How to go about buying a franchise


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A guide on how to go about buying a franchise.

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How to go about buying a franchise

  1. 1. How to Go About Buying a Franchise?
  2. 2. Understand the concept of franchising Understand the concept of franchising and how it operates. Be informed about the implications of signing a franchise contract that locks you in for 5 years or why you have to pay an upfront fee or ongoing management service fees.
  3. 3. Understand the concept of franchising • Read up on franchising , use the internet, find magazines, blogs and research franchising both locally and internationally. • Become familiar with the common terminology used in franchising • Understand the difference between the franchisor and franchisee to what is business format franchising and a turnkey operation.
  4. 4. Do Your Homework • Take note of new franchise brands. Make a note of what industries they represent and start mentally imagining whether you could be behind that fast food counter, managing a tool hire franchise, or having a retail outlet or a service franchise. • Read up as much as you can on franchising. Entrepreneurial magazines, newspapers, magazines run articles on franchising highlighting the benefits and often exposing unethical franchisors. • Be aware of unscrupulous franchise operators who prey on unsuspecting investors.
  5. 5. Do Your Homework • Visit the South African Franchise Association’s website (FASA), register to receive their newsletters which gives you an insight into what is going on in the franchise world. Scroll through the member database to see the range of franchise sectors represented. • Visit FASA’s International Franchise Expo which takes place annually, where you can find franchise and business opportunities. It offers an opportunity to talk face-to face with franchisors without obligation, find out what their business opportunities are and compare them with others. • FASA sells a range of publications to assist you in evaluating a franchise or help you start your own franchise • FASA runs a full programme of seminars that will educate you on what to expect from franchising and give you clarity on issues such as the legal and financial ramifications of acquiring a franchise. Sign up and attend
  6. 6. Shortlist Your Choices • Shortlist industries that really interest you, be realistic about your capabilities, establish investment levels and contact those franchisors who offer opportunities that not only appeal to you but are also within your target investment range. • Investigate as many franchises as possible, compare their support systems, training, administration and back-up. Meet the franchisor’s staff to see if you can relate to the people who run the franchise. As franchising is essentially a partnership, it is very important that you relate to your potential partners.
  7. 7. Shortlist Your Choices Ask yourself the million dollar question: “Can I see myself doing this day-in and day-out with enthusiasm for five, seven or even ten years? If the answer is yes, study the initial information packs and set up preliminary meetings.
  8. 8. The Buy-In • Both the franchisor and prospective franchisee have to buy into each other and feel satisfied that they’ve both made the right choice. • It is vital that you as the franchisee is comfortable with the people you will be working with, insist on meeting the support staff • Above all connect and talk to existing franchisees. They are the ones who will be happy to pass on frank and helpful comments on the franchise, whether positive or negative. You will get an overall sense of happy the franchisees are with their franchisors and this is the best source when checking out your chosen franchise system. • Most franchisors welcome a serious prospect to spend a day at a company-owned franchised unit. This will give you an invaluable opportunity to get a feel for the business and what your future working day will be like.
  9. 9. The Expectations and Responsibilities • Once you have honed in on a specific franchise offer, insist on receiving a disclosure document – a requirement that is now enshrined in the Consumer Protection Act. • Ask the franchisor to explain the franchise documents of disclosure, contract and operations manual to you and also have them scrutinized by your professional advisors. Listen to their comments and clarify any queries you may have with the franchisor before you sign the deal. • Do not enter into any commitment or pay any fees until you are absolutely certain that this is what you really want. • Once the contracts have been signed the expectations from the franchisee and the responsibilities from the franchisor kick in and it becomes a partnership of shared goals.
  10. 10. The End Result Franchisors want franchisees that will go out and represent the system in the best manner possible. In order to do that, they need to give the franchisee the best training and on-going support.
  11. 11. The End Result Franchisees, on the other hand, want to go out and immediately be successful. They can only achieve this if they follow the franchisor’s blueprint and put in the effort that is needed to get the business off the ground and be successful in the long-term.
  12. 12. The One Commonality The one commonality in both parties is their desire to be financially successful. If both parties can acknowledge that fact and work towards that goal, the relationship between franchisor and franchisee will be a mutually successful and financially viable one.
  13. 13. Disclaimer • Both this presentation and slides are copyright protected. • In terms of the Copyright Act No. 98 of 1978, no part of this presentation and slides may be reproduced or transmitted in any form or my any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without the prior written permission from the author. • This presentation and slides are for educational purposes only and does not constitute legal advice. • The author and FASA do not accept any liability for any loss or damage that may be occasioned as a result of the reliance by any person on the information contained in this presentation and/or slides.
  14. 14. Where to Find Us FASA as the official body for franchising in South Africa has as the underlying basis on which membership is granted and controlled, a Code of Ethics and Business Practices to which all members subscribe. Our list of members is a good place to start looking at franchise opportunities Website: Facebook/FranchiseAssociationSouthAfrica Twitter: @franchisingsa