by Eric Parker and Sasha-Lee de Bod

1. Thou shall make sure your business concept is proven before you start to franchise.

Franchising is a very successful distribution strategy to expand a proven, successful business. It’s not ethical or practical to franchise an idea or a business that has not been operated and proven by the franchisor. The model/concept has to be tried, tested and proven in the market before it can be replicated.  In franchising, the franchisor must be able to show that someone other than themselves can successfully run a copy of their business. Thus a pilot operation will establish the viability of the franchise model and product/service offering.

2. Thou shall ensure your Operation Manuals, Franchise Agreements and Disclosure Documents are updated and in place.

It is very important to have franchise documentation that is compliant to the FASA guidelines and Consumer Protection Act in terms of content and waiting and cooling off periods when signing on a new franchisee. The documentation is intended to provide prospective franchisees with comprehensive information, relative to the franchise opportunity as well as a blueprint for operational standards and processes. 

3. Thou shall have a Clear Business Plan including a Geographic Development Plan in Place.

Franchisors should ensure they have an annual business plan developed. A business plan is a very valuable tool to assist a franchisor in growing their network, developing business objectives, strategically planning ahead and to prepare accordingly. Most importantly, it provides holistic reflection and an overview of the current state of the entire franchise network.  Franchisors should adapt forward-thinking, strategic plans that can help solve problems and drive the network to greater success.

Franchisors need to expand to the best possible areas and locations to ensure the best possible return on investment and to maximise gains for franchisees, however the growth of the franchise network needs to be structured and controlled. It is important that a geographic development plan is in place to determine the ideal areas for expansion and prioritise the locations into manageable clusters.  An effective geographic development plan will define an ideal outlet in terms of demographics and requirements to achieve success.  More importantly, the geographic development plan will set goals for the franchisor to work towards and ensure that expansion and site selection is pro-active instead of reactive.

4. Thou shall be very careful in selecting suitable franchisees who will be hands-on

The franchise relationship is long term; therefore the franchisee selection and recruitment is one of the most important factors of developing a sustainable franchise network. Not everyone is suitable to be a franchisee and a franchise needs to be awarded, not sold. Franchisors need to have a clear franchisee recruitment process to successfully recruit and select franchisees.  The franchise recruitment process needs to be complaint with CPA regulations.  There are tools available to assist you such as the E test (a psychometric assessment for potential franchisees). Check references and ensure the franchisee will be hands-on in the outlet and that your business has his full-time attention and commitment.

5. Thou shall ensure a win-win relationship between the Franchisor and Franchisee.

Franchising is built around a business relationship and both parties need to do all they can to develop a successful relationship and grow it. A relationship revolves around trust and the franchisor must be honest and transparent with the franchisee. We have often seen this trust broken by the franchisor accepting confidential rebates without disclosing them or by offering poor ongoing support.  In order for the franchise network and brand to grow and succeed, there needs to be a win-win relationship between all parties that are collaborative and bound by common goals and mutual interest. It is important that both the franchisor and franchisee know their rights and responsibilities that contribute to the “win-win” situation. Franchisors need to develop effective management skills to managing successful franchise relationships based on trust, transparency, commitment and continuous feedback and communication.

6. Thou shall have a full training programme in place.

It is critical that all franchisees and their staff have the necessary initial training when they start out as a new franchisee of your network.  Direct (operational) and indirect (financial) training in a classroom and onsite training will be required to ensure effective training outcomes. We encourage our franchisors to let the franchisee write a test at the end of the training to ensure he is fully trained.  Certificates should be issued to prove that training was done. Training modules and programmes need to be developed for ongoing training.  Even though franchisees know how to run the business, refresher/ongoing training is essential to make sure standards are maintained.

7. Thou shall have a trained, experienced support structure in place.

Franchisors need to provide extensive support to franchisees in growing a successful business, even in tough economic times.  The franchise business must operate as effectively as possible and give customers optimal service from day one. The franchisee really needs the franchisor’s support in his initial trading period and ideally a team from the franchisor should be present for the first two weeks. Remember, the franchisee represents your brand and you must ensure he/she operates at your required standard. The franchisor needs to allocate time, resources and effort to make it happen.  A franchise support structure generally consists of a franchise manager, field service consultant and a franchisee representative council.  By incorporating an efficient franchisee support structure in your network, you will ensure that franchisees are more motivated, open to change and able to build stronger relationships.

8. Thou shall have a clear Marketing Plan

The franchisor should be formulating campaigns both at a national and local level.  When a franchisor provides national marketing, the entire franchise network receives exposure. This provides a different type of indirect support where the brand gets promoted and potentially attracts new and continuous business to franchisees’ outlets.  There has to be a clear marketing plan and communication strategy to ensure that efforts are focused, and the right message is delivered to customers.  It is important to dominate the selected media which is most suitable for your target market.  Marketing will help you create a brand which is your most valuable asset. A well-known brand and collective advertising is one of the main drivers to buy into a franchise. Growing your marketing presence will also grow your franchise network.

9. Thou shall have a procurement plan to ensure the franchisees get the best deals from the suppliers.

Franchisors need to closely scrutinise their product supply to franchisees. They need to review their involvement in the supply chain and review their infrastructure and offering to improve pricing, buying and convenience for franchisees. The franchisor would have the capability to negotiate a designated supply channel to franchisees; this can include extended credit, special deals and discounts. It is important to create strict controls on the supplies used for products and services as this greatly impacts the quality.

10. Thou shall have a proven “Point of Sale” system in place to ensure the franchisees get the data to manage their business effectively.

Strict adherence to operational standards and procedures can be achieved by implementing standardised systems and controls within a franchise network.  The system needs to add value to the network, increase the level of support provided, ensure consistency and provide valuable data.