Financial Data
Updated 21 Nov 2017


How conversion franchising could work for your franchise

Did know that the pizza shop around the corner could become your new franchise location? Putting your name on an existing – and popular store – could boost your growth efforts. 


Diana Albertyn, 09 September 2017  Share  0 comments  Print


Related stories


All the answers to your unique business lifestage questions

The influx of global brands franchising on local shores, along with the aggressive expansion of some well-established brands, means the franchisee pool is getting smaller. This leaves you with less options when seeking owners for your next location. 

Enter the conversion franchising model: Quality independent business owners creating another avenue for your franchise to grow its brand.

“Both the independent business owner and the franchisor will benefit from adding conversion franchising to their system,” says Mike Hawkins, vice president of franchising for the The Dwyer Group. “This can add a new dimension to any franchise company and will help franchises continue building their brand in addition to what they are already doing to attract new franchise owners.”

Related: 3 Ways to stimulate skills transfer in your franchise from day one


TAKE NOTE

The secret to successful conversion franchising, for both parties, is extensive communication before the decision, says Jeff Elgin, CEO of FranChoice Inc. “The franchisor needs to ensure potential franchisees are embracing the idea of conversion for all the reasons that are important to the franchise company, without reservation.”


What’s easier than finding someone to invest in your franchise concept, pay to open a new location and run it while you get a cut? Setting up shop with an existing business owner where the property, cash register and staff is already in place – all you bring is the sign outside.

1. Financial approval (almost always) guaranteed 

One of the biggest pain points when seeking out new franchisees is sorting the wheat from the chaff when it comes to financial health. This costs time and money, says Mark Siebert, CEO of iFranchise Group.

“The big problem is sorting through the unqualified buyers. The tighter credit standards and large number of total prospects has been responsible for lower overall close ratios,” says Siebert.

Their current income means that independent business owners have more unencumbered capital and won’t need much funding for set up costs, because they already have an operating business.

2. Established owners know the business

Existing -franchises -conversion

Offering your brand to existing business owners means you know upfront that they are capable of running a success shop. They have the sales records and financial records to prove it. Now all they need from you are your systems, processes, look, feel and name.

“Existing independent business already have real estate, staff and customers and most – if not all – of any other requirements for becoming an operating unit in your chain,” says Jeff Elgin, CEO of FranChoice Inc. “When they decide to convert, you immediately have another operating unit and ongoing income stream."

From the first day of operation, besides what’s in your manuals and the ongoing training, you’ll have franchisees capable of operating in your industry and have proven they’re competent through their independent business success.

Related: Can a teacher own a successful business?

3. Easier to incorporate operating systems

Your new franchisee may lack good marketing and sales systems or Internet and social media presence, but belonging to your umbrella not only will they draw new customers, they’ll bring their loyal customers with.

While you provide them with buying power, which could help them to compete better and attract new business, the benefits it makes independent business owners very receptive to finding additional and new methods to improve revenues they have lost over the last couple years, says Hawkins.

“If a franchise brand has better systems, training and coaching than an independent business owner currently has, the independent business owner can improve his business results by replacing his systems with the stronger systems the franchise brand has,” he explains. 


CONSIDER THIS

In 2008 Liquor City, originally a family business, expanded into franchising, offering independent liquor business owners in South Africa the opportunity to grow in what is a saturated, highly regulated market. The franchise network now represents over 50% of the total business, and the company’s drive and focus is to service franchisees with excellence.

Rate It12345rating

About the author


Diana Albertyn


Introducing the opportunities for franchising in Africa

The African market continues to grow and develop, offering business owners opportunities to expand their franchising brands into the continent. Philip Myburgh, Head of Franchising, Rest of Africa for Standard Bank discusses these franchising opportunities and how the bank is uniquely positioned to assist you and your business with your franchise expansion into Africa.

Login to comment