Full steam ahead into 2009


Facebook Twitter LinkedIn Google+ Grapevine News | The Latest Updates on Franchising


Treadmill

During the planning stage for this monthÔÇÖs editorial, we faced a serious dilemma. Throughout the preceding months, everyone around us had become increasingly concerned about the state of the economy and its impact on franchising. We, on the other hand, remained steadfast in our belief that downturn would be short-lived. We concluded that the best way to ride it out would be to continue conducting ÔÇ£business as usualÔÇØ, only with a greater sense of urgency.

Our approach made us the proverbial ÔÇ£lone voice in the wildernessÔÇØ. Feedback from readers was primarily negative, with some even urging us to discard our rose-tinted glasses. This placed us into an awkward position. On the one hand, we refused to join the chorus of negative sentiment that had engulfed the country; on the other hand, we did not want to appear naive. As it happened, we neednÔÇÖt have worried.

Vindication of our positive stance came in the form of the front page of South AfricaÔÇÖs leading Sunday paper. It carried a sufficient amount of good news to strengthen our resolve to remain positive (see box).

Buoyed by these developments, we decided to double our efforts to provide those who are prepared to help themselves with the advice they need to succeed. If, after reading this article, you feel inspired to take us up on this offer, just visit www.whichfranchise.co.za and post your questions. This is a free service.

Staying power is needed

We are not saying that the economic crisis is over just yet. In fact, we expect conditions to remain challenging throughout 2009, causing the meek to remain at the mercy of events beyond their control and the weak to fall by the wayside. The situation has improved sufficiently, however, to enable those willing to think smart and take calculated risks to prepare for the next upturn.

Opportunities beckon

This article is aimed at prospective and established franchisors. Quite clearly, the needs of these two groups will differ in many respects but they have one thing in common. During 2009, opportunities for both of them abound.

Prospective franchisors

If your business is profitable and ready for expansion, franchising is the way to go. Should you be the owner of a branch network, converting some of your branches into franchises could rejuvenate the operation. Whatever your situation, now is the time to act. There are a number of good reasons for this, including the following:

 

  • For the past few years, it has been extremely difficult to secure good sites. As a result of the current economic downturn, it has become easier but the situation is unlikely to last.

 

  • Much for the same reasons, an increasing number of good people are becoming available. Some will be looking for jobs and could strengthen your support infrastructure, others may make excellent franchisees.
  • Suppliers are keen to make deals. The faster you expand, the bigger the resulting economies of scale; this makes you more sought after as a customer. You may even be able to conclude favourable long-term arrangements that will propel your business into a leadership position.
  • The current downturn is not going to last. As soon as the economy turns, those who have built solid foundations now will enjoy a head start. From then onwards, the sky is the limit!

Managing the potential downside

Should you be concerned about the risks, you need not be but, and we cannot stress this enough, you need to manage the potential downside! Expansion through franchising is the safest avenue, because you bring likeminded people on board who invest in your brand, therefore have little choice but to share your dreams and aspirations with you.

However, setting up and operating a professional franchise operation requires a sizable upfront investment. It will also burden you with the moral responsibility to do right by your franchisees. There is no doubt, however, that it can be done.

Just follow these guidelines:

1. Find out everything there is to know about franchising, then decide whether franchising is for you.

2. Study the document Is franchising my business a viable option? It is available from Whichfranchise? on request. Just send a mail to experts@whichfranchise.co.za and weÔÇÖll gladly mail it to you.

3. Once you have decided that franchising is the way to go, contact us and weÔÇÖll provide tons of additional advice by email. Should you need more than that, we can either:

    • Put you in touch with experienced consultants who will guide you throughout the process of franchising your business. Finances permitting, this should be the preferred option.
    • Alternatively, you can purchase a set of documents known as the Absa Franchising Toolkit. It will enable you to establish a professional franchise operation on a shoestring budget.

Established franchisors

The current downturn provides you with an outstanding opportunity to grow your business. There are a number of good reasons for this, including the following:

  • For the past few years, it has been extremely difficult to secure good sites. As a result of the current economic downturn, this has become much easier. If your existing location is less than ideal, you could relocate your existing units and/or consider setting up an additional unit.
  • Much for the same reasons, an increasing number of good people are becoming available. Some will be looking for jobs and could strengthen your support infrastructure, others may make excellent franchisees.
  • Suppliers are keen to make deals. The faster you expand, the bigger the resulting economies of scale; this makes you more sought after as a customer. You may even be able to conclude favourable long-term arrangements that will propel your business into a leadership position.
  • The current downturn is not going to last. As soon as the economy turns, those who have built solid foundations now will enjoy a head start. From then onwards, the sky is the limit!

How to manage the risks

 

  • Prepare well

 

Before you do anything else, it is necessary to bring your own house in order.

      • Study every internal process, system or procedure that is applied at head office level and assess its efficacy. Improve, modify or drop as necessary. It is especially important to improve communications and reporting.
      • Review your product offering and adapt as required.
      • Review the market and look for opportunities to grow the network either by targeting new territories or by acquiring competing brands, especially those that are capable of conversion.

 

  • Analyse franchisee performance

 

      • Analyse the business of every franchisee, explore potential for improvements and map out a way to achieve them.
      • Conduct a franchisee satisfaction survey. To encourage your franchisees to speak frankly, and to remove possible bias, it is best to commission an outside organisation.
      • Identify your star performers.

 

  • Bring your franchisees on board

 

    • Inform franchisees of the findings emanating from the exercise described above, involve them in setting targets for expansion and encourage them to work with you to achieve them.
    • Single out your star performers and encourage them to:
      • Set up additional units; this is subject to industry sector requirements ÔÇô not every sector lends itself to it.
      • Act as mentors to struggling fellow franchisees.
    • Implement a performance improvement programme for struggling franchisees and replace those who fail to respond.

In this context, the article entitled Unleash the combined power of your franchisees makes interesting reading ÔÇô see link. Keep in mind, too, that we at Whichfranchise? believe implicitly in the future of franchising and will be happy to advise you further. Just visit www.whichfranchise.co.za/franchiseExperts and post your queries for prompt response.

Read “Unleash the combined power of your franchisees article”

Raising finance

Whatever form of expansion you decide on, it will cost money. Many people, including some professional advisors, will tell you that at the moment it is virtually impossible to raise capital for expansion purposes. Our advice: donÔÇÖt listen to them.

Fact is that banks have to continue lending, thatÔÇÖs the business they are in. Not surprisingly, they see lending to franchisors and/or their franchisees as a safer bet than financing small independent start-ups.

Did you know that Absa Franchising, the dedicated franchise finance arm of Absa Bank, is staffed by a team of experts on franchising and business expansion? Before they even discuss funding with you, they will look at your business plan and offer useful advice. Once your expansion plans have been formalised, they will consider your funding request with due care. To contact Absa Franchising call 0860 franchise or write to franchise@absa.co.za.

Comments