Do Business Well

Throughout this article, we have told you what your duties as a franchisor will be, and Figure 1 even provides a summary. Moreover, we have said that franchising is not all plain sailing. None of this was intended to put you on franchising, however, rather, we want to present you with a realistic picture. Having done so, we would like to touch on the positive once more.

By building a franchised network, you will have a group of dedicated entrepreneurs on your team who are eager to promote your brand at national level. Having invested their own capital to set up their individual branches, they will be highly motivated to operate at peak efficiency at all times, minimising the need for ongoing supervision. This affords you the time and space to fine-tune the concept and develop the brand.

Remember: For a franchised network, the sky is the limit. The documented successes of hundreds of South African franchisors, many of whom have started out small, confirm this motion.

Getting help

Help is available from various sources, and the appendix to this book contains some ideas. This brings us to the frequently asked question: “Do I need to employ consultants?” Regrettably, there is no straightforward answer.

Defining the consultant’s role

First and foremost, one would have to establish a definition of a consultant, d what he is expected to do for you.

An accountant will examine the financial and tax implications of franchising;

A manual writer will write the operations manual for you;

A lawyer draws up the franchise agreement and whatever supplementary legal documentation may be needed.

Figure 1

A Franchisor’s Ten Most
Important Obligations

As a franchisor, you will be expected to:

1. Recruit and train new franchisees in a professional manner. Thedesire to grow your network must be balanced against your franchisees‘ legitimate expectation that the outlets of all members of the network remain viable.
2. Assist new franchisees to establish their business in accordancewith carefully laid-down standards. You will be expected to provide franchisees with checklists covering every facet of this task, and offer hands-on assistance throughout this period.
3. Launch of the new franchise. You will approve the new premises,arrange initial advertising and have one or more experts on site to ensure that the operation is off to a smooth start.
4. Quality control and the maintenance of standards. Although yourvisits will become less frequent as the franchisee settles in, ongoing assistance and quality control in the widest sense of the word will remain your responsibility.
5. Joint purchase arrangements. Depending on the nature of thebusiness, you will either be the key supplier or you will arrange for the supply of goods on a network-wide basis. In this way, your franchisees will benefit from the combined buying power of the network.
6. National advertising. Brand building remains your responsibility.
7. As an enlightened franchisor, you will consult with your franchisees to ensure their wholehearted participation at local level, thus maximising the network-wide impact of promotional campaigns.
8. Market intelligence. By collecting and analysing feedback provided by your franchisees, field representatives, suppliers and other sources, you will keep a close watch on market activity. Your findings will be invaluable in plotting future strategy.
9. Research and development. Modern-day consumers, largely spoilt for choice, expect constant refinements of products and services. Centralised product development and initial market testing in your company-owned units will enable your franchisees to maintain a leadership position in their territory.

Training. To succeed in today’s competitive markets, training of your franchisees and their key staff must be ongoing.

A shoulder to lean on. Entrepreneurship is a lonely occupation. Your franchisees will expect you to be there for them if and when they need you, even if this clashes with corporate schedules.

Additional comment:

is list does not purport to be all-inclusive. Depending on the specifics f your business and the structure of your network, a host of other requirements will arise. The publication How To Franchise Your usiness, available from FASA, will tell you more.

Useful services for franchisors

Franchising Plus offers budding franchisors an interesting solution in the form of a professionally compiled do-it-yourself package that provides step-by-step instructions for the compilation of a franchise package. The package even contains layouts for standard forms and vouchers entitling the purchaser to a limited number of review sessions with a professional franchise advisor.

Franchize Directions presents courses tailored to the needs of franchise practitioners at various levels.

Omnicor provides assessment and capacity building services. Of specific interest to franchisors may be the ee-test, a tool used to establish the suitability of a prospective franchisee for a specific franchise opportunity.

Pentagon Business Services offer site selection and development services.

n A franchise consultant will look at the various expansion strategies th are available to you. Should franchising emerge as the best possible choice, he will investigate its feasibility under a given set of circumstances, prepare a country development plan, the necessary documentation, liaise with lawyers and other experts and generally drive the process.

Whatever the arrangement, ongoing involvement by the franchisor‘ imperative. Any franchisor who entrusts outsiders with the task t set up a franchise and/or to sell franchises on his behalf but fails to take any interest whatsoever in the matter is abdicating his responsibilities. He can expect to pay a heavy price for this omission, and we are not just talking about consultantancy fees, but the losses the franchisor will suffer as a result of the eventual failure of the franchise, likely to follow in the wake of his hands-off approach tothe project.

Do-it-yourself franchising

Many franchisors have developed a franchise package on their own, son with better results than others. Nobody knows your business better than you do, but what about franchise expertise? Granted, franchising is n exactly akin to rocket science and books and workshops are available that will guide you every step of the way. Setting up a franchise is a complex undertaking nonetheless and the question must be asked: “Do you really have the time and the dedication to do the work properly?”

If you can answer in the affirmative, you should be quite safe in doing most of the work yourself, except for drafting the franchise agreement. This task should definitely be left to a lawyer who is familiar with the peculiarities of franchising and keeps routinely up to date with related legal developments. Moreover, it may be a good idea to hire an accomplished all-rounder to act as a sounding board. He could be instructed to review progress from time, to time and ring the alarm bells if his experience tells him that something it’ gowing awry.

Operating under a master licence

To develop a franchise package from scratch is hard work and costly as well. This makes the acquisition of a master licence attractive to some. Under such an arrangement, you would purchase the rights to a franchise from a foreign franchisor. You would receive the entire package, including training and ongoing support and bring the package to South Africa where, for all practical purposes, you would act as the local franchisor.

Films, television sitcoms and extensive travel have seen to it that an increasing number of foreign brands have become well known in South Africa. Seen from this angle, the purchase of a licence would make sense, but there are problems. These include:

1. Population figures versus market size. Foreign franchisors base their fee calculations on population figures, overlooking the fact that in South Africa as in many developing countries, the number of people with real buying power is much smaller.
2. Not all concepts transfer easily. To appeal to the local market, some require extensive modifications, and this can be costly.
3. The South African master licensee will have to recoup the initial fee he paid to the foreign franchisor, plus his local development costs, from his future franchisees. This could affect his competitive position vis-à-vis local franchisors in a similar field.

In addition, he will have to share management services fees with his overseas counterpart, with similar results. To top it all, the weak rand makes licence deals increasingly unattractive to foreign franchisors.

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