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6 Rules To Follow In Buying A Franchise – Lessons From The Whichfranchise Webinar

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6 Rules To Follow In Buying A Franchise – Lessons From The Whichfranchise Webinar

6 Rules To Follow In Buying A Franchise – Lessons From The Whichfranchise Webinar

Whichfranchise recently hosted a webinar to assist individuals who want to buy a franchise or another business with top tips on doing the research.  The webinar featured two Whichfranchise premium members, Storage King and Fastway Couriers.  An upcoming new franchise opportunity in the health and beauty sector, Diva Slimming and Aesthetic Centre, was also introduced.  If you missed the webinar, you can still view it by clicking here. This article features a synopsis of the webinar.

To start off, Eric Parker of Franchising Plus talked about

The 6 Rules To Follow

Eric Parker - Franchising Expert

1. Select a growing market segment

The current environment with its restrictions and uncertainties mean that some sectors are faring better than others. These sectors include:

    1. Storage Solutions
    2. Delivery and Courier Services
    3. Beauty and Health
    4. Internet Service to Homes
    5. Cleaning Services
    6. Upgrading Homes
    7. Automotive Maintenance
    8. Occupational Health and Safety

2. Select a successful brand in your chosen category

Good brands make good franchises, consumer recognition is a massive driver to become successful. In addition to that, you want to make sure that the franchisor is responsible and ethical.  Consider the following:

    1. Study the Disclosure Document – this is a document required by the Consumer Protection Act (CPA) and the franchisor should give this to you to consider with the franchise agreement prior to signing.
    2. Visit existing franchises and ask about their experience with the franchisor, are they receiving support and would they buy the franchise again, are good questions to ask.
    3. Google the directors of the company and look at complaints about the company on Hello Peter and social media platforms
    4. Talk to the franchisor’s bankers/suppliers as part of your research
    5. As a potential franchisee, you could use a franchise consultant to do a full evaluation of the franchise

3. Ensure you are going to get a good return on your capital investment

The ultimate goal in buying a franchise is to be profitable and get a return on your investment. A good franchise/business should enable you to draw a market related salary and get your capital investment back in about three to three and a half years.

4. Make sure you have sufficient working capital:

    1. You must have sufficient capital to pay for the franchise/business and carry the overheads (including your salary) until the business breaks even
    2. This capital should include an initial marketing programme/launch of the business

5. Site selection is critical

There is truth in the adage: location, location, location. The site can make or break your business.

      1. In your enthusiasm to get started, don’t get rushed into signing a lease for a site that isn’t perfect. The franchisor should have guidelines on the ideal site such as accessibility, foot traffic, visibility and so forth.  Don’t go for second best, wait for the right location to come along.
      2. Currently, it is a tenants’ market – you can secure a good deal and negotiate with the landlord
      3. It may work out well for you if you pay for a full site evaluation by professionals in the field of geographic and demographic analysis.

6. Motivated and well-trained staff are critical

Friendly, efficient staff can make or break a business, especially in retail businesses

    1. Check applications thoroughly – Get referrals, credit checks, and research the past performance of applicants
    2. Once staff are appointed, train them well
    3. Follow the labour as a percentage of turnover rule – find out what the benchmark is in your industry (for example in retail staff cost should be in the region of 18% of turnover/sales) and make sure you don’t underpay your staff. This measure can also be used to determine what you can afford when it comes to incentives.

Whichfranchise is there to help potential franchisees and business owners.  We offer the following on the Whichfranchise website:

A Synopsis Of The Brands And Their Opportunities

Storage King 200

Storage King

Storage King was founded 8 years ago by Dylan Rodrigues, a qualified chartered accountant. The company currently have in excess of 2500 storage units with just two branches.

Storage King ticks the following boxes:

  • Creates passive income
  • Low capital expenditure required
  • Minimal staff compliment
  • Utilizes the best available technology to create a frictionless customer experience
  • Provides customers with convenience and a need-based service

The Storage King opportunity entails the following investment

(All figures are exclusive of VAT):

  • Total investment: R1 317 649
  • Upfront fee: R150 000
  • Setup cost: R145 500 (Setup may vary depending on the site and location, excludes rental deposit)
  • Working capital: R995 000 (Approximate working capital may vary depending on the site and location, excludes rental deposit
  • Monthly management service fee: 8% of sales
  • Monthly advertising fee: 4% of sales
Fastway couriers 200

Fastway Couriers

Fastway Couriers was represented by Murray Duncan, co-owner and founder of the brand.

Fastway Couriers is the world’s largest courier franchise that has operations in South Africa, New Zealand, Ireland, Australia and Northern Ireland.

There are three distinct franchise opportunities inside any country:

  1. Regional franchises, Holds the license for an entire City or Province. Recruits Courier Franchisees. Responsible for Courier Franchisee Support. Franchise Licence is in perpetuity.
  2. Courier franchises, Holds the license for a suburb (or part thereof) or area that falls inside the Regional Franchise Territory. Responsible for service and sales in the territory. Franchise Licence is in perpetuity. Must have suitable commercial vehicle and operational items.
  3. An Agency license for retail outlets. Each Courier Franchise territory will have a retail outlet inside its borders. To assist walk-in customers for sending and receiving parcels. Must have suitable premises (e.g. open early, closes late)

This is a low-cost franchise opportunity and the franchise investment varies according to the type of franchise opportunity.  As an example, the courier franchise starts at R50 000.  The investment could include the following, depending on the arrangement:

  • A vehicle
  • The fee for the franchise territory (range from R45 000 upwards.)
  • Training fee (R5,000 once off per territory)
  • Handheld scanner
  • Uniform
  • Marketing material etc.
DIVA 200

DIVA Slimming and Aesthetic Centre

This brand is a new franchise in the making and was represented by Jennifer Glodik, the Diva CEO.

Diva Slimming and Aesthetic Centre is in an upmarket centre located in Sunninghill and was established in May 2012 with their second head office located in Pretoria.

Diva specialises in

  • Weight loss,
  • Skin treatment and
  • Business Development.

They only work with international products and equipment.

An indication of set-up cost is provided below

(All figures are exclusive of VAT):

  • Total investment*: R2 050 000
  • Upfront fee: R150 000
  • Working capital: R190 000
  • Total franchise cost: R2 390 000
  • Franchisee own/minimum cash contribution: 50%
  • Monthly management service fee: 8% of sales
  • Monthly advertising fee: 3% of sales

*May vary depending on currency fluctuations, area, site, landlord requirements

Why choose Diva?

  1. Revolutionary Equipment
  2. Ongoing Training and Support
  3. Excellent reputation
  4. Exclusive Partners and Suppliers
  5. Experience Setting up Various Beauty Businesses
  6. Quality, Trusted Products
  7. Unique Beauty Experience
  8. Great ROI – less than 2 years based on projections.

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