GIVE YOUR FRANCHISE A HEAD START
in this article:
How can you best prepare for running your own business? Lorraine Lord takes some advice
OK, so you’ve taken the plunge and bought a franchise – what happens next? Whether or not you’ve been in business before, the next few weeks or months are going to be a blur of activity. During this time, you’ll be filling in paperwork, setting up systems, having meetings and being asked to make decisions every day. There may be staff to employ, finance to arrange and licences or qualifications to achieve. Oh yes, and you’ll also be attending training – perhaps near home, perhaps in another city or even overseas – so that you learn what the business involves and how to run it successfully. Welcome to the world of self-employment.
It might sound daunting but the pre-opening period will be one of the most exciting times of your life. You’ll find it less stressful, though, if you understand all the tasks that need to be done and are able to approach them in an organised fashion. This will have a major impact on your readiness for your first days in business and the results you achieve. Every franchise is different, of course, but here are some tips that you might find helpful. As Brad Jacobs of The Coffee Club says, ‘Individually there are hundreds of little tasks to do. If you think of it as one massive task – “get ready for opening” – you will explode. Break it down and it becomes easy.’
That’s why many franchises provide you with a checklist to work through. In the case of The Coffee Club, this takes the form of a comprehensive ‘countdown’ list that starts five weeks from the opening of the new franchisee’s business and details every task that needs to be completed and who needs to do it. ‘We like franchisees to get these items out of the way before they start the formal training with us,’ says Brad. ‘If they have to slot in visits to their accountant or solicitor during training, or they are constantly trying to remember what needs to be done next, it creates extra stress and breaks the momentum of training.’
With staff, premises, equipment and even liquor licences The Coffee Club might seem like a complex business, but the same applies to other franchises too. At paint repair specialists Touch Up Guys, the Jump-Start manual also lists various tasks that new franchisees need to complete, including reading they must do before training and a worksheet that helps them to identify their goals and objectives for their new business. Martin Smith, the master franchisee for Touch Up Guys in New Zealand, explains that this is all part of teaching franchisees not just how to do a job but how to run a business. ‘During training, we can then help them build the marketing plan and activity calendar that will help them achieve those goals,’ Martin explains. ‘We can help them see what needs to be done, what’s realistic and what impact it will have.’
Paul Brown of Paramount Services agrees that the pre-opening period is a vital one, whatever the business. ‘A lot of our franchisees are first-time business owners,’ he says. ‘We might supply them with contracts and handle admin functions like invoicing and collection but this is not a job, this is their business. They now own the Paramount brand and they must protect it and promote it and live up to it at all times in order to build a sustainable business. What we have to do is help them change their mindset from being employees to being employers. Assisting them through the set-up period prior to training is all part of that process.’
So what sort of activities might a new franchisee be expected to carry out before they start training? Well, every franchise is different but here are examples of some of the things you will be asked to do. Remember that, although pre-opening might seem to be a hectic time, things are going to get even busier once your business opens.
One of the first things you will need to do is decide, if you haven’t done it already, how your business is going to be structured: limited company, sole trader, partnership, trust or whatever. This is something to discuss with your lawyer and accountant. While the franchisor can tell you how other franchisees operate, you need to be certain that your structure suits your own specific needs for maximum tax efficiency and protection of your assets. Only once you have this established will you be able to set up your bank and suppliers accounts and various other agreements (eg. property, vehicle or equipment leases).
If you aren’t already registered – for example, if you are a new immigrant like many Paramount franchisees – you’ll also need to obtain an IRD number and register for ACC. You may need to register as a self-employed person and/or as an employer. Your business will probably need to be GST-registered. Work through all these stages with your lawyer and accountant.
What additional qualifications might you need to run the business? If it’s a food business, you will need to go through accredited food handling and hygiene training. This may be included as part of the franchisor’s training course, but that’s not necessarily the case. If you will be selling alcohol, like some outlets of The Coffee Club, you will need to acquire a General Manager’s Certificate, which requires external training. You’ll also need to obtain a liquor licence, which can take up to three months. It’s also a good idea to do a first aid course, especially if you are going to be employing people (some franchisors insist upon this).
Whatever your franchise, you are likely to need to set up agreements with suppliers. In many cases these will have been negotiated on a national basis by the franchisor with appropriate credit terms, but you will still need to complete all the forms. Where you need to establish relationships with local suppliers for some items, you will want to identify the best suppliers and terms available before opening your business. If you have premises, you may be required by your lease to provide a bank guarantee in favour of your landlord – check with both your franchisor and your lawyer to ensure this is reasonable.
You will also need insurance for your new business – many franchisors stipulate specific requirements such as public liability, business interruption and material damage insurance in the franchise agreement. ‘At Touch Up Guys, we take this very seriously,’ says Martin Smith. ‘We actually arrange for new franchisees to meet a broker during training so that if they don’t have adequate cover it can be arranged on the spot.’
If your new business is to be home-based, one of the things you can do to prepare is set up your work space in advance. Every business generates paperwork and phone calls, and you don’t want to be fighting for space on the kitchen table all the time. A separate work room is ideal but if this is not possible, try to create a corner that is business space and has all you need close to hand. Try to be disciplined about it and explain to the rest of the family that this is your work space and ask them to respect it. You don’t need the irritations or distractions of finding that the stapler has walked or the cordless phone has been left off the charger or the message book is missing.
Your franchisor will list the major items you need, such as a computer, printer, online accounting system and so on. You may require a separate cell phone for business. The Coffee Club provides a detailed list of stationery that each franchisee will need, right down to pencils and erasers.
Whatever equipment you buy, if it is not part of the standard franchise package (and therefore won’t be covered in training), it’s good to read any accompanying manuals before you start your business. It will save time and frustration later if you have everything set up properly in advance.
Many of the larger franchises provide customised software packages that will help you run the business efficiently, and full training on this software should be provided as part of your induction. In other cases, franchisees are free to use whatever software best suits them, although if a particular package is recommended it is usually best to use this as the franchisor will be familiar with it and be better able to help with set-up and support. This is particularly true for accounting programs, as the financial side can be a challenge for many people at first - but if you set it up right in the first place, your franchisor will be able to help you better later on.
Every business has competitors, and one of the secrets of success is to know as much about them as possible. Your franchisor may well know about the competition you will face from other chains or franchises, but even they will vary from place to place – and there will probably be independent operators in your industry, too. Make it your job to find out as much about all your competitors as possible. Find out where they are, what hours they keep, what their prices are. Visit them and talk to their staff (who are usually less guarded than the owners). Look at where they advertise and when. Get on their mailing lists for new promotions.
‘We encourage franchisees to have someone make test calls to competitors and find out what services they are offering and what prices they are charging,’ says Martin. ‘Competitors vary from town to town, even in the same company.’ By being well-informed, you can develop strategies with your franchisor to make your mark when you launch.
Once you are committed to joining a franchise, ask your franchisor to introduce you to other franchisees locally. They will become important colleagues in the months to come and you will benefit from being part of a wider group as you get to grips with your business. You might spend a day with them or even offer to help if you have some time before your own business gets going. Talk to your franchisor first, though – they may be keen that you don’t pick up bad habits before training!
Even before you have opened your doors or got your vehicle on the road, there are many things you can do to help your business get off to the best possible start in marketing terms. For a start, learn as much as you can about your area. This applies even if you have lived there for years; after all, you are looking at it through the eyes of a business owner now. Read the local papers and find out who’s who. Identify any local groups that might be interested in your product or service.
What other companies might you want to work with? For example, GroutPro franchisees see tilers and tile shops as ideal partners for their service. What networking groups are there in your area and which ones might it be worth getting involved with? Is there a local Chamber of Commerce, enterprise group or BNI you should join?
Research rates for local advertising. Remember, your customers might be reading or listening to very different things from you – they might be on the road with the radio on while you are in your store, or vice versa. If you have premises, find out where passers-by have come from and are going to – follow them, if necessary! It might help you work out how to encourage them to drop in.
If you’re going to be employing people in your business, take time to get to know a bit about them in advance. The Coffee Club requires quite a large team of part and full-time employees, and because of this the franchisor carries out the initial staff recruitment, interviews and induction on behalf of the franchisee. In most cases, though, recruitment is the franchisee’s responsibility. However staff are recruited, the task of managing them and building them into a reliable and efficient team is the franchisee’s job, and it will have its challenges. Be aware of your responsibilities as an employer, too - it's important to have good payroll systems to ensure you are complying with minimum wage, holiday pay and other obligations (see some tips here).
Brad Jacobs is well aware of the challenges new franchisees face and the amount of information that they have to take in in a limited time. ‘On the first day of training, a new franchisee walks into the restaurant, sees the coffee machine going flat out, food coming out of the kitchen, staff all doing different things – it’s overwhelming. There’s a moment when everyone thinks, ‘I can’t do this!’. But we say, “Open your manual, what does it say for day one? That’s what we’re going to do today.” We don’t even go near the kitchen till day seven, by which time they have been able to make sense of all the steps involved in running the front of house.
‘A pre-opening checklist is the same – it breaks everything down into small steps, and we confirm with the franchisee all along that each step has been handled. If something isn’t done, then the opening may be delayed – simple as that. Basically, that list shouldn’t leave a franchisee’s side for six weeks!’
And he has one last piece of advice. ‘We get new trainees who want to be there all hours to learn as much as possible. We love their enthusiasm but after four weeks of that, if their brain hasn’t stopped their body will stop for them. You have to learn to set a pace you can maintain for the next 6, 12, 24 months if your business is to be sustainable. The better organised you are in advance, the easier it is to get into good habits.’
This aricle has been amended from one that first appeared in Franchise New Zealand magazine Volume 19 Issue 1
This material is copyright © Franchise NZ Marketing Limited, Franchise New Zealand ™ magazine and Franchise New Zealand On Line . While it may be downloaded for personal use, no part may be reproduced in any form whatsoever without the specific written permission of the publisher.