Franchising as a Business Opportunity

Franchising as a Business Opportunity

by Andrew Patricio

I believe franchising is a good way to get in your own business. The main advantage of franchising is that you are in your own business but you have the added advantage of having a network of people that are there to assist you in achieving your goals, but it does cost money.
Franchising has grown phenomenally in South Africa over the last 10 years. Most of us deal with some or other franchise on a daily basis, whether it is to buy fast food, repair our cars, buy petrol etc.

What is a franchise?

A franchise is a legal and commercial relationship that exists between the franchisor (the owner of the brand) and the franchisee (the owner of the individual franchise). The franchise agreement sets strict guidelines on how the business will be run. For the use of the business system and the trademarks the franchisee pays a monthly royalty, which can be between 2% - 20% depending on the franchise. The franchisor usually assists in offering the following:

· Site selection
· Training
· Product and service suppliers
· Development of the business plan
· Assistance with applying for finance
· Marketing and advertising
· On-going head-office support

Before deciding to purchase a franchise ask yourself the following:

· Am I prepared to handle the workload and often long hours that could be required?
· Do I have sufficient money to purchase and operate the franchise?
· Will I be able to handle the staff?
· Do my family support me in my decision?
· Will the business keep me occupied mentally and physically?
· Will I be able to abide by the strict discipline required by franchising?
· Is franchising right for me?

Research and Business Plan

Ensure that you do the same research that you would do for a start-up business when purchasing a franchise i.e.:

· Develop your own business plan.
· Do your own market research.
· Don't take everything the franchisor says for granted investigate.

Questions you should ask the franchisor:

· How long has the franchise been in business?

· Is the franchise financial position strong?

· What are the initial start-up requirements?

· What services are offered as part of the start-up requirements?

· Is training of staff and management offered?

· Does the franchisor assist in the development of a business plan?

· Does the franchisor assist in launching the business. Will they be there to guide you in the first week or so?

· How much will you pay monthly as a royalty and advertising fee?

· What advertising and promotional support is offered by the franchisor?

· Does the company have support staff that will visit your business in person?

· Can they give you a list of franchisees and their phone numbers that you can contact? It is a very good idea to visit franchisees and ask them as many questions as possible.
Choose franchisees in different areas and one's from areas that are similar to the area that you intend starting in. Take a list of questions with you and see if the information the franchisor gave you tallies's up with the results they are achieving.

Ask franchisees:

· What their monthly expenses are?
· Are they happy with head office support?
· Are promotions and marketing working?
· Are the happy with their decision to purchase the franchise?
· Ask them about the negatives of being part of the group?

Is the group a member of the Franchise Association of Southern Africa (FASA)? They act as a watchdog body for the franchise industry and offer both buyers and sellers some protection. Remember being a member of FASA does not guarantee that the franchise will be successful.
Be aware of franchisor's that don't seem to be too interested in your abilities and qualifications. If the deal sounds to good to be true it probably is. Don't rush to sign any agreement speak to your legal and financial advisors first.

For more information on franchising in Southern Africa contact

Franchise Association of Southern Africa
24 Wellington Road, Parktown 2193
Tel: 011 484 1285 Fax: 011 484 1291
Email: fasa@fasa.co.za
Website: www.fasa.co.za

Back to www.bizland.co.za

·	How long has the franchise been in business?
·	Is the franchise financial position strong?
·	What are the initial start-up requirements?
·	What services are offered as part of the start-up requirements?
·	Is training of staff and management offered?
·	Does the franchisor assist in the development of a business plan?
·	Does the franchisor assist in launching the business. Will they be there to guide you in the first week or so?
·	How much will you pay monthly as a royalty and advertising fee?
·	What advertising and promotional support is offered by the franchisor?
·	Does the company have support staff that will visit your business in person?
·	Can they give you a list of franchisees and their phone numbers that you can contact? It is a very good idea to visit franchisees and ask them as many questions as possible. Choose franchisees in different areas and one's from areas that are similar to the area that you intend starting in. Take a list of questions with you and see if the information the franchisor gave you tallies's up with the results they are achieving.