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Mismatch in Franchise Industry could be fatal to business success

Three pillars which prospective franchisees must consider


Comprising of 11% of the total South African GDP, the franchising industry has become a well regulated sector in the past few years that cannot be ignored.


According to Gerrie van Biljon, Executive Director of Business Partners, the industry growth has encouraged many entrepreneurs to explore the opportunities that the sector has to offer. He says that however, due to the many types of businesses which operate within the sector, should franchisees want to thrive, they need to ensure that their personalities and skills set are suited to the type of business they are looking to partner with.


“Don’t buy a restaurant franchise if you like to go to sleep early,” says van Biljon. He says that although this may seem obvious, he is often surprised by how many first-time franchisees make the mistake of buying a franchise that simply does not fit their lifestyles.


“In the world of start-up franchising, it can easily be a fatal mistake to make because there is so little room for error. Very few people who buy their first franchise have the resources for a second chance once they’ve found out that the franchise they had set their heart on is actually not the right fit.”


He says that lifestyle preference is only one of three pillars which prospective franchisees must consider to make sure that the franchise they choose is the right fit for them. The other two are skills and personality.


“The skills set of the entrepreneur is the most important. Firstly, there is the technical know-how related to the specific industry, such as a beauty salon or a service station. Entrepreneurs should choose a franchise for which they either have a natural skills set, or one in which they have had previous experience in.”


Van Biljon says that irrespective of the industry, a franchisee will always have to be a jack-of-all-trades to a certain extent. “It is important to possess a good general hybrid of skills as often the franchisee is expected to fill the human resources role, the sales role, the office-manager role and be the tea lady.”


He says that franchisees should possess the following skills set in order to run a successful business:

  • Good management ability, which is the core of what the franchisee is signing up for;
  • Sales skills – This is because the whole enterprise revolves around the franchisee’s ability to secure business;
  • An eye for detail and practical problem solving skills. Because the business owner will be fulfilling multiple tasks within the business, he or she should know as much about all the different systems as possible;
  • Networking and relationship-building skills for forging ties with clients, staff, suppliers and franchisor, and
  • Practical problem-solving skills as business owners are faced with many challenges every day.

This list is true for any start-up business, franchised or not, says van Biljon, but there is one set of skills particular to franchising - the ability to follow the rules of the concept. “Franchising is a recipe that requires strict adherence by franchisees, otherwise the service or product will start differing from branch to branch, and the collective power of the brand will suffer. If the franchisee is not somebody who likes to operate under a strict set of rules, then franchising may not be the correct career path.”


He says that being a successful franchisee not only has to do with skills, but also with personality. “Prospective franchisees need to be honest with themselves about their personality. For example, a generally introverted person should shy from retail or service-heavy businesses such as restaurants. Similarly, a sociable, outgoing personality will become frustrated in a desk-bound business where there is little interaction with clients.


“Although nothing can replace common-sense self-knowledge, conducting a personality test such as the Myers Briggs test may assist in processing what individuals already know about themselves. However, the unknown usually lies on the side of the franchise, and a first-time franchisee who knows himself well could still be in for a nasty surprise when it turns out that the franchise requires an approach, attitude or trait the owner simply isn’t comfortable with.”


Van Biljon suggests two complementary methods of avoiding this mistake. “First, potential franchisees are advised to speak to the franchisor that they are interested in. A reputable, established franchise group will have a very clear idea of what kind of personality and skills set are required to make a success of their concept. Some will even have formal descriptions and tests as part of their assessment process.


“Most importantly, it is advisable that franchisees in the group are also consulted as part of the process. This exercise should leave possible franchisees with an opinion about whether they are up to the task, and whether the work and lifestyle is suited to their aspirations,” concludes van Biljon.

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Published in Venture Capital
SA's Leadership landscape shows dismal results with diversity

Senior executives are still being cut from the same cookie cutter with 95% of the top positions filled by white males, nearly 60% of whom are over 50, and close to 70% of whom have degrees in finance.


This has been revealed in a new study on top executives in South Africa, which shows a stereotypical CEO still exists in South Africa despite the significant push towards greater racial and gender equity.


The Jack Hammer Executive Report which was created in order to debunk myths around executive appointments and create an informed view of SA’s business leadership landscape, provides interesting insights into the C-suite, and is intended to become an annual measure of the changing face of top executives in SA.


The study which has created a clear identi-kit of the typical CEO, pulled together free-floating facts and statistics garnered from 80 top companies in South Africa. They comprise SA’s top 40 JSE listed companies as measured by market capitalisation as well as 40 leading corporate businesses from the broader industry, dubbed the ‘Broad 40’.


Debbie Goodman Bhyat, MD of Jack Hammer Executive Head Hunters says that the issue is not that business is loath to transform, but rather about companies’ perception of the risks of appointing non-traditional CEO’s who don’t fit the previously cast mould and might be seen as mavericks or outliers.


“It is no secret that there is some unhappiness about the slow pace of transformation and while good intentions abound, boards remain very risk averse, particularly in tough economic times.


 “Neither the decision makers, nor shareholders they are accountable to, like change. No one seems to want to shake up the status quo, for fear of a negative impact on the bottom line. Instead corporate employment decisions revert to default positions rather than making bold new moves to change those at the helm in top corporations.


“The general feeling is that we have progressed a great deal since the introduction of broad black economic empowerment policies. However, the snapshot our researchers have gleaned shows little progress has been made at the top echelons of South African business.


“Making the top appointment is one of the most intricate decisions especially in an age where accountability and transformation are crucial. The right information and insights are imperative as it takes things out of the realm of gut feel and guesswork”, she says.


The figures show that 15% of the Top 40 CEO’s are black, 5% are female and the vast majority have a degree in finance and at least one post graduate qualification. By expanding the view to the Broad 40, the picture is similar with only 13% black and 10% female.


Interestingly not many foreigners head the top 40 companies in SA – one of the corporate myths that can now be debunked. In the Top 40, 85% of the CEO’s are South African and among the Broad 40, 77% are South African citizens. 


Unsurprisingly, every top executive has at least one university degree and the MBA remains the most popular postgraduate qualification among this group, with 25% of  the top 40 CEO’s, and 20% of the broad 40 CEO’s having earned these. However, the CEO’s in the Top 40 have a significantly greater number of masters and doctorate degrees – 28%, versus only 11% in the broad 40.


Aside from the vast majority holding degrees in finance, 17,5% hold Mining and Engineering degrees, and 5% have a degree in Geology 5% . Only 1% has made it to the corner office with a Marketing degree.


The research shows among the top 40 group, not one of the CEO’s are younger than 40, 22% of them are under 50 and 20% are over 60 years old.


 “Among the larger corporations, significant experience (and by implication, age) is non-negotiable due to the levels of complexity and scale inherent in running such organisations. In the broad 40, age is less of a definer, with 62% of the CEO’s being below 50 years old, only 25% in their 50’s and 7% in their sixties.


“Among the Top 40, younger, more energetic and innovative executives may be overlooked in favour of a steady, older hand. There seems to be a reluctance to take a chance on a leader with ‘potential’. Instead, boards want tried and tested performers, and are more willing to forfeit supercharged outperformance, if it means that they can minimise potential downside risk,” says Goodman-Bhyat.


“Not surprisingly, 55% of these top executives have held their positions for longer than 5 years.  Among the top 40 companies, change is lot slower. These companies are big enough to accommodate several moves by a leader before reaching the CEO role and once there they tend to hold the position for at least a 5 year period, and sometime longer. 

“There seems to be shorter tenure in the broad 40 companies with nearly 50% of the incumbents having held their position for less than 3 years.”


The majority of executives from both groupings are married and have children and regularly play sport. Interestingly the top 40 executives overwhelmingly favour organised team sports such as cricket and tennis while within the broad 40, individual competitive sports are favoured such as cycling, running and golf.


“It is interesting that 75% of all the top leaders participate in sport, many of them at very competitive levels including marathons. Many proudly list their participation in endurance sport events such as Iron Man contests among their achievements, “ she says.

Published in Leadership
Tuesday, 16 July 2013 14:48

Health in the Workplace

Health in the Workplace

Whether you're an entrepreneur running you own business or a professional working your way up the corporate ladder, investing in your health should be one of your priorities, says Dr Anuschka Coovadia, a health and risk management expert at KPMG South Africa.


"Most people don't realise it, but the cost of neglecting your health is often greater than the cumulative return generated by your entire investment portfolio," she warns.

Published in Wellness & Ergonomics

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