There are more than 35 111 franchise outlets in South Africa. As the business landscape continues to evolve, it presents entrepreneurs with a new set of challenges and opportunities.
Franchisors and franchisees who stay ahead of industry developments will continue to grow and remain a step ahead of their competitors. Those who don’t could easily get left behind as consumers tighten their belts, and competition increases from global brands. Ultimately, though, you need to cater to customers who believe that convenience is a non-compromise.
Why consumers want more for less
One of the franchising industry’s biggest threats is the above-inflation cost of living increase that consumers face. Shrinking disposable incomes make them more selective about where and how they spend their money.
“Consumers are spending less and will have to make bigger trade-offs in their decision making,” says Louise Hefer, Media Strategist at The MediaShop.
Solution: Increases in fuel and electricity prices, further unemployment and ongoing drought mean consumer spend is going to get leaner. They are becoming more discerning in their purchases. But, it’s not just about price, as Vera Valasis, Executive Director of FASA (Franchising Association of South Africa), points out: “When times are tough consumers don’t stop spending. In my opinion the spending continues, but it is just different,” she says. “It’s even more imperative to ensure service is top notch together with quality and a market related price.” So up your service game, and you can keep customers coming back for more.
The playing field is getting larger
Your Vida e Caffé, Steers or Romans could be doing incredibly well – up until the Starbucks, Burger King or Pizza Hut opens down the road from you. How do you compete with international giants showing up at your doorstep, enticing your customers with worldwide popular appeal?
“Competition can push you to be better,” explains FASA chairman Naas du Preez. “While this has a positive economic impact, and gives consumers more choice, it significantly increases competition and puts more pressure on the performance of established brands.”
Solution: The arrival of global brands in your territories could lead to an expanded customer base in your arena, creating an opportunity for you to improve on your product, service and brand as a whole. “Competition helps you to focus and to improve the quality of your products and service. Competition will highlight your weaknesses for you,” says Du Preez. So, identify what the international brands are doing to attract spenders and see if you can deliver what they’re offering – more competitively.
Adapt to the consumer’s needs
If you rely on the same practices that have gotten you this far in your business, to get you through the next 10 years, think again. According to SA Franchise Warehouse, following a tried and tested model is no longer a guarantee for success in the franchising sector. “Convenience and innovation in technology is increasingly becoming important to customers,” says Liza Mijburgh.
“Consumers now want the option of ordering meals online and getting them delivered to their homes.”
Solution: The surge in South African smartphone users has seen 17.7 million of the 37.2 million adult population make use of mobile apps or access the Internet via their smartphones, according to MMAS (Mobile Marketing Association of South Africa). This means creating a delivery app and finding other ways to communicate with your customers using technology could be advantageous in catering to your current clientele as well as broadening your target audience.
Consumers aren’t just spending less, but are more selective in their purchasing decisions. This means value and quality trump price, and convenience gives you an edge over your competitors – local or international.
Be In The Property Business For Yourself, Not By Yourself
Why property franchising makes good business sense in today’s market.
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.
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:
- 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.
- 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!
- 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.
How To Become A Hi-Q Franchisee
Are you looking at investing in a tyre replacement and service industry? Look no further than the Hi-Q franchise.
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
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.
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.
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.
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