Introduction to franchising
Any business has the potential to be franchised and can technically be franchised with the creation of a suitable franchise business model. The opportunity exists to duplicate a business when the following questions can be answered:
- Is your business successful?
- Is your business profitable?
- Are your products or services in demand?
- Can the knowledge, know-how and systems be duplicated and transferred to a franchisee?
- Are you the owner of the brand or trademark?
- Is your business offering in demand in other areas?
- What makes your business unique?
Franchising offers a wide range of business opportunities in every business sector.
The Consumer Protection Act regulates franchising and every franchise business needs to comply with the legislation. The definition of franchising in the Act is fairly broad and may include licenses, agencies and distribution agreements when certain elements of the definition in the Act are present, for example using the same name or paying a fee to the owner of the brand or trademark.
Universally accepted formats of franchising
Franchising has two universally accepted formats:
- Business format franchising; and
- Product and Trade name franchising
Business format franchising is defined as a distribution network operating under a shared trademark with the franchisee paying the franchisor for the right to do business under the trade name for a specific period of time. In exchange, the franchisee is able to use the franchisor’s entire business system or format, including the name, goodwill, products and services, operating manuals and standards, marketing procedures, systems and support facilities.
Product and Trade Name franchising is characterized as a sales relationship between a supplier and a dealer and is found most commonly in car dealerships and petrol service stations. The dealer is granted the right to sell its products in exchange for fees and royalties and has an obligation to sell only the franchisor’s products. This format of franchising is currently also incorporated in business format franchising.
Benefits of franchising
- Franchising provides expansion capital with minimized growth risk, without tapping into own capital;
- Simpler management, franchisees are responsible for the day to day management, which for example avoids employee related problems;
- Accelerates expansion over a wide area, minimizing copy cats of your idea;
- Franchisee operators are motivated to succeed and will operate a business better than employing a manager;
- A good business model ensures monthly royalties and initial startup franchisee fees from all franchises;
- A good business model includes national advertising fees which make national advertising and marketing possible;
- Better market penetration; normally franchisees are established in the area of opening the business giving significant advantage in growing the business;
- Building strong brand awareness with quick expansion;
- Generate increased sales volumes and stronger purchasing power with possibility of higher discounts from suppliers;
- Franchisor can focus on strategic planning, marketing procedures, new products and innovative ideas; and
- Franchisor can expand its operations for example into manufacturing or sourcing and importing of its own unique products.
Requirements to establish a franchise
Significant indicators for a potentially successful franchise business are the following commonly asked questions from customers:
- Is this a franchise?
- Can I buy a franchise from you?
- Do you know of somebody who wants to copy your idea?
Uniqueness, something different, ownership of the brand, ownership of the products and a successful enterprise are all good indicators of a potentially successful franchise.
The Consumer Protection Act regulates franchising in South Africa and stipulates the minimum requirements for becoming a legal franchised business. The requirements according to the Act are a Disclosure Document, Franchise Agreement and an Operations and Procedures Manual. Each document has to comply with the prescribed regulations specified in the Act.
Services of Virido Franchise Business
Virido Franchise Business will assist you and your company to become a successful franchise business. Our assistance includes a wide range of services:
- Constructing a franchise Business Model;
- Compiling all the necessary documents as prescribed by the Consumer Protection Act;
- Advising on a rollout program to acquire franchisees;
- Assistance with the recruitment of the franchisees;
- Assistance with the signing of the franchise agreements;
- Constructing of legal entities for franchisees;
- Business management training for franchisees (Business coaching);
- Franchisor training - introduction to franchising; understanding of all the franchise documents; processes and systems to be employed as franchisor;
- Ongoing assistance with the franchise system (Business coaching);
- Updating of all documents as new developments and systems expand.
The fees of Virido Franchise Business will be presented after the first interview or visit to the existing business. The Business Model and development and compilation of the required franchise documents are quoted as a project. All the other services are discussed and quoted on an hourly rate or per item, as required.
The development of the franchise documents can be done within six weeks if all the necessary documentation and information are available on request. The time frame and process however depends on the type of business and the industry involved.
As a franchisor and franchise consultant, you are invited by Virido Franchise Business to become part of a very exciting and ever-growing franchise industry. Although there will be challenges and setbacks, it is most rewarding to replicate your business and see happy franchisees who are successful and taking ownership of your hard work, your name and your idea.