Is Franchising for You?
Looking to get into the restaurant industry but not sure if you should open a franchise or an independent? South Africa has more than 31,050 franchises, employs more than 323,519 people and generates a turnover in excess of R302 billion. A franchise is not a guarantee of success, but statistics show that franchise-owned businesses have a better chance of succeeding over an extended period in comparison to small independents.
Before becoming a franchisee, ask yourself the following questions:
- Is This the Right Opportunity for Me? Franchising isn’t necessarily for everyone. For some, it is a way for them to venture out and become their own boss while having the safety net that a franchisor provides. As a franchisee, you will be the boss but you will still be reporting to the franchisor. Some also view franchising as an avenue to earn an additional income. Seasonal franchising does offer the opportunity set more flexible working hours by working intensively during high-peak periods and less during the during the quieter periods. When you buy into a franchise, you’re doing so because it is a tried and tested business model that works.
- How Hard Do I Want to Work? The answer to this question should be, “As hard as it takes.” If you’re going into this thinking you’re going to coast then you’re going to fail and fast. If you’re willing to put in the long hours and persevere, you’ll have the tools to success. As a new franchisee, you will generally find the franchisor already has a system in place which is designed to help you succeed. If you’re buying into a lesser-known franchise then your motivation and physical investment will need to be double what you would put into a more established franchise. You need to build a solid foundation to help your business stand the tests that are eventually going to come your way and brand recognition will follow in time. There is no foolproof recipe for success but the hard work you put in from the beginning will pay off in the end.
- What Is the Risk? Any time you start a new business there is going to be an element of fear and risk. Franchising is often less risky but there is still a big risk involved: money. Starting a franchise is by no means cheap and initial fee can be a real eye-opener. Each franchise asks for a different fee but it will always be sizeable fee. The reason for the fee is because you’re paying for the rights to use the franchisor’s signage and logo and the franchisor will have already negotiated lower prices for the products and services you will need to run your store. You can also expect to pay ongoing royalty fees which are generally payable annually. Each franchise will have a different structure in place so you may find one franchisor asks for 12.5% of total sales for the year whereas another franchise will ask for a lower percentage of the total sales in addition to a fixed amount.
- Who Will Train My Employees? Training of employees will be down to you but before you panic, most franchisors will already have a solid training plan in place. Use the franchisor’s already established plan as a base and build on it. Remember, a franchisor will be invested in your success and they won’t want to see you fail. Once you have finalized your training plan, use it to train your employees. Your employees will be the face of your operation and you want them to get it right from the beginning.
Entering into a franchise is no guarantee for success, many franchises have failed before but there are steps you can take to improve your chances of success in the franchise world. Hard work, a sound business strategy, research and training will lead your franchise on the path to success.