Why Franchising Survives in Tough Times – It’s the Support and Strengths of Franchising
South Africa’s weak economy is currently being magnified and compounded by the 21-day national lockdown. There’s no sugar coating that fact – but one reassurance is that franchising has proven itself time and again to be the best possible protection as a business format to any economic crisis.
Even so, in tough economic times it is vital to harness the strengths of the franchising model. While nothing in life is guaranteed, using the advantages of the franchising system can provide an efficient business model.
Top five advantages:
- brand recognition
- negotiating muscle
- other franchisees’ experience
- training, coaching and development
- codes of conduct
These advantages spelled out
- There is the strength of the franchising brand, or brand recognition. This can be a powerful tool in negotiating with landlords and suppliers. For example, a franchisee may find that in dealing with landlords, being part of a franchise means they have more control than they would have if they were simply operating a stand-alone business. Typically, landlords of shopping malls view franchised businesses as desirable and even required tenants. From a landlord’s perspective, having the brands that franchises deliver in their centres is an advantage in attracting consumers and therefore other tenants.
- Often franchises in other areas have tried the strategies a would-be franchisee is considering, in other words they have “been there and done that” although not necessarily in the local market. In the current economic conditions, the strategies other franchisees are adopting to get through the current downturn in the business cycle offer invaluable insight to all franchisees. This is a time to be talking to your fellow franchisees and swopping best practices. The system’s Franchise Advisory Council – an internally focused group within the franchise system – is often a good means of establishing and maintaining communication between franchisees, allowing them to exchange ideas and experiences about dealing with what can be common issues.
- Training, support and preferred supplier arrangements are also benefits of franchising: the franchisor should have a detailed training course for first time franchisees, and in many cases for store managers and staff. This is a time to double down on training and prepare for an uptick in the economy. The training should also be industry appropriate as this will be the most effective training to prepare you for success in your business. Franchise systems have area managers employed to coach and assist a cluster of franchisees, generally in a close geographic spread, to reach maximum revenue and remain compliant across the network.
- There is also a Franchising Code of Conduct, which covers disclosure to prospective franchisees. It was set up by the Franchise Association of South Africa to try to ensure franchisees are fully informed of important information when starting their businesses. The aim is to cut down on, or if necessary, resolve as quickly and inexpensively as possible, any disputes between franchisee and franchisor. In addition to that, the Consumer Protection Act has requirements specific to franchising to ensure fair and ethical treatment of potential franchisees.
Looking beyond the downturn
In times like this, it is necessary to look beyond the current situation and try to see the bigger picture. What is going on that may influence the demand for the franchise business you are considering? Will it be a growing industry in future? These are important considerations when buying a franchise, even more so in difficult times.