15th Dec 2012
PASSION often resonates in the franchisor's list of criteria from to-be franchisees.
If franchise businesses had to be simplified, there are really only two segments that it is made of. Every franchise business has a hardware and a software segment.
The hardware segment consists of all the basics of the business, which include the franchise systems, operating manuals and guidelines on how the business is run.
However, the software segment could prove to be the more challenging but more important.
The software segment is really all about people, people, and more people.
Once all systems are in place, the one thing that will determine the success of not only a franchise business but all other businesses is the commitment of the people involved in it.
First of all, the relationship between franchisor and franchisee is very important.
“It's a very symbiotic relationship. If the franchisor does badly, the franchise will certainly do badly. If the franchisee does badly, it will reflect on the franchisor as well,” says Datin Mina Cheah-Foong, managing director of Rampai Niaga Sdn Bhd, the sole franchise holder for The Body Shop in Peninsular Malaysia.
The Body Shop was established in the country 28 years ago.
The task of picking the right franchisee lies solely with the franchisor. It is important that the franchisor picks franchisees that understand the brand, concept, values, and ethics, and vice versa.
Many franchisors would want to know that its franchisees will be “hands on” in the business. “They would want someone who is enthusiastic about the business, and at the same time runs it,” Foong says.
For the franchisee, it is important to be interested in the business. “Make sure the franchise is already a success. Don't pay money for a risk. A franchise is supposed to be a recipe for success. All you have to do is follow the steps, and you will most likely get the returns that you want. The franchisor must have proof that the franchise is a success,” she adds.
Homegrown food and beverage (F&B) company Chaswood Resources Holdings Ltd managing director Andrew Reddy stresses that apart from having the hardware and software segments, sufficient operating capital is needed to run the business.
“From a franchising perspective, you need at least RM500,000. Be prepared for the return on investment to take around three years. The franchising business is not something you can put your money in and cash out the next year,” he says.
From the restaurateur's perspective, Reddy warns that if one is not prepared to invest at least RM500,000, the person should not get into the restaurant business. “You can't do anything with let's say, RM100,000, because there is so much competition around,” he says.
Although there definitely are successes, there are many more failures, he adds.
Some franchisees may not realise that a substantial amount of money and effort is needed to go into the essentials of the business, such as training and research and development. “You will have to sacrifice your personal life,” Reddy says.
He highlights the possibility of franchisees “burning out” from failing to realise that fact and do not have passion in the business. “If you're not prepared for hard work, sacrifice and passion, you'll get burned out.”
“We want to know if they will run the business themselves. I need to see the passion in them,” he says.
In his earlier days of delving into the F&B business, Reddy says he even had to work on Christmas eve. “For the five years, Sundays were the only days I had the liberty to have family time. But, then again we still visit my restaurants on those days,” he says with a laugh.
Chaswood Resources is the only Malaysian firm that plays the role of both franchisee and franchisor. It acts as franchisee for international brands like T.G.I. Friday's, Bulgogi Brothers, and Watami Japanese Casual Restaurant.
Its homegrown brands include eateries such as The Apartment, Italiannies, and Teh Tarik Place.
It is vital to not only ensure the success of that single franchise outlet, but to also grow along with the business. “One of the questions I ask is... are they prepared to journey with this brand? I will give them a small region, say Setapak and tell them they have to build five restaurants in five years' time. One restaurant is not enough. It won't inspire you to build the next one. I want to protect the people who give us money,” Reddy says.
Having studied in the United Kingdom, The Body Shop's Foong had first laid eyes on the environmental-friendly brand while taking a walk at Covent Garden.
“Beauty with heart” the catchphrase of the brand, emanates caring for human rights and being environmentally friendly. Although the “green movement” was not exactly well received back then, founder Anita Roddick bore the risks of starting the business that steered in that direction.
“It's easier to be green' now then it was back then. So the business really could have gone either way. Perhaps it was Roddick's foresight, or just luck,” Foong says.
Foong, who believes strongly in The Body Shop, is obviously passionate not only for what the brand provides for, but also what it stands for. “Even with The Body Shop's model Lily Cole, yes, we do use make-up and good lighting, but we don't use Photoshop. Our photographs are authentic and we take this attitude with all our products,” she says.
The combination of passion and provision of the right products assists businesses in surviving the bad times. “When people are less certain, they go back to the basics. People are less open to trying new things. They become more introspective. They become less free and easy'. We find that when people do that, we shine,” Foong concludes.
[Source]
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