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Tips for entrepreneurs exploring franchising and financing for the franchise sector

Article provided by Business Partners

According to the latest pre-COVID-19 statistics recorded in late 2019, the South African franchising industry contributes 13.9% to the national GDP with an estimated turnover of R734 billion and is one of the most resilient sectors already showing signs of recovery.

Jeremy Lang, General Manager at Business Partners Limited, encourages entrepreneurs to explore the opportunities available in this exciting sector. He notes, however, that due to the many types of businesses operating within the sector, coupled with the challenging business landscape, ensuring that personalities and skillsets are well-matched to the type of business you are partnering with will be vital for a franchise to thrive.

“Don’t buy a restaurant franchise if you like to go to sleep early,” says Lang. He says that although this may seem obvious, he is often surprised by how many first-time franchisees make the mistake of buying a franchise that simply does not fit their lifestyle.

“In the world of start-up franchising, it can easily be a fatal mistake to make because there is so little room for error and the repercussions of the pandemic have not made it easier. Very few people who buy their first franchise have the resources for a second chance after finding out that the franchise they had set their heart on is not the right fit.”

He says that lifestyle preference is only one of three pillars which prospective franchisees must consider to ensure that the franchise they choose is the right fit for them. The other two are skills and personality.

“The skillset of the entrepreneur is a huge factor. Firstly, there is the technical know-how related to the specific industry, such as a beauty salon or a service station. Entrepreneurs should choose a franchise for which they either have a natural fit, or one in which they have had previous experience in.”

Lang says that irrespective of the industry, a franchisee will always have to be a jack-of-all-trades to a certain extent, and must be willing to innovate in response to market needs. “It is important to possess a good general hybrid of skills, because often the franchisee is expected to fill the human resources role, the sales role, the office manager role amongst others.”

He says that franchisees should possess the following skillset in order to run a successful business:

  • Good management ability, which is the core of what the franchisee is signing up for;
  • Sales skills – due to the enterprise revolving around the franchisee’s ability to secure business;
  • An eye for detail and practical problem-solving skills. Because the business owner will be fulfilling multiple tasks within the business, he or she should know as much about all the different systems as possible;
  • Networking and relationship-building skills for forging ties with clients, staff, suppliers and franchisors, and
  • Practical problem-solving skills as business owners are faced with many challenges every day, including pivoting in response to lockdown restrictions in the current landscape.

This list is true for any start-up business, franchised or not, says Lang, but there is one set of skills particular to franchising – the ability to follow the rules of the concept. “Franchising is a recipe that requires strict adherence by franchisees, otherwise the service or product will start differing from branch to branch, and the collective power of the brand will suffer. If the franchisee is not somebody who likes to operate under a strict set of rules, then franchising may not be the correct career path.”

He says that being a successful franchisee not only has to do with skills, but also with personality. “Prospective franchisees need to be honest with themselves about their inherent personality traits. For example, a generally introverted person should stay clear of retail or service-heavy businesses such as restaurants. Similarly, a sociable, outgoing personality will become frustrated in a desk-bound business where there is little interaction with clients.

“Although nothing can replace common-sense self-knowledge, conducting a personality test such as the Myers Briggs test may assist in processing what individuals already know about themselves. However, the unknown usually lies on the side of the franchise, and a first-time franchisee who knows himself well could still be in for a nasty surprise when it turns out that the franchise requires an approach, attitude or trait that the owner simply doesn’t possess or isn’t comfortable with.”

Lang suggests two complementary methods of avoiding this mistake. “First, potential franchisees are advised to speak to the franchisor that they are interested in. A reputable, established franchise group will have a very clear idea of what kind of personality and skillset is required to make a success of their concept. Some will even have formal descriptions and tests as part of their assessment process.

“Most importantly, it is advisable to consult with franchisees in the group as part of the process. This exercise should leave potential franchisees with a realistic view on whether they are up to the task, and whether the work and lifestyle is suited to their aspirations. Lastly, seek finance from reputable financiers like Business Partners Ltd who will also advise you on these and many other intricacies involved in running a franchise,” concludes Lang.

Business Partners is a proud Partner of the NSBC

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