Q: My business is small but it has been operating for over three years now and is highly profitable. People approach me for a franchise all the time but this means that I have to enter into a franchise agreement. I have spoken to several lawyers about this but they all are just too expensive. Why don’t you put a standard franchise agreement on your website?

A: There is no such thing as a standard franchise agreement. Although at first glance, many of the basic clauses may appear to be “standard”, they need to be tweaked to reflect the needs and peculiarities of your sector, and even the prevailing corporate culture. We would do you no favour by giving you a “standard agreement”, it just would not work. What we can tell you, however, is that you can save yourself a tidy sum if you do your homework. Find out all there is to know about franchising, then prepare an instruction sheet for the franchise attorney that contains every bit of information he or she will need to draft the agreement.

By doing this, you help the lawyer save time, and time is what he or she ultimately charges you for.

Q: I have developed a computer software package that will be a hit with every retailer in the country. As a self-confessed computer nerd, I have absolutely no idea how to market the thing and thought of franchising it. What do I need to do?

A: Based on what you are telling us, we can only conclude that you may have an excellent product but you do not have a franchiseable concept. You have two options:

You could set up a business that distributes the software in your area. You would have to register a trademark and develop all systems and procedures until they have been optimised and the business is profitable. At that point, you would be ready to start developing a franchise package which entails setting up the necessary legal framework and support infrastructure to put newcomers into business and help them become successful.

We gather that this is not what you have in mind. The alternative is that you appoint independent distributors and licence them to distribute your software in their territories, for their own account. This can be done under a simple license agreement and would not oblige you to provide a comprehensive training and support package. On the downside, you have less control over the activities of licensees, and your income may be lower.

Only you can make this decision, but should you decide to go the franchise route after all, we advise you to find out all there is to know about franchising before you embark on this in earnest. The website www.whichfranchise.co.za is an excellent starting point.

Q. I am the General Manager of a company in the service business. Our brand is highly respected and business is positively booming. We maintain branches in the larger centres and operate through independent contractors in smaller towns. I am not happy with service levels and would like to set up a network of franchisees. How do I go about that? More importantly, how do I convince my Board of Directors that this is the best course of action?

A. Eric Parker replies: You have the right idea but to ensure its successful implementation means that you have lots of hard work ahead of you. Proceed as follows:

• Learn everything there is to know about franchising. The Franchise Association of Southern Africa has expert literature available that will guide you.
• Work out a franchise development plan. Plan to start out on a small scale by franchising operations in outlying areas (but not before you have tested the concept at arm’s length – see below.)
• Obtain commitment from the top. Without the backing of your Board of Directors, you will not succeed.
• Bring in outside expertise. Having a reputable franchise consultant work with you will be invaluable, assistance from an attorney with experience in franchise matters indispensable.
• Set up a small operation, or convert an existing one into a pilot operation. Operate it for a period of 6-12 months as if it were a franchise. Not only will this help you to discover operational problems, you can use the experience you gain in developing realistic financial models.
• Set up a dedicated franchise infrastructure. To have your existing area managers double up as franchise managers will not work. Franchisees need to be treated differently to branch managers.
• There is no reason, however, why branch managers who are prepared to be re-educated cannot fulfil this role.
• Be prepared for the fact that franchising a business is a long-term project. It will take 2-3 years to get the franchise operation up and running. However, once you have reached this stage, customer satisfaction and with it market share will increase and profits will start rolling in.
• Once the franchise side of the business runs smoothly, you may want to consider franchising existing branches.
• Branches that are either unprofitable or difficult to manage will benefit from the involvement of an owner-operator (franchisee).
• Profitable branches, too, will benefit from the presence of an owner but it may make commercial sense to operate the franchise as a joint venture, with the franchisee owning a maximum of 49%. This retains some of the profits in the franchisor’s hands.

Q. About a year ago, I set up a biltong shop with a difference. After much tweaking, it is now doing very well, so much so that the owner of a business in a related field has approached me with a request to set up a mini operation and operate it under my brand name.

I want to franchise my business eventually but at this stage, I don’t feel I am ready to go all the way. However, the person is not prepared to take ‘no’ for an answer, or to wait? He wants to start trading right now. Should I just allow him to sell my product range under my brand? If so, how much can I charge?

A. Anita du Toit replies: Don’t do it! Setting up a sustainable franchise operation takes a lot of hard work, time and money. Allowing others to operate under your brand in the meantime could jeopardise your chances of ever becoming successful as a franchisor.

You are successful because your customers don’t just like your product, they also like the way you do business. If you permit others to operate under your brand name without having a proper franchise infrastructure in place, you risk losing control. This can damage your brand, and even your core business.

Allow yourself sufficient time to build a proper franchise infrastructure. Once ready, you can launch the franchise, secure in the knowledge that those who are loyal to your brand won’t be disappointed.

Q. My business is doing extremely well, so much so that several individuals have approached me with requests for a franchise. I was told that I need professional assistance to create a viable franchise package but because my business is new, I simply don’t have the funds for this. What can you suggest?

A. Trudi van Niekerk replies: Unless your business has proven itself for at least one year, it would be premature to consider franchising it. To franchise a business professionally requires a substantial investment upfront. Once you have a successful track record, however, you should be able to attract funding for this purpose. I advise you to approach the Small Business Advisor at your nearest Absa Bank branch. He or she will put you in touch with one of Absa’s franchising experts and they will take it from there.