How to make your franchise a success
With a variety of businesses you can buy into, and something for everyone, franchising is an easy and reliable way to start a business. But make sure you’ve covered these steps before becoming a franchisee.
Do your homework
Do as much research on the industry and business system you’re interested in buying into. There are a large variety of studies and reports available and educating yourself on both the big and small details will help you make the right decisions and ask the right questions. The more you understand about the brand, the product and the market, the more prepared you’ll be for purchasing decisions, negotiations and running a successful business.
Speak to other franchisees and learn from their experience, the good and the bad. Find out what it is like to be a franchisee in the franchise system that appeals to you. Do they provide training and support, how much flexibility are franchisees are allowed, and what are the lease agreements like?
These types of discussions will help you manage expectations, highlight gaps in skills or knowledge, and prepare you for how long it might take to turn a profit.
Is it a good fit for you?
Do you have the right skill and does the franchising opportunity appeal to your personality? A good franchise offers ongoing training and support making it easy to start no matter your experience. However, already having skills, such as sales, administration, marketing, people management and networking can be extremely helpful.
Finding a business that plays to your strengths could improve your chances of success. Knowing your own traits and your reason’s for pursuing it will give you good insight into the type of operation you’re likely to enjoy and succeed at.
Which franchises can you afford?
There are franchises to suit almost every budget, from a couple of hundred thousand up to several million. Work out how much of your own money you have available, and then determine what you need to borrow and how much you’ll be able to.
Banks like the franchise model because they can assess the track record of established franchises but bear in mind that you’re still investing in a start-up. you’ll need working capital to see you through the early days and you’ll need a strong business plan to access funding.
Location, location, location
Finding the right spot is critical to your business success. Your location determines your customer/client demographics as well as the type of goods/services you can sell. Furthermore, what are the facilities and restrictions associated with the location, and how accessible or visible will your business be there?
Understand the legislation
There are several pieces of legislation that have an impact on how franchise systems are operated and the relationship between franchisor and franchisee. But the two most important are The Consumer Protection Act and The Competition Act.
As a franchisee, you don’t need an in-depth understanding of the legislation, but it’s important to know the basics and to understand that the law provides protection for you and your business.
Also on the legal front, make sure that you have access to the following documents before you enter into a franchise agreement:
Lease agreement over premises
Remember that you are making a large investment, and as with any other contract, you are strongly advised to consult with specialists in franchise law before you sign on the dotted line.
For a full list of legal compliance as well as accredited professionals in the fields of law, accountancy and consulting, visit the website of the Franchise Association of South Africa (FASA).
Financing your franchise
Before you approach the franchisor or the bank, make sure you have the right amount of capital to start and that you’ve prepared for the hidden costs. Once you’ve decided which franchise best suits you and your needs, contact the franchisor and tell them you want to apply for a franchise. Once you’ve got the necessary documentation, contact your bank and start the application process for a loan.