According to the 2018 FASA franchise survey, there are 865 franchise systems in South Africa of which 23% is accounted for in the Fast Food and Restaurants category. The franchise sector currently contributes 15.7% of the total South African GDP
At the Restaurant and Quick Service Restaurant Africa Conference 2019 we unpacked what makes a franchise successful. So, let’s talk about 11 things in food franchises, shall we?
1. First things First: Get the concept and business model right
It is important to determine what is currently happening in the market:
- Mass-customisation e.g. Coca-Cola has been customising and personalising their products with their Share a Coke campaign to create a more personal relationship with customers. RocoMamas has also successfully done this with their build your own Gourmet Burger offering
- On-demand products and services are becoming the norm. We live in a time where customers expect instant service e.g. brands such as Netflix, Uber Eats, MrD, and Takealot.com have built their business model to service this customer need
- The rise of the experiential retail – these customers want experiences not thingse.g. the younger generation captures and shares activities on Instagram. RocoMamas founder noticed that photos being posted don’t look as good as the actual product. The decision then came to change the lighting in the store to resolve the issue.
- Mobility is key for all business models – Consumers are always on the move and you want to be considered for the transaction even if they aren’t in your store physically, therefore websites should be compatible for various devices and operating software e.g. smartphones, tablets, etc. Mobile pay options are very popular at this moment and allow consumers to purchase items in a simple and convenient way e.g. Tap and Go, Zapper, Visa, Master Card and PayPal facilities
- Social corporate responsibility is becoming more important for customers – customers want to know how organisations/franchises are giving back to the community e.g. KFC’s add hope campaign
2. Piloting is a critical stage
An idea cannot be franchised, the model needs to be proven first by piloting the business and operational system. The franchisor must be actively involved in the piloting phase to ensure the model is performing optimally.
3. Systems and Controls
Strict adherence to operational standards and procedures can be achieved by implementing standardised systems and controls within a business format franchise network. This can include but is not limited to:
- Product offering
- Pricing standards
- Corporate Identity
- Outlet design, layout and image
- Marketing and promotions
- Point of Sale
- Accounting system
- Franchise management/communication system – an operations and procedures manual should be turned into an online management tool that presents information in a user-friendly way, allowing franchisees, field service consultants and franchisors to easily search for information and resources they may need.
The key to implementation is that you must be able to measure it to control it!
4. Develop a strong franchise culture
- A franchise culture is learning orientated, open and collaborative.
- Franchisees are business partners, not employees therefore be sure to involve franchisees in decision making in terms of major decisions affecting the franchise
- A company culture based on respect and brand values passed down to franchisees e.g. Sorbet has developed their own culture where staff are called citizens and customers are guests. Citizens have such authority within the salon, that in a situation where a guest brings back a product that they can replace it without having to get approval. However this is backed up by a sophisticated system where the activity should be captured.
5. Franchise structure – opportunity for growth
In this industry there is the debate of Multi-Unit vs Multi-Brand:
- Multi-Units: Some brands offer franchisees the opportunity to open a few franchised outlets within the same brand e.g. When KFC were looking for franchisees, the applicant needed to have the capability and financial means to open up at least five outlets in future
- Multi-brands: Multi-brand franchising in South Africa gives franchisees the opportunity to seek efficiencies in their operations within a group. E.g. Famous brands gives franchisees the opportunity to own multiple brands within their network/group, for instance, a Steers and Fishaways.
6. Getting Franchise Ready
It is very important to have franchise documentation that is compliant to the Consumer Protection Act in terms of content waiting and cooling off periods when signing on a new franchisee.
In addition, a franchisor would need a comprehensive operations and procedure manual as well as training programmes.
7. Country Development – Where to next?
When a franchisor is expanding their footprint locally, it is important to saturate one area first by developing in clusters and controlling the growth to ensure that the franchise structure can support the network sufficiently. We generally advise that an average sized franchise structure can setup and support 10 new franchised outlets a year. An important factor is knowing the area and market you are expanding into before investing additional capital and setting a franchisee up for failure i.e. G.I.S analysis can assist in this regard
8. Franchising is all about the relationship
Franchisee selection is a critical element for the success of your franchise network. The Franchisor needs to attract the most suitable candidates. We need to award franchises and not sell them. A candidate needs to meet all the prescribed criteria of the franchised brand before even being considered as a franchisee i.e. just because they have the capital doesn’t mean they are suitable for your brand.
Due to this long-term commitment it is important to build strong and effective relationships with the Franchisees that are based on:
- Effective two-way communication
- Trust, respect and transparency
- Providing recognition, praise and rewards
- Creating opportunities for growth
- Encouraging and motivating
- Listening to franchisee’s feedback and thoughts i.e. The Big Mac was a franchisee invention for McDonald’s – so do not discredit their ideas and concerns
- A win-win working environment for both partners involved.
- Appointing Field Service Consultants that conduct frequent and regular visits to the franchise network where they provide guidance and support to the franchisees by reviewing financial statements, administration, equipment, staff and provide quality evaluation and in-store training
- By conducting benchmarking exercises within the network to set measurable objectives and review performance and being able to assist in maximising profitability as well as resolving problems
- Establishing a franchisee representative council to listen, motivate and involve your franchisees
9. All things marketing
When it comes to marketing:
- Never cut down on marketing expense in tough times
- When a franchisor provides national marketing, it provides a different type of indirect support where the brand gets promoted and potentially attracts new and continuous business to their outlets
- Provide franchisees with local marketing templates and guidelines – this allows franchisees to focus on selling products and services and not writing creative content.
- Word of mouth has never been this important, and it is online immediately
- Promote market awareness to attract customers e.g. There are only 2 ways to increase sales: customer count and transaction average.
- Each franchise should know their unique value proposition so that marketing messages can be specific, targeted and relevant
- Your marketing needs to rise above the cluttered mass-media presence – Nando’s did this extremely well with their advertisements being political, trendy, witty and spicy in the right way without being directly offensive.
10. Train, Retrain and Train Again
It is critical that all franchisees have the necessary initial training when they start out as a new franchisee of your network. Training modules and programmes need to be developed for ongoing training as well. Even though franchisees know how to run the business, refresher/ongoing training is essential to make sure standards are maintained.
KFC International developed the term QUEST – Quality Evaluation In-Store Training and we believe all franchise networks should implement this regardless of the industry.
11. Supply Chain – Approved and Available
- Franchisors need to negotiate a designated supply channel for franchisees this can include extended credit, special deals and discounts
- Create strict controls on the supplies used on products and services as this impacts quality
- It is time that franchisors negotiate favourable prices for the network – even more so in our current economy
- Even rebates and kickbacks need to be disclosed, and franchisors need to find alternative ways to benefit franchisees if rebates are part of the procurement offering from suppliers e.g. reduce royalties or allocate rebates to the marketing fund or further development of the network.