Tips on how to run a successful franchise in South Africa
Buying a franchise can be a good opportunity for people looking to start their own business. MD of Cash Converters, Richard Mukheibir, highlights several useful pointers for anyone considering this option in 2017.
Cash Converters claims to be the world’s largest franchised trader of second-hand goods and now also offers a range of personal cash loans. The brand has operated in South Africa since 1994 and has over 66 Southern African operations.
The group aims to expand by at least 15 stores in 2017 – providing new opportunities for people who want to empower themselves by starting their own business using the franchise model, said MD Richard Mukheibir.
“The franchise model works brilliantly for someone starting out on their own because it gives you opportunities to hone your skills and build your capital while being supported by your franchisor’s resources,” he said.
A typical franchise like Cash Converters, usually offers everything from a turnkey, fully stocked and branded store, backed by its own IT systems, to ongoing training, which the second-hand goods seller offers through its own training academy.
“We have a collaborative culture, which includes both franchisees networking through our quarterly franchisee meetings in the regions, and our support is guaranteed for 10 years,” said Mukheibir.
Starting prices for franchises vary across the industry – and this is a factor that any prospective franchisee should interrogate carefully, Mukheibir cautioned.
“Compare not just the bottom line of the initial working capital you need to invest but also what the franchisor offers you,” he said. “Also find out how much of the total cost of the franchise investment you must provide upfront and what this gives you in return.”
In Cash Converters’ case, for example, the total setup costs start at R2.3 million for a store of up to 250 square metres. New franchisees must be able to invest half this total cost in unencumbered cash.
“On average it takes two years of working seven days a week to build momentum and realise return on investment but franchisees continue to amaze us. Within just one month of opening its doors one operation in Polokwane achieved the trading level we normally envisage after a store has been operating for a year,” Mukheibir said.
However, he warned that successful franchisees need particular qualities – they need to be happy working within the processes and procedures of the franchise they decide on – and should make sure that they understand these parameters before signing up.
In the case of Cash Converters, Mukheibir said that ideal partners should already understand cash flow, have previous business experience and a trader mentality. “Our franchise model is very hands on – not the kind of franchise where you can let staff run the business for you and just drop in once or twice a week to check for problems.
“We are passionate about our business and we want our franchisees to share that passion. They should be excited by the prospect of owning and operating their own business from day to day. To sustain this, they need a high degree of energy, initiative and motivation,” Mukheibir said.
“Our franchisees also need to be empathetic and people-oriented, whether they are dealing with customers or staff,” he said.
Before investing in a franchise, Mukheibir advised the importance of researching what kind of returns you can expect, how economic circumstances might affect the business and how the franchise is affected by existing legislation or anything that might be in the pipeline for its industry.
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