Support Services Essential in Franchising

The Franchise Association of South Africa (FASA) since its establishment in 1979 has been dedicated to ethical franchising, guiding and safeguarding the reputation of the sector which today contributes around 14% to the country’s GDP. FASA does not have statutory powers and regulating and enforcing its code of ethics and business practices can only apply to its members. The requirements of becoming a member of FASA are stringent – this no doubt scares off the less scrupulous operators and those who do not have correct structures and support systems required of a top class franchise system.

The very nature of the successful business formula of franchising is one of interdependence where both the franchisors and franchisees have an obligation to make their partnership work resulting in a win-win outcome of ‘if the franchisees are profitable, the franchisor will be too’.

Despite the on-going recession that is impacting heavily on small businesses, the franchise sector continues to be resilient and franchising globally has fared far better than independently owned businesses. This is largely due to the strong business format and support system inherent in franchising and to the strong support team that services franchising and ensures that all aspects of the business – from legal requirements to operational strategies; from training to marketing – is at the forefront guiding this global phenomenon.

Franchisees, before they sign on the dotted line, need to ensure that they have thoroughly investigated the franchisor, spoken to existing franchisees and above all, made sure that they fully understand the terms of their agreement and what they are committing to. It is the responsibility of the franchisor to supply a franchisee with a full turn-key operation, give extensive training on how to operate the business and above all give ongoing support and guidance to help the franchisee make a success of his/her business.

Entrepreneurs who are embarking on starting a franchise should, as their first port of call, engage with FASA for information on what is required to set up a franchise and then use the expertise of the support service providers – from franchise and business consultants to lawyers that specialise in franchising who can add value to their businesses.

Service Providers to Franchising are essential as franchising is a unique business format with very definitive operating principles requiring expertise in setting up the structures to operate a successful franchise – from transparency and operating principles to funding and legal requirements. Experts specialising in franchising also belong to the franchise associations and these include the legal firms that specialise in franchising and its various IP and business legalities; commercial and developmental banks that provide funding; financial services ranging from auditing services, insurance and other financial services. Franchise consultants specialising in setting up the structures necessary for both new franchise concepts and conversions as well as marketing, advertising and social media consultancies also offer their services to the franchise community. As franchising covers so many sectors offering varied products, suppliers are also closely aligned to the industry.

Turning bright ideas into a viable franchise

Every cloud has a silver lining, goes the saying and even in the midst of global challenges, there are those entrepreneurs that have taken a new idea and forged a new path to business success. The Regulations of the Consumer Protection Act reference franchising by stipulating that you will need to have a franchise agreement, operations/procedures manual and disclosure document in place before you start franchising. It is imperative that you use use bona-fide lawyers and accredited franchise consultants that know and understand the intricacies of the franchise business system.

Ethical franchising requires expertise

The Franchise Association of South Africa sets down standards for ethical franchising in South Africa particularly with reference to franchise companies, by way of its Code of Ethics in conjunction with the requirements of the Regulations of the Consumer Protection Act. Applications are invited from franchise companies to apply for accreditation but this process involves investing funds if the franchise company’s franchise agreement, operations/procedures manual and disclosure document are not compliant with the requirements of the CPA.  Experienced franchise attorneys who are members as well as specialist franchise consultants are readily available to assist franchise companies to ensure that their company documents are compliant and won’t leave the franchise company open to risks.

Franchise attorneys spend years honing their craft and understand how to draft a suitable franchise agreement that would provide the necessary protection for all parties concerned – as no franchise agreement is the same!  Agreements vary from brand to brand and industry to industry and are developed according to the individual requirements of the franchise owner.  Attorneys make sure that agreements would stand up to being challenged in a court of law.

Professional franchise consultant members that assist franchisors in setting up their franchises are often key to the success of establishing a new brand. Whilst franchising may follow universally accepted guidelines, it requires careful and specific planning from the very early stages and the services of an experienced franchise consultant can go a long way to ensuring long-term success. In addition to assisting to compile the statutory Disclosure Document, franchise consultants spend between 6 to 8 months developing an operations manual for a franchise brand as it has to cover all areas of operations.

Owners and managers of franchise companies or prospective franchise companies must take heed and only contract the services of qualified professional specialists who are members of the association. Having properly developed documents and manuals in place provides peace of mind to the franchise owner as well as prospective franchisees and is an imperative for successful franchising.