"Successful franchised outlets attract a lot of customers. It is inevitable that, over time, the kitchen, and its appliances - and most importantly to patrons - the customer service areas will show wear and tear, and begin to look worn out. That is when the franchisee is unexpectedly faced with the responsibility of freshening up the outlet, which can often be costly," said Ethel Nyembe, Head of Small Enterprise of Standard Bank.
"Many people who buy franchises, whether they are new or well-established outlets, do not realise that there are often contractual obligations placed on them regarding the refurbishment of their facilities. These can require that an outlet undergoes a 'facelift' or complete refurbishment at stipulated times - usually every five years.
"It may seem unreasonable to have these clauses in contracts, but they are there for good reasons. To be successful, franchised outlets have to remain appealing. The longer they remain attractive to customers, the better the likelihood of success. It is also true that peoples' taste in furniture and fittings change over time. So, although corporate colours and logos may remain in place, keeping an outlet looking modern ensures that it stays relevant to its customers.
"As one of the major success factors with outlets is that they look the same, it is also reasonable that the franchisor reserves the right to appoint the contractors who will undertake refurbishments and other enhancements."
To avoid the stress of suddenly finding yourself facing massive bills for your outlet, Nyembe suggests that if buying an existing outlet, discuss refurbishment policy with the owner:
"If you are confident that the business is strong enough to take a major refurbishment in its stride, you should discuss this with your financier. If they review the financial history of the outlet and agree with you, they may be willing to factor renovation costs into the purchase price. Alternatively, the bank may structure a separate financial package to assist you," said Nyembe.
If you are signing a contract for a new outlet with the franchisor, you should ask questions about renovation policy before signing on the dotted line. Find out:
"Never just sign a contract because you are told that it is 'a standard industry contract'. Also, don't only rely on a franchisor's word that a refurbishment is really nothing to worry about. Get an attorney, or the franchise specialist at your bank or financier, to give you an independent opinion about these and other clauses in your contract.
"A decision to buy an existing franchise or new outlet store is a life-changing decision. Make sure it is the right one, that no surprises await you and that you have the time available to set aside funds for refurbishments before they come due.
"Asking your bank for advice on how best to save for these changes, or how to finance them, will also mean that you avoid sleepless nights," concluded Nyembe.