Franchising success: location, location, location

The current business landscape is competitive, calls for innovative thinking and at the same time widely influenced by international and global trends. McDonald's South Africa is a true example of this. With 185 restaurants in all nine provinces and with the plan of reaching 200 restaurants by the end of 2013, McDonald's is the second largest property owner in the world.

Growing landscape of franchising

Wilma Lombard-Maree, development director of McDonald's South Africa says, "The franchise business has changed more in the last 24 months than in the past five years. We believe an integrated business approach, which ensures that our franchisees are successful, by taking into account the market and the potential sites for the business."

Just like McDonald's, potential franchisees need to ensure that the location of their franchise will drive business as well as generate profit. "Opening and operating a franchise is a costly affair and requires research and knowledge of the industry. Research on the best location, coupled with thorough competitor analysis could help potential franchisors determine the success of their franchise," explains Cronje.

Upkeep

Franchisees need to ensure that they keep their businesses branded, fresh and when necessary revamped according to global standards. Revamps are often not popular with franchisees as it usually means more debt incurred however, it has been proven that revamps can lead to a 15-20% increase in sales in franchised businesses.

High impact reimages are done according to McDonald's international standards. "We partner with the franchisee to work out returns and then a decision is made accordingly. Additionally, trends have shown that expected returns after the reimaging were surpassed," explains Maree.

Maree adds that, "Where a strong generator (e.g. shopping mall) is developed we influence the micro location as best we can for visibility and accessibility. It is pivotal to understand the demographics of the area and customer base as well as asking questions about anchor client's and competitors. Where a new location is offered, sales are unknown and merely an estimate."

Funding

Funding is also a crucial element to the franchise lifecycle. The current economic landscape has proven quite difficult and very onerous for a franchisee to successfully apply for franchise funding. It is clear that if a franchisor wants to achieve sustainable growth, they will need to start becoming more innovative to provide assistance to potential franchisees seeking finance.

"We encourage franchisors and potential franchisees to develop relationships with their financial institutions. This contributes to the trust factor between both parties and can have long term advantages for the franchise such us reduced collateral requirements due to the brand being perceived as less risky," adds Cronje.

McDonald's uses international franchising trends and learning's that are tailor made to suit the local industry and this puts them ahead of the pack. "Entering a well established market is expensive and the challenge gaining market share. But with the correct support and advice, your franchise can be successful," says Maree.

"FNB supports and mentors franchisees in South Africa. It's great to see that there contribution to our economy and believe that they are creating platforms for business growth in South Africa," concludes Cronje.