Eric Parker, Franchising Plus Partner
Expert in Franchise Business Strategy
Eric Parker has been a senior partner at Franchising Plus since joining the firm in 2000. Now a sought after guest speaker and expert in franchise business strategy, Parker is one of the most renowned franchise professionals in South Africa.His infectious entrepreneurial spirit, decades of hard work and an unwavering appetite for success, have paved the way for his stature within the franchising industry.
Climbing the Franchise Ladder
Parker’s career in franchising began with his entrance into the world of marketing, through the completion of a three year IMM (Institute of Marketing Management) IMM diploma.
His new diploma landed him a position as the marketing manager at Carlton Paper, where he worked for six years followed by his role as the managing director of Kreepy Krauly for four years. Parker’s next position was as the marketing director of KFC and co-founder of Nando’s for a further six years. To top it all off, he later became the executive director of Interfare for three years.
Eric Parker went from strength to strength as he gained experience within the franchising sector. Having been instrumental in the brisk growth of Nando’s, Chickenland, inside and outside of South African borders, Parker gained notoriety as a franchising authority. In recognition of this, Parker was appointed chairman of the Franchising Association of South Africa and named the FASA personality of the Year in 1995.
In 1998, Parker joined Deloitte & Touche as a director of the franchising division. In 2000 Deloitte & Touche merged with Franchising Plus, where he is still senior partner and continues to apply his franchise expertise in the creation of custom strategic plans for franchise organisations.
A few Frequently Asked Questions…
I am a marketing student and currently in my third and final year. I would like to become a franchisee after graduating. Do I qualify?
This depends on your level of maturity, practical business experience and, last but not least, your ability to fund the necessary investment. Franchisors will generally look for prospects with some practical business experience. Perhaps your best bet would be to seek employment in a unit of the franchise you plan to invest in, work there for a year or two then apply for a franchise. This would give you an opportunity to learn the business from scratch without risking your own capital and prepare you well for your future role.
What do I receive for the money I pay to a franchisor? Is it only for the name, or is shop fitting included?
To begin with, you need to differentiate between initial fee and ongoing fees. The initial fee pays for access to the network’s intellectual property (brand, know-how, trade connections etc.) for the duration of the franchise agreement, plus initial training and assistance with the setting-up of the business. In suitable cases, this may include a “Grand Opening”. Shopfittings, equipment, stock and working capital are usually not included but are an additional responsibility of the franchisee. This should be explained in the network’s disclosure document, where it should be shown under the heading total investment. On an ongoing basis, you can expect to pay two types of fees, namely a management services fee and a contribution to the network’s marketing fund. The management services fee entitles you to receive extensive ongoing support as well as access to special deals set up by the franchisor. The marketing contribution will be used to fund national and/or regional marketing activities.
The fact that there are over 400 franchise opportunities available in South Africa, this question pops up with greater frequency than any other. Unfortunately, we have to disappoint you: KFC do not offer franchises to the general public. This stance has given rise to all sorts of conspiracy theories but the reality is quite simple. Many years ago, KFC has taken a strategic decision to grow their footprint through area developers. These area developers had to convince KFC that they have the ability (and the financial resources) to operate a regional structure that would encompass the operation of a minimum of about six restaurants plus the necessary infrastructure to manage the regional network, train staff etc. Given the density of KFC’s existing South African network, no new opportunities arise.
I would like to set up my business as a franchise from the outset. What do I have to consider and what are the likely costs?
Setting up your business with a view to expand it via franchising later is an excellent idea. Franchising, in a nutshell, means that you offer your future franchisees a blueprint to business success. This means that you need to operate the business for a reasonable period, say 1-2 years. This will enable you to iron out all the kinks in the product range and the systems you use. Next, you need to document everything so that franchisees can follow your blueprint; this is done by creating an operations manual. You will also need marketing materials, a disclosure document and a franchise agreement.
Most importantly, you need to take a medium to long term view towards financial returns. The reason for this is that during the start-up phase, all your franchisees will be new. They will require much hand-holding whilst returns in the form of management services fees will be limited. On the upside, as the network evolves, returns from franchising can become extremely lucrative.
It is extremely difficult to provide meaningful cost estimates at this stage as this depends on sector needs and the extent to which you have managed to fine-tune your systems, procedures and processes. As a guide, the total package, if created by a reputable consultant with extensive input from yourself, will cost between R300 000 and R500 000. Subject to the necessary expertise and capacity being available in-house, you could do much of the work yourself, with the exception of drafting the franchise agreement; this requires the services of an experienced franchise attorney. We would also advise you to have a reputable consultant at least review your material before you launch the franchise in earnest.
Ask Eric a Question
Having both authored and co-authored several books such as, ‘Eric Parker’s Roadmap to Business Success’, Eric Parker is the person you want business advice from.