BRAND POWER WITHIN ENTREPRENEURS' REACH

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Brand power within entrepreneurs' reach
Mondli Phewa

18 October 2006 at 06h00

The power of well-established brands may seem out of reach for entrepreneurs, but the truth is it's more accessible than many think. Business franchising makes the clout and credibility of big brand names available to entrepreneurs by providing accessible participation in total business concepts that include everything from operational models to brand support.

In South Africa, in particular, it provides a viable conduit for previously-disadvantaged individuals to enter into the mainstream economy. Franchising is one of the world's most successful business models. In the US a new franchise opens somewhere every eight minutes and there can be no doubt of its economic force and significance. Globally, franchising is an unquestioned success story and is one of the most underrated tools of economic empowerment and growth.

In the US nearly 50 percent of all retail business is conducted through franchises. The trend is similar throughout the world's developed economies. In Canada this figure is about 45 percent and in Europe about 30 percent, with Australia fast gaining ground with about 26 percent of all retail sales.

In South Africa, franchises account for only 7 percent of retail sales, indicating huge potential for growth in the sector. And franchising offers the perfect business model for both existing and potential entrepreneurs, enabling particularly individuals from previously-disadvantaged communities to enter the mainstream economy. Franchising offers a total package to entrepreneurs, from proven operational models to business planning assistance, and from established branding to advertising and marketing support. ChainsMost franchise chains also offer economies of scale through the syndicated purchasing of raw materials.

The Business Partners Umsobomvu Franchise Fund is an initiative of the national government. With an initial investment allocation of R125-million, the fund's specific aim is to make all of the opportunities and benefits of franchising available to the country's new generation of entrepreneurs.

In line with Umsobomvu's vision, very clear qualifying criteria have been established for entrepreneurs seeking investment financing from this fund. Since its stated objective is to provide investment financing for viable youth-owned franchises across all sectors, applicants will - first and foremost - need to have some knowledge of and experience in business. The composition of the business is also be a vital qualifying factor. Entrepreneurs can only qualify for financing from the fund if young black people between the ages of 18 and 35 have an equity holding of at least 30 percent. As specialist investors, Business Partners suggests the following guidelines for entrepreneurs considering the franchising option:

Choose the kind of business carefully, selecting one that suits your lifestyle and skills base.

Investigate your chosen franchise option carefully, considering such factors as the franchisor's track record, as well as training and marketing support offered by the franchise organisation.

Draw up a detailed business plan and discuss it with an independent franchising specialist.

Think through your financial requirements carefully and select an investment company that specialises in the sector.

Use specialists to supplement your own skills when and where necessary.

Consider purchasing your own property - not only is it a sound investment, a property also acts as security for growth financing.