclear to you, don’t be afraid to ask.

5. Talk to the professionals.

If you like the idea and you want to pursue it further, take the contract to a franchise consultant or a good business lawyer. Let them look through it and explain each point to you in detail. You need to ensure you are comfortable with every detail of that contract.

6. Look at the numbers.

Take the financial statements to an accountant who can evaluate the numbers. You need answers to the following questions: Does the franchisor have the financial means to meet their commitments according to the franchise agreement? Does the franchisor have a solid business track record?

Request a check on the franchisor and the franchise system from Experian. Such a report will provide you with a company history, an overview of the staff, management and directors, a detailed assessment of the company’s potential risk, and any other information which may affect the creditworthiness of the franchisor.

7. Evaluate the contract.

Determine what fees you have to pay to the franchisor as a franchise owner, including the initial franchise fee, continuing royalty payments, advertising contributions and any other fees. Establish exactly what your total investment will be. What products and services can you buy and sell through your franchised business? Knowing this will enable you to understand the franchisor’s specifications, know who the approved suppliers are, and whether you’re required to purchase inventory from the franchisor. Does the franchisor source suppliers who offer competitive prices?

8. Establish your rights as a franchisee.

What intangible rights will you receive with your franchise package? These must include territory rights, trademarks, patents, copyrights and confidential information. Make sure you understand the territory rights. Is your territory exclusive? Can the franchisor or other franchisees compete with you in your territory? Make sure you understand the franchise agreement in terms of your rights to renewal, termination, transfer and dispute resolution. Ask the franchisor how much money a franchise makes. Find out about smaller and bigger stores and what they earn. Ask about the different locations. What are the differences between urban and rural locations, for example?

9. Find out what support the franchisor offers.

What are the obligations of the franchisor in terms of the franchise agreement before and after you buy a store. What does the training  programme include? All good franchisors have a well established, comprehensive training programme. Training should be the biggest service you buy with your initial franchise fee; make sure you get your money’s worth.

10. Talk to past and present franchisees.

Ask how many franchisees joined the system in the last three to five years of the company and how many left. Contact current franchisees and those who left in the past year. Call as many franchisees as you can; get in your car and visit several as well. Ask them how they like being a part of the programme, how much money they grossed last year and whether they would make the same investment decision if they had it to do all over again. Ask whether the franchisor follows through on promises made.

11. Make sure there is a strong sense of law and order.

In a franchise system the alternative to order is chaos. The system must be consistent, and the franchise concept must be completely replicable. There must be no room for latitude in the business format.

12. Establish the strength of the leadership.

Without a powerful leader at the helm, you have no way of knowing what the future of the franchise system will be.

Find out about the business experience of the franchisor managers, whether they are involved in any disputes and whether they have ever been declared insolvent. Who heads marketing, finance, operations? Are there competent people in each of these areas? Are the areas themselves properly defined?

Franchise Research Checklist

So you think you’ve found the right franchise? Follow these 12 steps. If what you uncover is not to your satisfaction, chances are there’s not much opportunity there.

  1. Collect information 
  2.  Evaluate the industry 
  3.  Assess the brand 
  4.  Research the franchise organisation 
  5.  Talk to the professionals 
  6.  Look at the numbers 
  7.  Evaluate the contract 
  8.  Establish your rights as a franchisee 
  9.  Find out what support the franchisor offers 
  10.  Talk to past and present franchisees 
  11.  Make sure there is a strong sense of law and order 
  12.  Establish the strength of the leadership team

FASA’s Code of Ethics

The code of ethics and business practices of the Franchise Association of Southern Africa (FASA) lays down the minimum amount of information a disclosure document must provide:

  • Full and traceable information about the franchisor company, including contact details and details of professional affiliations.
  • Details of qualifications and business experience of the franchisor and their officers in the type of business being offered as a franchise.
  • Details of criminal or civil action against the franchisor or his officers, either taken during the past three years or pending.
  • Full details of the franchise offer and the underlying business.
  • Full details of the obligations of the franchisor vis-à-vis the franchisee.
  • Full details of the obligations of the franchisee vis-à-vis the franchisor.
  • An explanation of the most important clauses of the franchise agreement, including restrictions placed on the franchisee.
  • Financial projections for at least two years and an explanation of the basis on which these projections were calculated.
  • Full details of all payments, initial and ongoing, the franchisee will be expected to make, and what they can expect to receive in return for these payments.
  • A list of existing franchisees and their contact details.
  • An auditor’s certificate certifying that the franchisor’s business is a going concern and able to meet its obligations as they fall due.
  • A statement by the franchisor to the effect that to their best knowledge and belief, the financial situation of the franchise company has not deteriorated since the day the auditor’s certificate was issued.

For further information, call FASA on +27 11 615 0359 / 58 / 78 or visit www.fasa.co.za

Monique Verduyn is a freelance writer. She has more than 12 years’ experience in writing for the corporate, SME, IT and entertainment sectors, and has interviewed many of South Africa’s most prominent business leaders and thinkers. Find her on Google+.

Company Posts

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.

Col'Cacchio

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Vital Stats

  • 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

colcacchio-pizza-franchise-dessert

  • 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.

Related: 300 Business Ideas To Inspire You Into Entrepreneurship

#FoodwithaStory

“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

Related: Got An Awesome New Business Idea? Here’s What To Do Next

Visit www.colcacchio.co.za or call Tarryn Godley on 084 800 7264 and let’s get this adventure going.

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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.

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.

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.

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.

Why Consider This Franchising Opportunity

healthy-smoothie-franchise

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 / info@purefrooty.co.za 

Want to know more about this franchise? Watch the video below for more.

 

ent_mag_6-11-18

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Researching a Franchise

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.

Richard Mukheibir

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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.

Related: Key Phases Of The Franchising Relationship

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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