Connect with us

Researching a Franchise

The Search For An Opportunity

Ready to become a franchisee? Here’s what you need to know.

GG van Rooyen

Published

on

new-opportunities

If buying an existing business doesn’t sound right for you, but starting from scratch sounds a bit intimidating, you could be suited for franchise ownership. What is a franchise — and how do you know if you’re right for one? Essentially, a franchisee pays an initial fee and ongoing royalties to a franchisor.

In return, the franchisee gains the use of a trademark, ongoing support from the franchisor, and the right to use the franchisor’s system of doing business and sell its products or services.

Related: Franchising Mistakes You Need To Avoid

In addition to a well-known brand name, buying a franchise offers many other advantages that aren’t available to the entrepreneur starting a business from scratch. Perhaps the most significant is that you get a proven system of operation and training on how to use it.

New franchisees can avoid a lot of the mistakes start-up entrepreneurs typically make because the franchisor has already perfected daily operations through trial and error.

Reputable franchisors conduct market research before selling a new outlet, so you’ll feel greater confidence that there is a demand for the product or service.

Failing to do adequate market research is one of the biggest mistakes independent entrepreneurs typically make; as a franchisee, it’s done for you. The franchisor also provides you with a clear picture of the competition, and the ability to differentiate yourself from them.

Finally, franchisees enjoy the benefit of strength in numbers. You’ll gain from economics of scale in buying materials, supplies and services, such as advertising, as well as in negotiating for locations and lease terms.

By comparison, independent operators have to negotiate on their own, usually getting less favourable terms. Some suppliers won’t deal with new businesses or will reject your business because your account isn’t big enough.

Franchise or Business Opportunity?

Business opportunities are less structured than franchises, so the definition of what constitutes a business opportunity isn’t easy to pin down.

In essence, a business opportunity is any package of goods or services that enables the purchaser to begin a business and in which the seller indicates that they will provide a marketing or sales plan, that a market exists for the product or service, and that the venture will be profitable.

Here are other key factors:

  • A business opportunity doesn’t generally feature the seller’s trademark; a buyer will operate under his or her own name.
  • Business opportunities tend to be less expensive than franchises and generally don’t charge ongoing royalty fees.
  • Business opportunities allow buyers to proceed with no restrictions on geographic market and operations.
  • Most business opportunity ventures have no continuing supportive relationship between the seller and the buyer; after the initial package is sold, buyers are on their own.

The Pros

advantages-of-franchising

The greatest strength of franchising is its ability to bring independent retailers together using a single trademark and business concept. The benefits of this affiliation are many: Brand awareness, uniformity in meeting customer expectations, the power of pooled advertising and the efficiencies of group purchasing.

For the individual owner, there are several advantages to franchising. The ever-present risk of business failure is reduced when the business programme has already proved to be successful in the marketplace; the use of an established trademark saves the business owner the cost of creating and advertising a name that customers will recognise; and the advantages of group advertising and purchasing make operations more profitable.

Related: Alternatives To Franchising

In addition, ongoing training creates an instant operational expertise that would otherwise need to be acquired through trial and error. Also, with franchising, expansion seems to come more naturally.

Operating a successful franchise may quickly lead to building a second and then a third business, and so on. Fortunes have been built this way.

The Benefits

  • Reduction of risk
  • Turnkey operation
  • Standardised products and systems
  • Standardised financial and accounting systems
  • Collective buying power
  • Supervision and consulting readily available
  • National and local advertising programmes
  • Point-of-sale advertising
  • Uniform packaging
  • Ongoing research and development
  • Financial assistance
  • Site selection guidance
  • Operations manual provided
  • Sales and marketing assistance.

The Cons

franchise-disadvantage

Franchising, however, is not for everyone. Fiercely independent entrepreneurial types (you know who you are) may chafe under the strict operational requirements and specifications of a franchised business. If things have to be done their way, you may want to head in another direction.

Also know that some franchise systems are better than others. A weak franchise programme will not train you well to handle the challenges of the business, will not do a good job of assisting you when problems arise, and will not make the best use of your advertising dollars.

The Downside

  • Loss of control
  • A binding contract
  • The franchisor’s problems are also your problems.

If you’re considering buying a franchise, don’t let wild expectations influence your decision. While franchising is designed to put people into business who have never owned a business before, the excitement of ownership can create an impulse to move forward without proper planning.

If you rush headlong into buying a franchise expecting to boost your current working salary, but the earnings don’t allow you to pull out more than half your former salary, you will be one unhappy camper.

Work with a good accountant to prepare a cash-flow projection for the business before you take the plunge. Know how long it will take to break even and turn a profit, as well as the amount you’ll realistically be able to pay yourself.

Associated Costs

In terms of capital investment, your franchise fee will be determined by the profitability of the business. Most companies have a scale when it comes to franchise fees. They can have varying ranges, anywhere from R10 000 to R500 000+, depending on the size of the system.

Related: Signing Up With An Emerging Franchise

In addition to this front-end franchise fee there is, the one-time fee that a franchisor charges you for the privilege of using the business concept, attending their training programme, and learning the entire business. There will also be an ongoing royalty fee, typically ranging from 2% to 10%, or a monthly figure.

Some of the other costs associated with a franchise include:

Facility/Location

In some cases, you may also have to buy land or a building, or you may have to rent a building. If you rent a building, you’ll be responsible for not only the monthly lease but for the one-time deposit as well. In addition, you’ll have to pay for leasehold improvements. In some cases, the owner of the building will put these in and factor them into your rental, probably charging you a small additional fee.

Equipment

Different types of businesses will need various pieces of equipment. There are generally long-term payments available for most equipment purchases. Fortunately, most banks will provide loans for equipment because it also serves as collateral.

Signs

Outside signage can be very expensive for the small-business owner. Most franchisors have developed a sign package that the franchisee is obligated to purchase.

Opening Inventory

This will usually consist of at least a two-week supply, unless you’re in a business that requires a much more complicated inventory. Most franchisors will tell you what their opening inventory requirements are.

Related: How To Choose The Right Franchise

Working Capital

For rent, you may be required to deposit the first and last months’ payments as well as a security fee. You’ll need some working capital and money in the cash drawer to make change.

You’ll need money to pay your employees. You’ll need money just to operate until there’s a cash flow. If you’re buying a franchise that relies on charge accounts, you’re going to have to allow yourself some additional capital before the bills are paid by the customers and returned to you.

Advertising Fees

There is usually a fee for advertising on a regional or national basis. Larger franchisors often require their franchisees to pay a certain amount into a national fund used to advance the concept. The upside is the benefits are quite substantial in terms of the visibility you get with the type of advertising that most franchisors do.

GG van Rooyen is the deputy editor for Entrepreneur Magazine South Africa. Follow him on Twitter.

Advertisement
Click to comment

You must be logged in to post a comment Login

Leave a Reply

Researching a Franchise

The Digital Headaches Of A Franchise Marketing Team

Here are my top 5 tools that can help control and regulate franchisees marketing with minimum friction.

JG Bezuidenhout

Published

on

digital-marketing-tools

Franchise marketing teams already know that managing campaigns for a business with multiple locations and/or stores is a time-consuming job.

When it comes to online marketing, many franchisees are frustrated with the mother brands’ national campaign strategy, as it may not suit their immediate needs. This often means they embark down the dangerous route of “rogue” or unapproved campaigns.

This is a huge risk for any brand as there is limited to no control over the message and quality of creative, often resulting in brand CI and best practices not being followed.

Rogue advertising can be totally avoided by a franchises’ marketing team by employing tools that allow them to set up a managed process where franchisees can advertise through. With a managed approval process (preferably automated) it is easier to manage “rouge” content.

Here are my top 5 tools that can help control and regulate franchisees marketing with minimum friction.

1. Create a consistent Facebook content experience whilst still allowing your franchisees to post to their own page

Facebook location pages makes it possible to, as an alternative, allow every store to open a Facebook page, each with different versions of your logo as their profile picture, as well as incomplete profile data or even old or past promotions as their cover image. You as a brand manager can set up each store as a location page on the brand’s main FB page.

The pages can all be linked to the main page and if you change the profile image or cover art, it will automatically update all the other pages. There are also a number of other marketing advantages to this, but most importantly for me was the ability to manage them all from a single interface and clean up all the old and abandoned pages that just confused customers.

2. Manage social media content

Gain is extremely simple to use and connected to all the popular social media platforms such as Facebook, Twitter, LinkedIn etc. As a user, you can create posts or ads and schedule them all from the same window. Once said posts are scheduled, the marketing team can preview the content and approve it for publication or request changes all within a matter of seconds.  Best of all, nothing will get posted without your approval.

3. Free professional looking content in a template

Pablo is an old favourite of mine! It supplies predefined size templates where a user can use free professional stock photos and quickly overlay text. The feature I love most on this tool is the “insert logo” feature, which with the click of a button can overlay a banner or brand element that creates consistent content experiences. Once done, you can export the image and post it to gain for approval. Simple right!

4. Create email alerts for when your brand is found online

Talk Walker alerts is a nifty tool and acts like your personal internet detective who constantly crawls the internet for keywords that you define. I like to use my clients’ brand names and sometimes even my competitors just to keep tabs on their activity. Once set up, you receive daily emails with links to the content in question.

5. Pre-approved marketing creatives and targeting with machine learning optimisation

Lead Gener8or tool can define a bespoke target audience per store and lock advertising geographical areas to prevent any cannibalisation. Once completed, franchisees can execute pre-approved marketing campaigns as and when they wish on any of the integrated channels (SMS, Email, Facebook, Google and Youtube), without any further involvement required from the marketing team.

Powered by big-data machine learning, campaigns are automatically optimised while in flight. Marketing teams can monitor all campaigns in real time. This tool really is a game changer for franchise marketing teams and brand managers.

With these tools correctly implemented into your business, the digital headache of your franchise’s marketing team can subside and focus on what you do best, delivering results!

Continue Reading

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

Published

on

colcacchio-pizza-franchise-food

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.

Continue Reading

Company Posts

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

Published

on

saying-no

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

Continue Reading
Advertisement

SPOTLIGHT

Advertisement

Recent Posts

Follow Us

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

Trending