You probably have heard about franchise business before now. In this tutorial, I will be explaining some important things you should know about franchise business opportunities for Africa and few other crucial things you have to do to make your franchise business a success.
To start with,
what is franchise?
Franchising is a business practice in which a successful company (franchisor) allow other entrepreneurs (franchisees) to use its business model and brand for an agreed period of time.
This model is becoming increasingly popular because it is easier to succeed in business by buying a franchise than by starting a new business afresh.
You ask me why?
Because a franchisor who is selling you a license to use its name, trademark and brand has worked so hard to overcome the earlier (toughest) period of business. By the time a business had succeeded and had earned a significant place in the hearts of consumers, it`s easier to succeed using such company`s name.
Take for instance if you`ve got a business agreement from Coca-Cola (just for example) to follow their formula and produce coke, how hard do you think it will be to sell the coke you produce as a Coca Cola franchisee? As easy as attracting ants to sugar.
Because Coca-Cola has successfully built a brand (name) in the minds of the people.
That`s why Michael Gerber claimed that franchisee`s failure rate is just 25% while the independent start-up`s failure is around 80% in a period of 5 years.
According to the International Franchise Association, around 44% of all the business in the United States are franchise.
There have being much innovations in this industry which have created many more franchise opportunities. Now you may hear of Social Franchises, Third party logistics franchising, Event franchising, Home-based franchises and more
What to do before obtaining franchise permit
- Search for franchisor who is already a success
This seems obvious, yet I have to emphasize it. Why do you want a license to start a business under someone`s name in the first place? Isn`t it because of his brand awareness and success?
So if there is a business advertising franchise but has not even become a well-known brand, what do you need them for? What if that business has become grossly successful in another country?
Except your local market is very much aware of that company`s integrity, you may still fail. You think about it. Great Clips is a hair salon`s franchise. Did you ever hear of that name? Probably no if you`re in Africa. What good can it do you to get Great Clips` authorization to use their trademark in Nigeria?
Similar things may be applicable to 7-eleven, Subway, Hampton Inns, Servpro and many other franchisors. If your target market isn`t aware of the integrity of your intending franchisor, you may not obtain its permit (even if it has become successful in other part of the world)
- Do you understand and love the products of your intending franchisor?
I was in a church program about two weeks ago when a police officer who happens to be a member of the church announced an opportunity to join police and the attractive salary attached.
Many youths in the church made some envious noise about that amount and are willing to be part of the police force… just because of the money.
When later I had an opportunity to speak in that congregation I told them, “you don`t choose a profession because there is a lot of money to be earned there. You only choose profession base on your love for it”
As you can guess, they are too young to understand what I am saying, though some of them are above 25.
We grew up with this erroneous thought that what is most important in a job is the pay (and what is the most important in business is the money we can make from it).
If you`re into a business or profession which gives you #100,000 per month and love it, you`re far more successful than a man who is into a business or job that gives him #200,000 each month but who hates his job.
The reason is simple. If you love what you`re doing, it will no more be a work, but a hobby. In other words, if you hate what you`re doing, it will no longer be work, but a punishment and enslavement.
Don`t go for a franchise simply because the entry fee is low or because the profit margin is high. Choose only the products you love, care about and have passion for when considering franchising.
- Is there a good market for the products you want to be a franchisee for?
There is no point in getting H&R Block`s permit (a company franchising tax-preparation and e-filling service) because you love their business, if there is nobody willing to patronize your service.
This law is applicable to every business out there. You don`t start if there are no willing buyers. So do your homework and see that there are enough people who are willing to buy the products of your franchisor before you will obtain the permit to operate in it name.
- Find out about the necessary fees the franchisor demands
There are usually three important payments a company may require when franchising:
- A royalty for the trademark
- Reimbursement for the training and advisory services given to you, the franchisee
- A percentage of the individual business unit`s sales
A franchisor has right for all these fees. First for their brand name you want to be using. Brand name is the most important asset of any company. The trademark is far more important than whatever products any business is selling. Also the advice and guidance you will need your franchisor for and lastly, a percentage out of the sales in your business.
All these fees are well deserved and it will in turn favour the franchisee.
All these fees could be put together in a single payment and called “management fees”.
- Understand the franchising agreement
There will be a partnership agreement between you (a franchisee) and the franchisor (someone giving you the permit to operate with his brand name.)
You have to understand the content of this contract and agreement so you will know what is require of you. This business contract may vary from one company to another.
The numbers of years you will be having the right to use the particular trademark before you`ll have to renew the contract will be stated (you may buy a franchise permit for 5, 10 or 20 years)
The territories you will cover with your franchise and few other things will be in the contract.
Some countries are having franchise brokers who can help in locating good franchise and their conditions. You may locate one if your country has these brokers.
- Prepare your mind for some strict guidelines from the company franchising to you
Well, just as I have said earlier, the trademark, brand names and integrity are the most valuable assets of every business. These are the things the franchisor wants to lend you. He is at risk of losing what he has spent many years or decade building.
In order to prevent some negative attitudes or business policies that might stand against these invisible assets of the company, there have to be some “rules”, some of which could be a little strict.
- Business is a business. Franchise is a business.
Over the years I have seen people looking at some businesses as easier way to harvest money. Some will think of making money online as an easy thing. Others will rush to network marketing hoping to make quick money.
No business is easy, not even franchise business.
To be a franchisee, you have to be prepared that you`re starting a business. Every important business skills will be needed if you want to make money in your intending business.
Your leadership skills, your communication skills, your marketing skills. And many other entrepreneurial skills you can read here
Business is business, get prepared. Read business and financial books. Sharpen your business skills and you will be successful.
What other things do you want me to tell you?
Ok, what are the most profitable franchise businesses you can look in to?
This question remind me of my discussion with one of my friends about blogging. While we both are aware that Nigerians love news and entertainment and so news and entertainment blogs are making it good time, both of us are not having what it takes to succeed as entertainment or news bloggers.
How can I succeed in entertainment or news blog when I hate reading about them (except important news of course)?
So to our discussion, we cannot conclude here about a profitable franchising business you can look at. Instead, we`ll say “it`s all about you”. what your interests and passions are.
3 Franchise Business Opportunities You Should Consider
But just to make things easier, let me list some potential areas you can look into:
- Food franchises: this is because food is the most essential commodity for man. People may not buy clothes, but they must eat. People may buy phone every year, but they have to buy food every day.
- Health related products/service: though people hate to patronize this sector, they are forced to do so and are willing to pay whenever they have to (though by force whenever they have issues with their health)
- Business services, cleaning services, coffee shop, hotels and lodging, etc. are other options you can look into.
My final word?
Be business minded. Acquire more business skills every day. Fight the war of the business and win.