While franchising is all about the systems, there is no such thing as one size fits all. “Over and above the fact that no industry is right for everyone, locations and markets differ as well,” says Barry Davies, franchising director, Chas Everitt International Property Group.
“We are always very clear to prospective new entrants that the property industry is not for everyone. For example, in order for a franchise to be successful, there needs to be a good fit, and that starts with whether or not you are meant to be in that sector,” he adds.
According to Davies, the one-size-fits-all approach is a thing of the past. “A real-estate franchises in Brits is very different from one in Sandton. It’s a totally different market, and the franchisee has to understand that.”
His advice to prospective franchisees is simple: Do your homework.
“Before you spend upwards of a million investing in a franchise, make sure it’s the sector you want to be in, and that you understand the local market. It doesn’t matter what you do, you need to understand your customers: Who they are, what they care about and how to deliver on their needs.”
Know the market
A successful franchisee lays the right foundations for their endeavour. “The best franchisees do exhaustive market research before they even approach us,” says Davies. “They don’t apply for a franchise based on assumptions. They understand the market and the challenges they will face.”
These challenges include early cash flow restrictions and understanding how the real-estate cycle works. “Initial capital is incredibly important. A franchisee needs to be able to cover themselves for up to 12 months. Real-estate is a long sales cycle. There can be transfer delays or a prospective customer could battle to secure finance. Either way, until a few deals have come through the pipeline, cash flow is essential. As a new franchisee, you have to be prepared for any eventuality.”
This same advice holds true of any sector. Before you approach a franchisor, understand how that industry works, how the sales cycle works, and how long it will take to typically break even – and rather plan for the worst case scenario than the best case scenario. The aim is to have money in the bank and a healthy cash flow.
Be on board
“As the franchisor, we are brand custodians. It’s up to us to protect the brand for all our other franchisees as well. This means that if we receive applications where the prospective franchisee clearly hasn’t done their research, we already see red flags.”
Chas Everitt’s application form is 28 pages long, and includes questions designed to evaluate if the franchisee has realistic expectations, understands the market, is a good cultural fit with the group, where their cash flow is coming from, how much capital they have, and which territories they are best suited to.
“We have a 382-step plan. Everything is documented. If you aren’t ready to go through this process with us, you probably aren’t suited to our business. The strength of franchises is based on processes and brand integrity. This means we choose our franchisees carefully. We want your investment to be protected, but we also want to ensure that we don’t damage the brand by opening franchises that don’t survive. This is why it’s so important for prospective franchisees to really know the markets – and franchises – they want to join.”