THINGS TO CONSIDER BEFORE BUYING A FRANCHISE
Before you blindly buy into any franchise and putting your investment at risk, be sure you make an informed and calculated decision.
1. Do your homework!
i) Get information online (articles, press, reviews etc).
This alone will give you a good indication of whether the franchise has a reputable name in the industry. There are sites like Hello Peter that monitor and address challenges by franchisees and their customers.
ii) Speak to current franchisees
Find out how they are being treated and if the system works for them. Speak to more than one franchisee to get a better picture.
Ask the right questions: Is there support? Is there brand development? Is there a training program available? Do they test new products? Are there systems in place? Turnover figures? Is there a stable supply chain in place? Is the brand moving forward?
iii) Don’t generalize
Please be aware that if a particular franchisee has a store that is in a less favourable position or location, he or she won’t be giving you good feedback on the franchise as a whole, even though it might work very well elsewhere. In any franchise you will find stores that have failed, that doesn’t mean that the brand is not successful.
2. Be cautious but also be realistic
Because opening any new business comes with risk it’s important to understand that just because a store has closed down, it’s not always the brands fault.
There are many factors to consider that make for a successful operation:
Rent vs. Turnover, Management, marketing, advertising, consistency, shop look and branding, service, quality control, stock control, cleanliness, systems and most of all location!
3. Be wary of franchises that grow too rapidly
There are many franchises in South Africa that have a less favorable track record. They are in the business of opening as many stores as they can, as a result many of those stores close down again because there wasn’t a realistic site evaluation done and the support structure can’t keep up with the growing high demand. Make sure you chose a responsible brand.
4. Renting the right space
Be realistic about turnover. Make sure the franchisor doesn’t sell you a store with excess floor space. Excess floor space = Excess monthly rental costs. Optimize your business from the beginning.
5. Food cost
It is very important to be selling food with a calculated mark up percentage and food cost. There is a very fine line between being to cheap and still making money. Don’t undersell your products.
6. Location! Location! Location!
7. Don’t rush into it
Be patient, don’t rush into opening a store that doesn’t feel right. Weigh up your options.