THE EXPECTATIONS AND RESPONSIBILITIES OF FRANCHISING
Whether you decide to establish your own venture or to buy into a franchise, you need to make sure that you have what it takes to go it alone. You need to be brutally honest as to your motives, your health, lifestyle and family situation to be sure that all fits into your plan to become your own boss.
Franchising is not for everyone and certainly not for the faint-hearted. Although most franchisees have an element of entrepreneurship inherent in them, it is also true that most are former employees with corporate backgrounds. Some are the victims of mergers or downsizing, or are on the verge of retirement. You must consider whether you are suited to franchising and willing to abide by the controls the franchisor will impose on your business.
On a personal level ask yourself the following questions…
• Are you generally a healthy person?
• Are you a confident, outgoing type of person not afraid to tackle challenges and problems head-on?
• Are you a people-orientated person, able to interact with people on all levels?
• Can you handle stressful situations, are you comfortable with taking risks and are you prepared for a total change in lifestyle?
• Are you in a position to support yourself through the initial stages of setting up a business?
• Do you have the qualifications or experience to manage the finances and carry out the sales and marketing functions of the business?
• Are you customer service orientated?
• Are you the type of person who takes direction willingly or are you known as a “buck-the-system” type of person?
• Do you like and enjoy people in general?
• Can you lead and manage people?
• Do you have the support of your family?
• What do you like to do?
• What are your interests and what type of occupation would be most compatible with those interests?
• Do you think you will enjoy operating your business of choice?
- Do I fit the Franchise Mould?
AGE:
Consider whether your age is a barrier or an advantage to the particular business opportunity you are investigating. Are you in the right age group for the business venture you are considering? Some franchise opportunities are better suited to a mature person whilst others require substantial amounts of time and energy.
HEALTH:
Whilst it is quite common for retired people to invest in a franchise, and do so quite successfully, it is important to assess your health before embarking on a business venture that requires you to be on your feet for long hours every day, often seven days a week. Taking on a challenging franchise can cost you your health.
BACKGROUND:
Although franchising is promoted as providing franchisees with a blueprint to running a business, background and applicable experience can stand a new franchisee in good stead. Make sure you can put your experience, education and training to good use, or look at acquiring some basic business and marketing skills.
COMMITMENT:
Without total commitment on the part of a franchisee, even the most successful franchise can fail. That commitment extends to following the franchisor’s business system, being fully “hands-on” in the business and taking the business seriously.
FINANCIAL:
The franchise option, with its upfront fees and ongoing management fees, is not always the cheapest way to get into business. You must ensure that you have adequate financial resources available for the franchise to sustain itself. You should look at how much money you have to invest rather than how much you are going to borrow. As with every business, the start-up phase until break-even is crucial and you must not be under-capitalised.
According to Eric Parker and Kurt Illetschko, authors of the book Franchising in South Africa: The Real Story, investing in a franchise is a long-term commitment that, once made, is extremely difficult (and expensive to reverse). Franchise experts like to compare entering into a franchise arrangement with a marriage. The honeymoon is the easy part but it does not last very long. Once the novelty has worn off, making the best of the relationship can be a grind, but many endure and decades later, would not want to have it any other way. These two franchise experts suggest you ask yourself the following questions….
• Am I cut out for entrepreneurship?
Being successful in a business of your own requires an entrepreneurial spirit. Although joining a franchise eases you into your new role, it does not eliminate this requirement altogether. A carefully chosen franchise offers you a blueprint to business success but there are no guarantees. A franchisor that offers a franchise complete with a success guarantee is either a fraud or a fool. A prospective franchisee who relies on such a guarantee is simply a fool.
• Will I be happy as a franchisee?
In a franchise, you may own the infrastructure of the business, but you cannot do as you please. To protect the brand, the franchisor is obliged to insist that you operate in accordance with the network’s rules. Some people find this too restrictive.
• Do I have the necessary passion?
People often say that their sole reason for wanting to start a business is to make lots of money. They pretend not to care about the sector but in reality, this does not work too well. Starting a business is hard work, and it takes some time before you see any rewards. Unless you enjoy what you do, the business will soon become a burden and success is likely to elude you.
• Is a franchise available in this sector?
It has been said that almost any business can be franchised. While this is probably true, it is only of academic interest to you. What you need to find is a franchisor, well established in your field of choice and able to deliver on the promise of franchising. Otherwise, why bother paying franchise fees?
• Is the franchisor responsive?
Although a large number of franchise systems exist, the better known brands continue to operate in a seller’s market. Many networks, especially those in food and retail, battle to locate good sites and this tends to slow down their expansion plans. Never mind the reasons, unless the franchisor shows interest in your approach, move on. If the franchisor neglects you during the courting stage, what will happen once you are part of the network?
• Is the franchisor’s approach professional?
Acceptable premises, membership of FASA, professionally produced franchise materials and the availability of a formal disclosure document, indicate that the franchise operates to sound professional standards. A good franchisor will insist on checking you out, but knows that this should be a two-way street. The franchisor will welcome your questions, in fact, most love to talk about their achievements and the standing of their brand. Should you come across a franchisor whose representative is reluctant to provide essential information or, worse still, attempts to pressurize you into making a rush decision, terminate negotiations immediately. Responsible franchisors do not act this way.
• Are we compatible?
When you visit the franchisor and get to know the network’s team, do you feel like an outsider, or do you fit right in? Unless there is an instant spark, it is unlikely to work.
• Can I afford the franchise?
The financial implications of becoming a franchisee are manifold. You are required to pay an upfront fee, fund the establishment of your business and provide working capital. On an ongoing basis, you also need to provide working capital, pay periodic franchise fees and make provision for living expenses. It may be several months or longer before the cash flow of the business is sufficiently strong to cover expenses. Many finance schemes are available but this is not necessarily a good thing. Most franchisors will insist that franchisees fund between 30 to 50 percent of the complete investment from their own resources, with good reason. Loans have to be repaid on time and with interest. Excessive borrowings and the resultant payments will place strain on the businesses’ cash flow. This could force the business into a cash flow crisis and cause it to fail.
• Can the franchise afford me?
This is another important consideration. As this is your own business, you can determine your salary – on paper. In practice, the business may not be able to support the lifestyle you and your family have become accustomed to, especially if you held a senior position in a large corporation. Of course, a few years down the line, the situation should change but you need to survive the here and now.
FASA contact details
Phone : 011 615 0359
E-mail :fasa@fasa.co.za
Website :www.fasa.co.za
http://www.safw.co.za/
Franchising is not for everyone and certainly not for the faint-hearted. Although most franchisees have an element of entrepreneurship inherent in them, it is also true that most are former employees with corporate backgrounds. Some are the victims of mergers or downsizing, or are on the verge of retirement. You must consider whether you are suited to franchising and willing to abide by the controls the franchisor will impose on your business.
On a personal level ask yourself the following questions…
• Are you generally a healthy person?
• Are you a confident, outgoing type of person not afraid to tackle challenges and problems head-on?
• Are you a people-orientated person, able to interact with people on all levels?
• Can you handle stressful situations, are you comfortable with taking risks and are you prepared for a total change in lifestyle?
• Are you in a position to support yourself through the initial stages of setting up a business?
• Do you have the qualifications or experience to manage the finances and carry out the sales and marketing functions of the business?
• Are you customer service orientated?
• Are you the type of person who takes direction willingly or are you known as a “buck-the-system” type of person?
• Do you like and enjoy people in general?
• Can you lead and manage people?
• Do you have the support of your family?
• What do you like to do?
• What are your interests and what type of occupation would be most compatible with those interests?
• Do you think you will enjoy operating your business of choice?
- Do I fit the Franchise Mould?
Whilst there can never be a “perfect” franchisee, there is general consensus worldwide that there has to be a compatible “franchise fit” between franchisor and franchisee. Gone are the days when franchisors would accept anyone who had a ready cheque book at hand. Today, selecting franchisees has become a science in itself, with most franchise companies using psychometric testing to determine whether a franchisee is a suitable fit with their culture and requirements. The broad guidelines that have to be taken into account include:
Consider whether your age is a barrier or an advantage to the particular business opportunity you are investigating. Are you in the right age group for the business venture you are considering? Some franchise opportunities are better suited to a mature person whilst others require substantial amounts of time and energy.
HEALTH:
Whilst it is quite common for retired people to invest in a franchise, and do so quite successfully, it is important to assess your health before embarking on a business venture that requires you to be on your feet for long hours every day, often seven days a week. Taking on a challenging franchise can cost you your health.
BACKGROUND:
Although franchising is promoted as providing franchisees with a blueprint to running a business, background and applicable experience can stand a new franchisee in good stead. Make sure you can put your experience, education and training to good use, or look at acquiring some basic business and marketing skills.
COMMITMENT:
Without total commitment on the part of a franchisee, even the most successful franchise can fail. That commitment extends to following the franchisor’s business system, being fully “hands-on” in the business and taking the business seriously.
FINANCIAL:
The franchise option, with its upfront fees and ongoing management fees, is not always the cheapest way to get into business. You must ensure that you have adequate financial resources available for the franchise to sustain itself. You should look at how much money you have to invest rather than how much you are going to borrow. As with every business, the start-up phase until break-even is crucial and you must not be under-capitalised.
According to Eric Parker and Kurt Illetschko, authors of the book Franchising in South Africa: The Real Story, investing in a franchise is a long-term commitment that, once made, is extremely difficult (and expensive to reverse). Franchise experts like to compare entering into a franchise arrangement with a marriage. The honeymoon is the easy part but it does not last very long. Once the novelty has worn off, making the best of the relationship can be a grind, but many endure and decades later, would not want to have it any other way. These two franchise experts suggest you ask yourself the following questions….
• Am I cut out for entrepreneurship?
Being successful in a business of your own requires an entrepreneurial spirit. Although joining a franchise eases you into your new role, it does not eliminate this requirement altogether. A carefully chosen franchise offers you a blueprint to business success but there are no guarantees. A franchisor that offers a franchise complete with a success guarantee is either a fraud or a fool. A prospective franchisee who relies on such a guarantee is simply a fool.
• Will I be happy as a franchisee?
In a franchise, you may own the infrastructure of the business, but you cannot do as you please. To protect the brand, the franchisor is obliged to insist that you operate in accordance with the network’s rules. Some people find this too restrictive.
• Do I have the necessary passion?
People often say that their sole reason for wanting to start a business is to make lots of money. They pretend not to care about the sector but in reality, this does not work too well. Starting a business is hard work, and it takes some time before you see any rewards. Unless you enjoy what you do, the business will soon become a burden and success is likely to elude you.
• Is a franchise available in this sector?
It has been said that almost any business can be franchised. While this is probably true, it is only of academic interest to you. What you need to find is a franchisor, well established in your field of choice and able to deliver on the promise of franchising. Otherwise, why bother paying franchise fees?
• Is the franchisor responsive?
Although a large number of franchise systems exist, the better known brands continue to operate in a seller’s market. Many networks, especially those in food and retail, battle to locate good sites and this tends to slow down their expansion plans. Never mind the reasons, unless the franchisor shows interest in your approach, move on. If the franchisor neglects you during the courting stage, what will happen once you are part of the network?
• Is the franchisor’s approach professional?
Acceptable premises, membership of FASA, professionally produced franchise materials and the availability of a formal disclosure document, indicate that the franchise operates to sound professional standards. A good franchisor will insist on checking you out, but knows that this should be a two-way street. The franchisor will welcome your questions, in fact, most love to talk about their achievements and the standing of their brand. Should you come across a franchisor whose representative is reluctant to provide essential information or, worse still, attempts to pressurize you into making a rush decision, terminate negotiations immediately. Responsible franchisors do not act this way.
• Are we compatible?
When you visit the franchisor and get to know the network’s team, do you feel like an outsider, or do you fit right in? Unless there is an instant spark, it is unlikely to work.
• Can I afford the franchise?
The financial implications of becoming a franchisee are manifold. You are required to pay an upfront fee, fund the establishment of your business and provide working capital. On an ongoing basis, you also need to provide working capital, pay periodic franchise fees and make provision for living expenses. It may be several months or longer before the cash flow of the business is sufficiently strong to cover expenses. Many finance schemes are available but this is not necessarily a good thing. Most franchisors will insist that franchisees fund between 30 to 50 percent of the complete investment from their own resources, with good reason. Loans have to be repaid on time and with interest. Excessive borrowings and the resultant payments will place strain on the businesses’ cash flow. This could force the business into a cash flow crisis and cause it to fail.
• Can the franchise afford me?
This is another important consideration. As this is your own business, you can determine your salary – on paper. In practice, the business may not be able to support the lifestyle you and your family have become accustomed to, especially if you held a senior position in a large corporation. Of course, a few years down the line, the situation should change but you need to survive the here and now.
FASA contact details
Phone : 011 615 0359
E-mail :fasa@fasa.co.za
Website :www.fasa.co.za
http://www.safw.co.za/
Franchising is an amazing option to expand your business and it is beneficial for both the franchiser and franchisee.As an investor You should research every details about the company very well before buying a franchise.
ReplyDeletefrozen yogurt franchise