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Researching a Franchise

To Buy, Or Not To Buy

Here are five questions you need to answer before choosing a franchise.

Kyle Zagrodzky

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If you’re in the market for a franchise, there are loads to choose from. Those looking to become part of a franchise have to sort through everything from childcare to pizza, salons, gyms and medical facilities. That’s a lot to narrow down.

As potential franchisees make sense of all the information and start finalising their top picks, they often neglect to notice a key factor in the decision process: How many questions do franchisors actually ask them?

People making a choice as big as becoming a franchisee have so much on their minds and so many questions to answer that they may not focus enough on the way franchisors interview them.

Not all franchises are created equal, and the way a franchise gets to know you will tell you a lot about its culture. Ideally, you want to work with a franchise that is as interested in you as you are in it. The questions they ask (or fail to ask) can tell you a lot.

Above all, franchisors shouldn’t just want to take your money. They should be as deeply invested in building a successful business as you are, and the questions they ask say a lot about the kind of experience you can expect.

Here are five questions a franchise should ask potential partners:

1. What is your professional background?

Franchising is such an interesting business model because it attracts people from all kinds of backgrounds. There isn’t just one type of person who becomes a franchisee, so a good franchise will want to understand your previous experience to make sure you have what it takes to be a successful part of their business.

Some franchises look for a particular segment of past experience, but most will look at each franchise candidate individually.

If a franchise doesn’t care about your past experience, it’s a sign that they’re not choosy about who becomes a franchisee — which also means they aren’t as likely to be invested in your success.

2. How much time do you have to spend on the business?

Every franchise will have different guidelines for how much time a franchisee should expect to spend on the business. Some franchises are higher maintenance than others. It all depends on the type of product and service, the franchise’s culture of how involved each franchisee will be personally, and how easy or complex the business is to set up and run.

A basic mall kiosk will be easier to manage from a distance, but a retail unit that will be built from the ground up as a standalone store will require more time and legwork. Make sure the franchise cares and asks how much time you’re willing to commit.

how-to-choose-a-franchise-to-invest-in

3. What do you hope to accomplish?

If you expect a franchise to be profitable in a month, and the franchise generally isn’t profitable for a year, it’s better to get that out in the open before you sign on the dotted line. Great franchises know how to manage expectations so that franchisees can stay positive and know what they’re signing up for.

Franchising isn’t a magic bullet of profitability. It’s a business like any other, and most businesses take time to earn profits.

The franchisor should also want to know if you have plans for expansion, since that should lead to in-depth conversations about territories and development. If a franchise makes promises that don’t seem reasonable, take a step back, and do some more research. It’s better to work with a company that is up-front about what you can expect than one that makes assurances and might not be there with support after you’ve joined
the team.

4. Why are you interested in franchising?

People get into franchising for all sorts of reasons. Sometimes they have always dreamed of entrepreneurship. Sometimes they want to take more control of their careers. And sometimes they are looking to segue out of another career.

The thing is, most people aren’t actually well-suited to running a franchise. Franchisees need to have a unique personality that can walk the line between visionary and team player. If you want to call all the shots, do things your way and build a brand from scratch, you might be happier with start-up entrepreneurship. If you are looking for the support of operations systems, sales practices and complete marketing and training tools, franchising is a better way to go.

Franchising doesn’t offer a guarantee of success, but merely a template for running a successful business.

A good franchisor recognises that and will only work with people who are a great fit for the franchising life.

5. Why are you interested in this particular franchise?

A lot of people get into franchising because they think it’s a sure bet for running a profitable business. However, the allure of profitability shouldn’t be the only reason you’re interested in a franchise. If you’re lactose intolerant, you aren’t the ideal person to open an ice cream shop. However, if you’re lactose intolerant and the ice cream shop sells products made exclusively from coconut, almond and soy milks, you might be perfect.

Running a business is about making money, but to do that well, you have to be passionate about what you’re pitching. The best franchises know every franchisee is passionate about the brand, not just the profits.

Kyle Zagrodzky is president of OsteoStrong, the health and wellness system that boosts bone and muscle strength in less than 10 minutes a week using scientifically proven osteogenic loading concepts. OsteoStrong introduced a new era in modern fitness and aging prevention two years ago and has since helped thousands of clients between ages 8 and 92 improve strength, balance, endurance and bone density. In 2014, the brand signed commitments with nine regional developers to launch 500 new locations across America.

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Researching a Franchise

Maximise Your Social Media Reach This Holiday Season

Quick and cost-effective, social media is your best tool to reach target markets when it matters most – during the holidays.

Diana Albertyn

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It’s not just the end of the year that can be lucrative for businesses. School holidays and other major breaks during the year present consumers with more time to spend shopping. Why not ensure money is spent at your franchise by capitalising on the minimal cost and maximum exposure of social media?

You don’t have to create entirely new deals or promotions from what you may already have running on your store, but find a way to make it special for your social media followers, suggests Kelly Mason, marketer at Customer Paradigm.

Holiday campaigns on Twitter, benefitting from popular hashtags, streaming live content, and receiving information instead of just distributing it via social media are just some of the ways to stay ahead of the competition.

Related: Why Your Business’ Social Media Marketing Strategy Is Probably Wrong

Know your customers well

The first step to attracting customers and getting them to complete a sale is understanding their customer journey.

“Being able to document where they spend their time online, which social channels they use most, and what they’re reading or watching on those channels is a huge plus. Finding that crucial information is fairly easy to do, thanks to modern-day marketing tools and resources,” advises Paul Herman, ‎VP: Product and Solutions Enablement Group, at Sprinklr, a unified customer experience management platform for enterprises.

The better you understand your customers, the easier it is to reach them through a campaign optimised for their interests.

Master social listening

You could be using social media all wrong in the run up to all your holiday campaigns. Perhaps it’s time you used this platform to listen to your customers?

“Through social listening, marketers can identify major trends and product keywords in their industries,” says Herman. “For instance, knowing those keywords can help marketers identify which social platforms are more popular for a target audience. With that information, they can make smarter decisions about where to spend their money and which products or services to promote on each platform.”

Related: 10 Laws Of Social Media Marketing

Use the information gathered to determine what customers like about your product, what they dislike about it, and how you can improve upon it so they can buy more of it. The more of this data you collect, the better and more effective your interactions with customers will be.

Try something new

50% of consumers look for a video of the product they want to buy before going to an ecommerce store to buy it, according to a 2016 Google survey. “Video can be an extremely effective way to get your customers to take action – in this case, to make a purchase with your store,” adds Mason.

Video adverts are often used as an experimental tool in social marketing and switching it up on platforms such as Facebook Live, Instagram Live, Instagram Stories, or Snapchat – depending on your brand’s activity and your audiences’ interests – can help attract customers during seasonal periods.

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Researching a Franchise

Selling Your First Franchise? Consider These Key Pointers

You’re ready to franchise your business, but who do you sell to and how? Your first few franchisees may be the hardest to acquire, but the process will be smoother if you get some basics right.

Diana Albertyn

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Business experience gained running your independent brand will come in handy, but looking for franchisees is a different ballgame. “We have to attract the right people in enough numbers to make the difference; and, the key to more leads is to have a multi-prong strategy to marketing,” says franchise strategist and expansion expert Lizette Pirtle.

Using media (social, or otherwise), trained experts in franchise sales, and keeping in mind that whoever you sell to will become an extension of your brand, are important considerations before selling your to first franchisee:

1. Use (all) media wisely

Website marketing, print advertising and social media are just some of the many different ways to attract potential owners to your franchise. But the most cost-effect of the three may be a ‘tweet’ or ‘post’ away, says former Director of Marketing at the International Franchise Association and owner of Burris Branding and Marketing, Jack Burris.

Related: To Buy Into A Franchise Or Purchase A Licence? 3 Factors To Consider

“Three out of four people using the Internet are either on Facebook or LinkedIn or Twitter or all of them. Take advantage of social media,” he says.

“There’s typically no cost to play in the space except for the time that you need to invest to build your brand with a social media presence.”

2. Seek out franchise coaches or brokers

While this is a more traditional method of making reliable franchise sales, it’s a great way to form lasting associations that will take you beyond your first few sales. “Using broker networks is a great way to supplement your own efforts. However, you must spend time developing relationships with these people if you want to get results,” advises Pirtle. “Don’t think that just listing your opportunity with them is sufficient.”

Franchise coaches and brokers have multiple options for potential franchisees, so to put yourself high on their list of consideration when prospects enquire, you have to form memorable relationships.

Related: 3 Factors To Focus On When Opening Your First Franchise

3. Always consider the bigger picture

Out of all the people your marketing efforts attract, always keep in mind that few will check all the boxes and compromising could cost you in the long run.

“The franchise relationship is a long-term one. If you’re going to be successful as a franchisor, you should start with the attitude that every franchisee will be someone who you’ll have to live with for years to come. And nowhere is this philosophy more important than when awarding your first franchise,” says Mark Siebert, CEO of the iFranchise Group, a franchise consulting organisation.

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Researching a Franchise

To Buy Into A Franchise Or Purchase A Licence? 3 Factors To Consider

So you want to become an entrepreneur, but prefer support from an established brand? Franchising isn’t your only option, but is licensing right for you?

Diana Albertyn

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Opening a new business under a successful brand is a sure-fire way to success. Given that you’ve done your homework and the projections are looking good, you could be running a profitable operation in no time. However, the choice between buying into a franchise and purchasing a licence to operate under the brand, in exchange for a fee and portion of your profits can go one of two ways.

“It is essential to understand the difference between a franchising agreement and a licensing agreement, especially when seeking funding from a financial services provider,” says Morné Cronjé, head of franchising at FNB Business.

“Each business model is governed by a completely different agreement or contract and they operate in a unique way.”

Related: Should You Purchase An Existing Franchise?

When contemplating which option is right for you, consider how much independence you’d like to hold as a business owner, what kind of investment and share of the profits you’re willing to make and the type of relationship you’d like with your mother brand.

1Support vs autonomy

When toy industry behemoth Toys “R” Us filed for bankruptcy in September 2017, Toys “R” Us South Africa distanced itself from its US affiliates saying that the SA business is performing so well, it’s embarking on an expansion drive. How can the mothership be suffering while its SA counterpart is thriving?

Toys “R” Us SA is a privately-owned independent company operating under a license agreement with Toys “R” Us Inc. While the local version of the toy giant has purchased the right to use licensed material and intellectual property, the licensor has no control over the operations of the licensee.

With franchising, however, the franchisor exerts more control over the franchisee, but where the franchise lacks in autonomy, it makes up for in support.  “While entering into a franchise requires more of an initial investment, the benefits of an entire organisation supporting you are powerful,” say the owners of US-based fitness studio Barre Forte.

2Financial implications

While both franchisees and licensees pay an upfront fee and ongoing royalty payments to the owner of the brand or intellectual property – the franchisor or licensor – as a licensee, you bear the developmental cost and the risk associated with launching foreign operations.

Cronjé explains a franchising agreement as a duplication of a specific business model, governed or controlled through a franchise agreement where the franchisor holds all rights, including the business model.

“While franchise and license agreements vary significantly, looking at the cost distinctions between the two, it is generally more affordable to pursue a license agreement than a franchise agreement,” he says.

Related: Owning A Franchise – Good Idea Or Bad Idea?

3Relationship matters

The initial investment may be higher for a franchise operation, but access to a proven concept, an established customer base and ongoing product and service innovation could end up wing worth the cost. Not to mention the support franchisees get in the form of ongoing training and assistance with the initial setup process.

“When it comes to training, the licensing model would only train staff on the product they are selling,” explains Cronjé. “This is very different to franchising, where comprehensive training is provided on how to operate the entire business.”

Licensing generally includes some components of franchising, however what the difference is that specific operational support systems aren’t dictated by the group, which could bode well for you if you’re looking for the benefits of a big brand without the red tape.

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