How to succeed as a franchisee

Turning a start-up franchise business into a success is tough, but possible. Learn from an expert the keys to striking gold.


By Jeremy Lang

If you’re the kind of guy who likes to go to sleep early, don’t buy a restaurant franchise. I am stating the obvious? Perhaps, but you’ll be surprised how many first-time franchisees make the mistake of buying a franchise that simply does not fit their lifestyles.

In the world of start-up franchising, it can easily be a fatal mistake to make, because there is so little room for error. Very few people who buy their first franchise have the resources for a second chance once they’ve found out that the franchise they had set their heart on is actually not the right fit.

Lifestyle preference is only one of three pillars which prospective franchisees must consider to make sure that the franchise they choose is the right fit for them. The other two are skills and personality.

The skills set of the entrepreneur is the most important. First, there is the technical know-how related to the specific industry, such as a beauty salon or a service station. You’ve got to be able to choose a franchise for which you either have a natural skills set, or one in which you’ve had previous experience in.

Irrespective of the industry, a franchisee will always have to be a jack-of-all-trades to a certain extent - the HR person, the salesperson, the office-manager person and the tea lady, so you’ve really got to have a good general hybrid of skills such as:

• Good management ability, which is the core of what the franchisee is signing up for
• Sales skills, because your whole enterprise revolves around your ability to secure business
• An eye for detail and practical problem solving skills. Because you will be fulfilling multiple tasks in your business, you have to know as much about all the different systems as possible
• Networking and relationship-building skills for forging ties with your clients, staff, suppliers and franchisor, and
• Practical problem-solving skills. You are going to be faced with many challenges every day. You will have to be decisive, and think quickly to find solutions to problems.

This list is true for any start-up business, franchised or not, but there is one set of skills particular to franchising: the ability to follow the rules of the concept. Franchising is a recipe that requires strict adherence by franchisees, otherwise the service or product will start differing from branch to branch, and the collective power of the brand will suffer. If you are not somebody who likes to operate your business under a strict set of rules that you have not created, then franchising may not be for you.

Being a successful franchisee not only has to do with skills, but also with personality. Prospective franchisees need to be honest with themselves about their personality. A generally introverted person should shy from retail or service-heavy businesses such as restaurants. Similarly, a sociable, outgoing personality will become frustrated in a desk-bound business where there is little interaction with clients.

Although nothing can replace common-sense self-knowledge, I would suggest doing a personality test such as the Myers Briggs test, more to help you think through what you already know about yourself rather than teach you about aspects of your personality that you didn’t know.

The unknown usually lies on the side of the franchise. A first-time franchisee who knows himself well could still be in for a nasty surprise when it turns out that the franchise requires an approach, attitude or trait that he simply isn’t comfortable with.

There are two methods of avoiding this mistake. First, speak to the franchisor that you have your eye on. A reputable, established franchise group will have a very clear idea of what kind of personality and skills set are required to make a success of their concept. Some will have formal descriptions and even tests as part of their assessment process.

Most importantly, speak to the franchisees in the group that you want to join. If possible, work-shadow franchisees who are hands-on involved in the management of their businesses for a week or two. The exercise should leave you under few illusions about whether you are up to the task, and whether the work and lifestyle suit you.

Jeremy is regional general manager of Business Partners Limited.

______________________

Below are links to some franchise opportunities on the Frontier platform

International financial services company is seeking a master licensees in Africa

Investors sought for expanding popular fast food franchise in South Africa

10 top tips for potential franchisees

Need help to find the perfect business opportunity?      
  

The South African franchise industry presents a mind-boggling array of franchises, and every month more are added to this fast-growing sector. Wonderful choice, but the bling generated from aggressive marketing by each franchise can be blinding to someone looking for a solid business opportunity.

Fortunately, those prepared to work their way methodically through a number of basic steps will be able to cut through the clutter and find a franchise in which they can thrive.  

Below are some useful tips if you are looking to buy a franchise:

Know the industry

Choose a franchise in an industry that you know. Your industry knowledge is an important tool for judging the value of the business opportunity, to know if the business suits your personality, and to help you succeed. The ideal scenario is to have worked in an outlet of a franchise that you intend to buy. Failing that, work experience in a similar business is invaluable. Where even that is lacking, choose a franchise with a thorough franchisee training course, the bare minimum for any franchisee.

Choose within your budget

Work out what price range you can afford – savings together with finance that you would realistically be able to raise. There are a number of things to keep in mind here. First, too much finance can ruin your venture. Even if you can get it, be wary of overburdening your business with too big a loan. Second, calculate the entire investment required, including set-up costs and working capital. Do not limit your funding to just the franchise fee.

Check out the franchisor

The first two steps should dramatically narrow down your search and allow you to focus on a particular franchise. Now you have to investigate the franchisor. Start by having a look at the documentation the group provides, but go beyond that. Find out as much as you can about the reputation and financial help of the franchise. The business media and internet searches can reveal a lot about a company’s reputation. Membership of the Franchise Association of South Africa counts in the favour of a franchise, but it does not guarantee success.

Speak to franchisees and ex-franchisees

This is probably the most important exercise in the process. A franchisor should be able to give you a fully updated list of franchisees and ex-franchisees and their contact details. You can test all the assertions of the franchise group with the franchisees – their levels of support, the quality of their training, the profitability of the business, and the integrity of the franchisor’s business dealings.

Investigate the site

Just as important as the integrity of the franchise group is the suitability of the site that you are going to choose for your outlet, or, in the case of non-retail franchises, the area in which you are going to operate. You have to gain a truly deep understanding of the market around your site, not just merely the foot traffic past it, but what kind of foot traffic it is. Are they your target clientele? If you have access to advice from experts or the franchisor, use it, but do your own independent research to help you think deeply about it.

Get the value calculation right

You have to make sure that you are not overpaying for the franchise outlet that you have in mind, whether it is a new or existing one. Once you have done your due diligence and market research, sit down with an accountant to check your financial projections and value calculations. Industry specialists are helpful if you can afford them.

Get legal advice and knowledge

The franchisor will give you a franchise agreement to sign. This is a crucial document detailing the rights and obligations of you and the franchisor. Get a lawyer, preferably one with knowledge about the franchising sector, to go through the document with you, not only to make sure that it is fair to you, but also to explain any clause that you do not understand. While you are in a legal frame of mind, get to know your rights as a franchisee as embodied in the Consumer Protection Act.

Lease considerations

Don’t neglect to get legal and strategic advice on the lease you will sign with the landlord. Some franchisors may recommend that they hold the lease, which can help you if they use their clout to negotiate a good rental. But the disadvantage is that you lose some control over your business if the group ever decides to disband as a franchise.

Think before taking on a business partner

Do not just go into business with someone because it seems nicer than doing it alone. A business partner must add value, such as bringing a skill or capital that you do not have. Even so, you have to make sure that your values and expectations of reward are aligned.

In the end, it depends on you

The strongest franchise brand can still fail if you, the franchisee, do not make it work. Just as in any other business, your operational and cash-flow management must be sharp if you are going to make a success of it. Hands-on management is almost always required. And remember, if you are an experienced independent business owner and this is your first attempt at franchising, you’ll need to get used to operating according to the rules of the group.

Article by Jeremy Lang, regional general manager at Business Partners Limited