Training vital to franchising success

16 Nov 2005

The growing popularity of franchising in South Africa has made it increasingly important that new or existing franchisees are given the confidence to manage their businesses successfully. From a financier's perspective, the importance of franchisee and staff training cannot be stressed enough.

"If a franchisee applying for finance has not had the correct level of training, and clearly demonstrates inadequate skills to generate a profitable outcome for the franchise, then it is likely that the loan application will be unsuccessful," says Frank Orchard, head of franchising at Standard Bank board member of the Franchising Association of South Africa (FASA).

"Franchisors who create an active support network for their franchisees, providing ongoing training for all staff and giving strategic direction, create a franchise with better service, better financial management and, ultimately, better revenue," Orchard points out.

Chairman of the Franchising Association of South Africa (FASA), Brenda Macqueen, commented, "The need for start-up and ongoing training for franchisees should not be something that franchisors debate. Many franchisors ask me how they can afford to train their staff, as it can equate to quite a substantial investment. My answer is always the same - how can they afford not to?"

Bendeta Gordon, MD of training company Franchize Directions, said they conducted a census in 2004 which indicated that franchisors on average trained franchisees for a period of four to five weeks at the start of a franchise operation, with limited training on an ongoing basis thereafter.

"This minimal training falls drastically short of international franchise standards. Companies like McDonalds, who set the benchmark in successful franchising, undergo an intensive 9-month training course before the franchisee even knows if they are qualified to be granted the rights to a McDonalds store," she noted.

According to Orchard, "Operational and technical skills are usually the first, and sometimes only, areas that franchisors consider when training their franchisees. Only 40% of franchisors include a business management element in their training programmes. A recent study has shown, however, that a business owner who has been trained in the management of cash flow, stock control and the correct handling of debtors and creditors has an 80% greater chance of growing the profitability of the business."

It is therefore understandable that a large part of the bank's decision-making process when faced with an application to finance a franchisee is based on the amount of training that the franchisee has received.

Standard Bank Business Banking operates a dedicated Franchise Desk, where the three-way relationship between the franchisor, franchisee and the bank is managed so as to provide appropriate banking solutions to meet their respective business needs.