ALTHOUGH starting a franchising business may seem easy as it is all in a template, the real hard work begins when the business is up and running. It takes a lot of effort to sustain and ultimately make a profit out of it.
Malaysian Franchise Association chairman Abdul Malik Abdullah says the relationship between a franchisor and franchisee is just like a marriage, at the early stage it could all be rosy and beautiful.
“I mean, when a person has the money, almost anybody can start a franchise business. But the real action and hard work begin when the business is up and running.
“A franchisee must take the franchisor as a ‘guru’ as the latter has been doing this for many years,” he says.
Abdul Malik is also the owner of D’Tandoor Food Industries Sdn Bhd, the franchisor for D’Tandoor Malaysian Restaurant, established about 20 years ago.
D’Tandoor Malaysian Restaurant is the largest North Indian restaurant chain in the country with 15 outlets and is also the first North Indian food franchise in Malaysia.
As a rule of thumb, Abdul Malik says, there is no short-cut in the franchising business and one needs to really adhere to the operation manuals and guidelines given by the franchisor.
“For example, let’s say that a restaurant needs five staff members, but the franchisee downgrades that to three due to low volume of customers – then this is already a wrong approach.
“An increase in volume could be sudden and unexpected and when that happens, the owner will have a hard time looking for extra staff to work.
“This is crucial especially for any newly-open place because bad news can spread like wild fire,” he says.
Abdul Malik also cautions against some franchisees seeking cheaper suppliers for raw materials, rather than the ones recommended by the franchisor, to cut cost.
“Again this is not advisable as the franchisor must have valid reasons to recommend the suppliers that could provide the consistency in raw material quality and reliability,” he says.
Financially, Abdul Malik advises that a franchisee must have extra cash of about 20% from the total initial capital investment as the rolling capital for the next six months.
In ensuring that a franchisee complies with all the requirements, OldTown Bhd executive director Clarence D’Silva says the company actually assigns a field consultant.
“We also send a secret shopper on a quarterly basis to each outlet to assess the quality of service and food from the point of view of a customer.
“Thirdly, we have an operating evaluation system, conducted by our quality assurance people. If the franchisee fails, we would discuss with him on how to actually improve the situation.
“For a franchise brandname, what is important is to maintain consistency across the board,” he says.
For Chaswood Resources Holdings Ltd, which operates both as franchisors and franchisees a number of casual dining outlets, research and development (R&D) is important.
“As a franchisor we set the systems as well as continuous R&D and guidance, and the franchisee gets that for a fee.
“It’s a step up in the right direction instead of making trial and error on your own,” says managing director Andrew Reddy.
As a franchisee to a number of international brands such as T.G.I Friday’s, Reddy admits that he had to really learn to do things according to the franchisors.
“I started to learn their (TGIF) way, and I learnt the Japanese (watami) way. It’s quite thorough. I’m not afraid to say I have learnt something new. That’s why I love both elements. I learn franchising models and then I use that knowlegde for our homegrown brands,” he says. – By Sharidan M. Ali
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