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Researching a Franchise

Signing Up With An Emerging Franchise

Getting involved in a new and emerging franchise can be risky. But it can also be phenomenally profitable. The trick lies in identifying those franchises that are on the cusp of exploding and offering 1 000% returns.

David Nilssen

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In 1955, multi-mixer salesman Ray Kroc saw the future in hamburgers and opened the first McDonald’s franchise location in Des Plaines, Illinois. Today, more than 80% of the 36 000 worldwide McDonald’s locations are franchises.

Every superstar franchise starts as a new brand. Entrepreneurs who get in on the ground floor can potentially reap great rewards.

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“Think of it like the stock market, where early investors can score big,” says Brent Dowling, chief operating officer at RainTree, a franchise consulting company.

“Imagine being one of the first 20 McDonald’s franchise owners. When the smaller franchises become big, that’s where we see 1 000% returns.”

Beyond the money: Input and influence

An often-cited benefit of early ownership is the chance to influence the franchise systems. “Established brands just want you to follow the programme,” says Terry Powell, whose company, The Entrepreneur’s Source, helps individuals find the right franchise concept for themselves. “Early franchisees get to be part of the development and have their ideas listened to.”

Serial entrepreneur Amy Lewallen has more than ten years’ experience as an early owner in three different emerging wellness and fitness brands: Fitness Together, Elements Therapeutic Massage and her current Iron Tribe Fitness centre in Washington in the US. She’s drawn by the opportunity to influence the rollout of new concepts as the franchise grows.

“I saw the chance to help steer the brand,” she says. “You just have to know there will be growing pains.”

Franchisors know how important this input and influence can be. Anna Phillips, CEO and founder of emerging brand Lash Lounge, actively looks for franchisees who are ‘team players, flexible with change and able to help provide solutions to gaps that will improve the overall franchise organisation.’

She views her franchisees as ‘contributing pioneers’ who benefit from prime territory selection and lower franchise fees. RainTree’s Dowling notes that early owners also receive direct support from founders eager to prove success in new markets, along with the chance to be involved in “decision-making for the entire franchise brand, from new products or services to systems and processes.”

Mitigating the risks

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As with any investment, there are liabilities to being an early adopter. “Without a track record of success in different markets, there is the risk that the brand just isn’t as replicable as predicted,” says Dowling.

Success may not be immediately apparent either. It can take a while for emerging brands to reach what Terry Powell calls the stage of critical mass, when growth begins to happen more rapidly and exponentially — from his perspective, that’s around 75 units.

And franchisor Phillips is frank that emerging franchises are still building brand recognition and growing their internal team with systems that don’t always provide the support owners expect from more established franchises.

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Powell’s 32 years’ experience in matching entrepreneurs with franchise opportunities has also taught him that prospective franchisees can sometimes be their own greatest danger.

“People think it’ll be like falling in love, but it’s better not to think of a right fit in purely emotional terms. A franchise is a vehicle to accomplish your lifestyle, wealth and equity goals.”

How do you decide if an emerging franchise is right for you?

In the absence of an extensive track record of financial performance, entrepreneurs need to dig deeper and research creatively. Focus on the business model, the direct experience of owners already in the system and the values and culture of the franchise.

Business considerations include:

  • Is there a clear demand for the product or service offered by the emerging franchise?
  • What key differentiators does the franchise bring to the market?
  • Is the franchisor team professional and experienced?
  • What is the performance track record within existing units?
  • How many units have closed and why?

Are the current operations, marketing and training systems understandable, usable and streamlined? Lash Lounge CEO Phillips says, “If the early systems look organised and well-developed, it is a fair assessment that they will continue to grow and provide great support as the franchise becomes more established.”

  • Does the business model meet your income and lifestyle goals?
  • Do you have the marketing and sales skills to help build brand awareness?
  • If the emerging brand is a new concept, how comfortable are you with being a pioneer?

Make sure you talk to as many current owners as possible. Amy Lewallen advises that you insist on being put in contact with struggling owners as well as successful ones, so you can gain insight into the real challenges of the business and evaluate your own ability to respond to them.

“This is likely to be the most important part of your research process,” says Brent Dowling. “In addition to asking existing owners about their profits and losses, timeframes and milestones, the most important question is, ‘Would you do it all again?’”

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Finally, it’s vital that you’re comfortable with, and excited by, the vision, values and culture of the franchise. Your success depends on your long-term engagement with the brand. Amy Lewallen’s approach is to ask herself, “Is there anything about this brand that I wonder if I can live with that or not? Because when you buy in, you’re married to that brand, and what they believe in, you have to believe in.”

David Nilssen is the co-founder and CEO of US-based Guidant Financial. The company helps entrepreneurs invest their retirement funds into a business or franchise without taking a taxable distribution or incurring penalties.

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Researching a Franchise

How Your Fast Food Franchise Can Attract Quality-Conscious Consumers

In a world where customers are becoming increasingly picky about where they dine and what they pick from a menu, it can be challenging to meet demands.

Diana Albertyn

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“Major foodborne illness incidents and outbreaks seem to be increasing. Even innocent or careless mistakes can sicken guests and ruin a restaurant’s reputation,” says Francine Shaw, President of Food Safety Training Solutions Inc. “Foodborne illnesses are 100% preventable and could be avoided if food service organisations adopted a food safety culture.”

Following a listeriosis scare in South Africa early in 2018, consumers have become more conscious about the foods they eat. Today’s customer is more concerned about the cleanliness of the food they buy over its taste.

“How food is sourced, prepared and served is uppermost with many diners demanding transparency when it comes to where they spend their hard-earned money.” – Franchise Association of South Africa (FASA)

The addition of more nutritious choices to your menu may be attracting health-conscious consumers, but it’s the quality of the regular – and perhaps popular – menu items that may win over consumers concerned with quality and not just calorie content.

Related: 3 Ways To Make Your Franchise ‘Instagrammable’

Here’s how you can ensure your customers are at ease with having their next meal at any of your franchises nationwide:

1. Ensure everyone knows why and how it’s done

Even with buy-in from the top-tier, your food safety efforts will be futile if not incorporated into every training touch point and may appear to be optional, when they should be a priority, says Chris Boyles, vice president for The Steritech Institute. When you have well-trained workers who understand the ‘why’ behind food-quality policies, momentum is built and a culture of food safety is created.

“Through encouraging genuine, comprehensive behavioural shifts, your franchise will protect the brand, safeguard employees and sustain a reduction in risk,” Boyles adds.

2. Build food-quality impetus across the network

As a company that serves food to the public you’re in a position of great responsibility. It’s important to pass this message down to your franchisees too. “Co-operation between the franchisee and their employees in this regard cannot be stressed enough,” says Marcel Strauss, Managing Executive of The Fish & Chip Co. – which was voted the top fish brand in 2012.

To get your franchisees on board with tightened food safety regulations, ensure they’re aware of the looming food-quality changes you’re planning on implementing and the ROI for your brand. This enables them to make budgetary allowance for certain credentials and technology you may require to meet certain standards of food safety.

Related: Why Your Franchise Brand Should Be Culturally Relevant

3. Tell your customers every chance you get

Give consumers a glimpse into your production process by including your quality mission statement on customer-facing materials such as your website, social media pages, profiles on external review sites and menus. “Use stories, images and videos to show your practices in action,” Katy Jones, Chief Marketing Officer at FoodLogiQ explains. “Take customers behind the scenes into internal discussions. Practice is the way you demonstrate your commitment.”

To incorporate quality and safety messaging into customer relations, you need collaboration between your food safety managers and marketing managers.

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Researching a Franchise

The Future Of Franchising Looks Smaller (And Fancier)

Franchises are adding smaller locations and reduced menu options, as niche markets emerge, to attract the customer of the future.

Diana Albertyn

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As the owner of a thriving franchise, you’re well aware of the fact that fluctuations in the world economy has both negative and positive effects on business. When it comes to your successful franchise, tough times could mean adopting new trends or seizing gaps, potentially resulting in a new franchise concept you wouldn’t have otherwise thought of.

“The buzz word in global franchising is ‘flexibility and adaptability’,” according to the Franchise Association of South Africa (FASA). “Whether a result of a need to inject some life into stagnant franchise brands or as a result of the new world order brought about by the recession, franchising is embracing alternative and options in a big way.”

Related: As Consumers’ Tastes Change Can Your Franchise Keep Up?

You can do this by either devising innovative areas to franchise or allowing more flexible ways for franchisees to operate to help with their bottom line. FASA has earmarked these as some of the biggest franchising trends in 2018 and beyond:

Smaller, more cost-effective franchise models

When franchisees don’t have high franchise fees and start-up costs to worry about, they can focus more on what customers want, and deliver. The added benefit of smaller spaces include having fewer employees and reasonable rental.

Among the new frontiers in franchising are the food court losing its legacy as the preferred setting for food franchises, as service stations increase in popularity in the industry. A number of brands – like Steers, Debonairs and Mugg & Bean On-the-Go outlets – are co-locating with major fuel retailers to create fully-integrated accessible centres.

Niche markets are offering one-of-a-kind franchises

“The opportunity to get in on the ground floor of a new franchise trend is also on the rise,” notes FASA. This could be offering a unique gourmet food experience in your outlets or a ‘green’ space of energy saving technology in your operations.

“Consumers have gained control of what they want,” says Morné Cronjé, head of franchising at FNB Business. “It is no longer about what you have on the menu, but how your product or service can be tailor-made to what a customer really wants.”

Founded just five years ago (2013), RocoMamas boasts over 60 franchise outlets, clearly responding to the essence of this trend –allowing consumers to build their own burgers without having to pay for items they’d rather leave out.

Related: Key Franchising Trends To Consider For 2018

Stay ahead of the game

For long-term success, franchisors who want to expand their business should start exploring beyond present circumstances and current predictions.

“2018 will no doubt bring its challenges, however for every challenge there is a window of opportunity to explore. We are advising franchisors to scrutinise these trends carefully, it can definitely give them a boost for 2018,” says Cronjé.

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Researching a Franchise

As Consumers’ Tastes Change Can Your Franchise Keep Up?

More of your customers are eating in, and if you’re not packaging, portioning and pricing your food accordingly, they’re heading to a retailer that does.

Diana Albertyn

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It’s generally believed that it’s cheaper to cook your own breakfast, lunch or supper than to go out and pay a much higher price for the same food in your fridge at home. But today’s consumer’s live fast-paced lifestyles – so food is becoming more about convenience.

31% of 6 022 middle-to-high income South African earners surveyed by BusinessTech, put eating out and entertainment at the top of their list of things they’re most willing to cut their spending on in 2018 to save money. Research by supermarket giant Pick n Pay correlates, reporting an increase in customers buying quality convenience food, not just to entertain at home, but for dining at home.

Related: Driving Your Business Growth Towards More Customers

Consumers are empowered by variety

You’ve heard about the ‘fast casual generation’, aka Millennials? They are demanding healthy, affordable eating experiences. But do you know how this affects the future of the food industry, and your business in particular – because they’re not the only ones adapting their lifestyles.

An increasing number of food brands and chefs are compelled to create complete ranges of new, convenient meal options that are not only packaged, portioned and precooked attractively, but affordable too.

The fastest growing sector of retail foodservice for the past four years has been the convenience store sector. Non-traditional avenues of distribution are growing, gobbling market share while establishing new patterns of consumption, price points, and customer loyalty.

Shoppers are becoming value-focused

A savvy franchise would acknowledge that although pre-packaged and pre-cooked convenience food isn’t a new trend among consumers and supermarkets, it is gaining popularity. “Some of the most notable trends in 2017 were an increasing shift to convenience foods as customers looked for both value and convenience,” says Pick ‘n Pay’s Head of Marketing, John Bradshaw.

Related: 5 Techniques To Leave Customers Grinning And Vowing To Return

Value for money and healthier food choices will continue to be top of the convenience food list for consumer in 2018, as more shoppers cut down on luxuries.

“We’ve seen significant growth in the number of customers looking for an easy way to enjoy a good meal without the cost of eating out,” says Bradshaw.

But he cautions that South African shoppers have always been value-focused, and while the most significant shift Pick ‘n Pay has seen is how all its shoppers, no matter what their income levels, are watching their budgets.

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