Are You Fit To Become A Franchisee?
Let us establish if you will be a happy, successful franchisee by answering these 7 questions:
Do you consider yourself to be a semi-entrepreneur?
You need to be prepared to take a risk in an established business where “you will be in business for yourself, but not by yourself”. You will need to be able to follow the rules of the brand, accept advice, support, and guidance from the franchisor, and not just do your own thing. Bear in mind that you will need to be able to cope with the isolation of self-employment. Think about the effects of working for yourself will have on your future.
Are you prepared to buy yourself employment and take the risk?
What? Yup, buy yourself employment! If you are unemployed or insecure in your current job you may have to do so. In this case, you would need to risk some of your own capital to secure an income for you and your family. Options to acquire a franchise opportunity could include:
- Your retrenchment package if you were retrenched
- Your provident fund
- A loan
Are you prepared to do extensive research?
This would be extremely necessary to ensure you buy into a successful and proven concept. Buying into a franchise is a great idea but it does come with risk, as do many business ventures. A successful franchise will be a ‘life-changer’, an unsuccessful franchise will be a ‘life destroyer’. Knowing and understanding what you are getting into is of utmost importance, do not go in blind sighted.
A lot of your questions can be answered on www.whichfranchise.co.za and if you can’t find what you are looking for, please ask the experts for advice and guidance. You can reach out to existing franchisees of the brand and ask the franchisor various questions
Are you prepared to work hard, over long hours and under pressure at certain times?
To make sure the new business is a success, you need to be committed, motivated and put your all effort into the growing your new venture. You family is a big success factor, they need to understand the new workload and support you otherwise you endeavour won’t be an easy one. As most franchisors prefer the franchisee to be an owner-operator, one cannot think that they can just employ a manager to run the business. Your skin in the game is what drives everyone else in the business when your capital is at stake.
Are you prepared to earn an initial low salary?
In order to get the business to a profitable level as soon as possible, you would need to forfeit your idea of immediate payback. You and your family might need to cut back on expenditure for a few months until the business becomes lucrative. During this time, you will be using up working capital that was needed in order to purchase the franchise. The period until the business reaches a stage of breakeven will vary per industry, franchise opportunity as well the area you operate from. Keep in mind a good franchise opportunity will give you a payback in 3.5-4 years if you draw a market-related salary.
Are you prepared to do some extra studying?
You would also need to study what your rights are under the Consumer Protection Act (CPA). You will receive a Franchise Disclosure Document and if it is a legitimate and ethical franchise opportunity, this document should be CPA compliant.
In terms of the CPA, franchisors must provide prospective franchisees with a disclosure document which must:
- contain certain information as listed in the CPA regulations,
- be dated and signed by an authorised officer of the franchisor; and
- be given to the prospective franchisee at least 14 days prior to the signing of the franchise agreement.
Are you prepared to learn how to run a small business successfully?
In addition to the daily operations of the business you you will need to really understand certain business administrative tasks like controlling, adhering and implementing e.g.:
- Cashflow (financial management)
- VAT payments
- PAYE and UIF payments
- Other labour requirements
- Stakeholder relations (suppliers, service providers, customers, staff, etc)
If you have only worked as an employee in a corporate company this will be a new experience for you.
Despite all the above, the sense of achievement of starting and creating a successful small business is immense. You are now the owner of a proven business model, which in the long term has immense profit potential that can secure a monthly income, dividends at the end of the financial year and an asset that you can sell if you decide to. You are now in control of your own destiny – you are the boss!