Connect with us

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

Published

on

ResearchFranchiseOpp

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

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

Published

on

By

grosvenor-crossing-hiq

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.

tyresurance-visual

Related: We Want To Invite You To Join Us On The Hi-Q Journey And Become A Franchisee

Continue Reading

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

Published

on

property-franchising

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?

Continue Reading

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

Published

on

benefits-of-the-franchise-model

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.

Continue Reading
Advertisement

SPOTLIGHT

Advertisement

Recent Posts

Follow Us

Entrepreneur-Newsletters
*
We respect your privacy. 
* indicates required.
Advertisement

Trending