SUCCESS his issue is all about success – and in the following pages, T you’ll find plenty of examples of people who have created the businesses and the lifestyles they want. They have won Awards, bought their first homes, or found the perfect mix of work and family life. Some, like Gary and Kirsten Camoin, the new Supreme Franchisees of the Year, have achieved all three.
But if you’re looking for a business opportunity, how do you go about finding a franchise that can deliver what you want? Buy a good franchise and you stand every chance of success. All the effort you put into developing and marketing your new business will be directed towards activities that really work, offering a product or service that people really want – as Gary and Kirsten have proved. But buy a franchise that isn’t so well developed and you’ll use all your energies trying to overcome the flaws; worse, your efforts might just multiply problems you can do nothing about. That’s why you need to choose your franchise carefully. What are the differences that make one franchise successful while another one struggles? Let’s look at the ingredients that make up a quality franchise system. These can be broadly divided into seven main categories: 1. The business and industry 2. The franchise itself 3. Establishing new franchisees 4. Systems in place 5. Ongoing business management 6. Maximising return for franchisees 7. The franchise culture
1. The business and industry For any business to succeed, it must provide a product or service that people actually want, at a price they are willing to pay, and which delivers a profit to the business owner after all costs are taken into account. The key ingredients here are:
Proven product or service If you are looking at any franchise, you need to be certain that the main product or service is a popular one with a real market. If the business has been operating for some time that should be quite easy to confirm. Talk to the franchisor, to franchisees and to customers. Have a look online to see what people are saying about the brand and what feedback they give about its products or services versus those of its competitors.
Real market Successful franchises not only have a great product or service; they have a large enough market to sell it at a profit on an ongoing basis. New Zealand has a small population and if a product only appeals to a niche market, then it may not work here – even if it is successful overseas. But be aware that new niches are developing all the time: concepts such as Katsubi and Driving Miss Daisy have been made viable by changing demographics. Equally, new technologies and new legislation constantly open up more opportunities: for example, the rise of online shopping has created massive demand for Aramex and Pack & Send, while changing legislation makes PeopleCare a very interesting business option.
Strong brand For a business to attract customers, it has to communicate what it stocks or what it does, and what advantages it offers compared to others in the same market: price, service, quality, convenience, range or whatever. Having a well-known brand means that the business can short-cut that communication. If you see the Pizza Hut logo, you know it stands for speed, cleanliness and a value range: if you open a new store with their name above the door, you will have a ready-made fan base. The stronger the brand, the more the franchise is worth – provided that it has the rest of the elements for success in place. A big customer base is only worth having if every sale makes a worthwhile profit. Which brings us on to …
2. The franchise itself For a business to be successfully franchised, it must be capable of being reproduced in other locations and run by other people – the franchisees. Crucially, the level of profitability must be high enough that both the franchisor and franchisee can make a fair income from the business.
Proven business model All of the winners in this year’s Franchise Awards have one thing in common: experience. Good franchises know what a franchisee needs to achieve in order to be successful and have proven it across multiple locations. They have target percentages that have to be met in key areas such as rent, staff costs, power bills, fuel costs, wastage and so on. They have target figures for foot or vehicle traffic past a location, or the population numbers and type within a particular territory.
Buying the right franchise can take the fear out of starting your own business – but how do you choose a good one? Here’s what to look out for
With this information, they can evaluate the probable success of any new venture and if the numbers don’t stack up, they won’t proceed – whatever the would-be franchisee might think. If the numbers do stack up, they are able to give the franchisee a good indication of the level of sales they need to achieve in order to build a viable business.
Financially healthy franchisor For a franchisee to succeed, they must be on a sound financial footing with adequate finance and borrowing capability in place. The same applies to the franchisor – if the franchisor is not sound, the investment of all the individual franchisees could be in danger. As Grant McLauchlan
Franchise New Zealand
Year 31 Issue 01