Buying a Franchise 101

Looking to buy a franchise? Here’s how to start.


Buying a Franchise 101

Many people are drawn to the built-in security of the franchise model: There’s a track record, an established brand name with consumer following, training programmes, not to mention ongoing support and marketing assistance.

But franchising is nevertheless a significant investment: Start-up costs can be high, profits aren’t guaranteed, and your independence – whether you like it or not – is limited as most franchisors impose strict standards on everything from price to interior design.

If you’re considering buying a franchise, the best thing you can do is research, and research some more. But what do you research? Here’s advice on how to do that from franchise law principal at Shelton &Power, Jason Power.

1. Attend franchise events

There are a number of events in South Africa designed to give would-be franchisees an opportunity to scope out their options. There’s the Rand Easter Show in March for biz ops, the International Franchise Expo (IFE) in May, the Business Opportunities and Franchise Expo (BOFE) in September, and numerous workshops hosted by the Franchise Association of South Africa (FASA) throughout the year to help you on your way.

At these events you can network and gather basic information, but be aware of ‘shiny ads’ and smooth sales people who are ready to hard-sell.

2. Talk to franchisors and franchisees

As an initial step, head to a franchise’s website, request more information, or call the company directly. And don’t be afraid to ask the ‘stupid questions’. Carefully review the material you get. If you’re still on board by this point, gather further information by meeting with as many franchisees as you can, not just the ones recommended by the franchisor, to get the real scoop.

Ask franchisees if you can shadow them for a day. Buying a franchise is like getting involved in a long-term relationship, so take time early on in talking to franchisees, reps, regional managers, and head office.

3.  Consult with FASA and online customer service sites

If the business is FASA accredited, it has passed the stringent disclosure document requirements, has a fair and reasonable franchise agreement, a comprehensive operations and procedures manual, and must demonstrate a successful franchised concept.

To be sure you’re getting involved with a franchise that is well regarded by the public, which will have an impact on your potential sales, visit sites like Hellopeter.com to see whether there are isolated or systemic problems affecting the customer experience, and how the brand remedies problems. A brand that has unhappy customers is an ailing one.

4. Ask consultants and lawyers

Never sign any agreements until you fully understand the terms and conditions, and the finances involved. To find professional service providers like lawyers specialising in franchising, accountants, or consultants, visit www.fasa.co.za.

While you will pay fees for their services that can add up quickly, it’s money well spent as it’s extremely important that you are firstly investing in a financially viable and sustainable franchise, secondly that you understand what your financial and personal commitments to the brand will be, and lastly that you avoid a mess later down the road.

5. Ask the Internet

While the Internet can lead you down Alice’s rabbit hole, there are buckets of information you can gather from it. These include any lawsuits against the brand, marketing activities, general information, people’s response to the brand, insight into how the sector is performing in your area, and whether it’s a good time to invest in that sector.

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