Making Your Franchise A Success: Part II
In the second of a two-part series Karen Keylock, Nedbank Business Banking’s National Franchise Manager, discusses the nuts and bolts of identifying a strong franchise system, the value of e-commerce and staying relevant, as well as the importance of working capital.
You’ve done your homework, you’re sure that you want to own a franchise business and you know that you have the financial means to do so: but now what? Start by narrowing down your search for your ultimate franchise match by analysing yourself. Maybe you have a passion for food, you love interacting with people all day or enjoy getting your hands dirty. These are all factors that will help guide you in matching your best chance of success with what feels right for you.
Finding the right match
The next step is to consider which franchise system in your chosen sector to invest in. The International Franchise Association recommends paying special attention to these factors:
- The costs associated with buying into the franchise, including the continuing right to operate.
- The hours, personal commitment and type of experience required.
- How other franchisees in the same system are doing and how many franchisees have left during the past few years.
- The terms and conditions under which the franchise relationship can be terminated or renewed.
- The track record and financial condition of the franchisor and its system.
We also recommend speaking to several current franchisees in the same industry. Ask them if there is anything they have learnt that they didn’t gather from their initial research? How long did it take them to become profitable? How much did they budget for start-up costs, and how much did they end up spending? What was the toughest part of building the business? How supportive are their head office? Ask if they would do it all over again or recommend the franchise to a close friend or family member, given what they know now?
Staying relevant and cash flush
Looking forward, what gives you the best chance at making your franchise a success? By now it’s abundantly clear that the Covid-19 pandemic accelerated the development of e-commerce and alternative delivery models. Those businesses that were quicker to adapt and evolve have been the most successful during these challenging times. Now more than ever, the online customer experience can make or break a future relationship with a brand or retail outlet, so it’s essential that all elements work together and that the ordering services are streamlined and easy to navigate. To succeed, brands must offer alternative delivery options, quicker turnaround times, slick exchange and return policies, and most importantly, accurate knowledge of stock availability.
Another golden secret is to always have a working capital buffer. Do this by ensuring that clients pay as soon as possible while negotiating the longest payment terms possible with suppliers. Stay on good terms with suppliers and offer early settlement discounts to clients. Managing your working capital carefully improves profitability, stock management, creditor and franchisor relationships and the overall efficiency of your business.
In closing, it’s important to examine your existing business plans and infrastructure, and continue to identify other products and services you can offer to expand your business in this climate of uncertainty and flux. We all need to adapt to the new ways of doing business and this could mean the difference between succeeding or closing down your business.
Nedbank has a highly experienced, specialised division that fully understands the challenges and opportunities faced by the franchise sector. Talk to one of our business managers or email us on firstname.lastname@example.org for more information on how we can help you grow your franchise business in 2021 and beyond.