Absa Retail and Business Bank: Smart Franchising

Andre Rosslee, general manager, sector solutions, Absa Retail and Business Bank, shares his views on some of the important steps new franchisees should take as well as his expectations for the future of the industry.

Absa Retail and Business Bank: Smart Franchising

What is the best advice you would give a franchisee?

Do not take on too much debt and thereby over-gear your business. Also ensure that you have adequate working capital. This will safeguard the business against unexpected reductions in turnover possibly as a result of economic downswings.

What do you think some of the most common misconceptions among franchisees are?

One of the major misconceptions amongst prospective or new franchisees is that you don’t have to work so hard and will still earn large profits. In many instances franchising requires long hours and hands-on involvement from the owners.

What are the most important steps that a new franchisee should take when starting out?

Before buying a franchise do your homework thoroughly. Speak to existing franchisees, and not only the ones recommended by the franchisor, to ensure that you get all the facts that will enable you to make an informed decision. And remember that the first 18 – 24 months are going to be hard work to get a new business going – you need to pay particular attention to managing your cash flow and costs.

What do you think the ‘next big thing’ in franchising is?

The delivery of basic services in South Africa is not on par with that of first-world countries and could present exciting franchise opportunities. Changes within the South African demographics, such as an ageing population, might also give rise to new franchise opportunities.

What do you think the biggest challenge currently is for the franchising industry?

The franchise industry is currently facing a number of challenges with tough trading conditions providing the biggest headaches. Other issues include labour legislation, high rentals, increasing electricity and fuel prices as well as limited support from government for SMEs.

Where do you believe the gaps lie in the franchising sector?

Gaps exist within a variety of facets of the industry such as with entrepreneurs who are not adequately financially skilled or unethical franchisors who, for instance, take high margins on the set-up cost of franchise businesses. Another gap is the large number of franchise concepts which do not cater for lower income groups. There is also a lot to be done to increase the level of black and female ownership amongst franchisors and franchisees.

Franchise Zone
About the Author
Franchise Zone is published by Entrepreneur Media SA. It offers advice and franchising opportunities in South Africa.

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