Want to get a franchise?
A serial entrepreneur Tony Da Fonseca SHARES 5 KEY POINTS
Franchising provides unhindered opportunities for all South Africans to get into business and it’s a catalyst for inclusive economic growth; poverty alleviation and equality.
BY: TONY DA FONSECA
Franchising is a field of expanding economic opportunity and one of the safest options to getting into business. However, while the failure rate is 10% compared to the 90% rate on independent businesses getting into a franchise is still a decision that must be taken with serious consultation and self-examination. Running a franchise and working within the parameters of a strict operating format may not suit everyone and the pressures put on running a franchise is not for the faint-hearted.
Here are some tried and tested nuggets from Tony Da Fonseca, chief executive officer of OBC Chicken and Meat on how to navigate the choppy waters.
- Understand the concept of franchising
Many people have a vague idea that you simply acquire a franchise, open the doors and ‘Bob’s your uncle’ – you are now rich and successful! You must fully understand what the implications are of signing a franchise contract that contractually locks you in for a fixed period of time (anywhere from 3 to 10 years) or why you have to pay an upfront fee or ongoing management service fees.
- Choose a franchise business that you’ll enjoy
Don’t let the idea of being your own boss cloud your judgement or be swept away by the allure of a well-known brand. Choose a franchise concept that you understand, are familiar with or even have some expertise in. Be realistic about your expectations and your ability to manage a stressful business and identify a sector that you know will stimulate you and which will give you great pleasure.
- Do your homework and choose well
Wonderful ideas and passing fads don’t make for long-lasting business ventures and you could be buying into a concept that is set for failure. Above all else, check the sustainability of the financial model
-those with innovative products and services, protected technology and new growing markets make ideal businesses. Look at the competition as well as most new and successful concepts will soon have copy-cat businesses which can dilute profitability.
- Find the right ethical fit
You may love the product or service you are investigating and admire the success of the brand but have a niggling feeling that the principals of the business are not what they make themselves out to be. Any uneasy instinct from your side needs to be taken as a warning sign – not necessarily that the opportunity is flawed but that it doesn’t fit in with your own value system and just isn’t a good fit. A franchise relationship between franchisor and franchisee is much like a marriage – you are stuck with each other for the duration of the agreement and it is in both your interests that there is trust and transparency and a genuine compatibility.
- Franchising still the best investment option
Despite the on-going recession that is impacting heavily on small businesses, the franchise sector continues to be resilient and franchising globally has fared far better than independently owned businesses – largely due to the strong business format and support system inherent in franchising. The business model of franchising is globally one of the soundest business methods and in South Africa has grown to over 700 franchise systems, with over 35 000 franchise outlets and employing over 300 000 people contributing 11.6% to South Africa’s GDP.