By Rachel Sim

FRANCHISE models often pose risk of investment and uncertain returns for franchise investors. The common franchise model adopted by most mega enterprises is generally inclined towards monetary benefit as they collect franchise fees.

However, franchise failure rates are higher than we realise and franchisee limitation on knowledge, lack of support from franchisors and inexperience can easily take a franchise venture into a downward spiral.

But all is not lost. The journey can be smooth and fuss-free if the franchisor is willing to go the extra mile.

For example, local brand Chocz has developed a unique model where franchisees gradually take over an existing outlet.

'For many franchisees, the journey is fraught with difficulty. From finding retail space to training staff, franchisees may find themselves lost in the unfamiliarity of the day-to-day operations of a business. For them to start an outlet from scratch, the risk of failure is high,' said Benny Chua, director and founder of Chocz.

Having experienced two previous failures in Malaysia with the traditional model, Mr Chua has learnt from experience and adopted a new approach.

'By allowing them to take over our existing outlets with proven records of existing sales, their return on investment is assured while they can learn fully about the brand and the operations of the outlet,' he said.

Chocz franchisees can enjoy a projected net profit of 30-35 per cent annually.

'We understand that franchisees want to invest for a good return and we want to ensure that we can provide them with that,' commented Mr Chua.

Chocz franchisees do not pay franchise fees. Instead, they pay a fee to take over an outlet that covers the outlet as well as its renovations and assets including equipment.

Fees may range from between $100,000 and $150,000 for a small takeaway kiosk to between $200,000 and $300,000 for a mid-sized shop with a cafe.

Franchisees enter the existing mature outlets and existing Chocz staff show them the ropes and work to integrate franchisees and their new staff into the outlet until full takeover to allow for a smoother transition in coping with day-to-day operations.

According to the Franchise Licensing Association (FLA), common complaints are franchisors not providing adequate support and franchisees not putting in sufficient time and effort.

'Franchisor-franchisee relations are just like a managing partnership in any other business venture, where open communication and managing expectations are crucial in keeping a healthy franchisor-franchisee relationship,' added an FLA spokesman.

However, one Chocz franchisee feels that the support and communication from Chocz's franchise model has enabled him to overcome an otherwise daunting challenge for one who has no experience in the industry.

'My venture into the F&B industry, where I have no experience, has been made possible by such a model and as it is an existing outlet, business commenced from Day One of the venture,' said the franchisee, who wanted to be known simply as Mr Sim.

'We have a good working relationship with Chocz. During the transition process, I'm learning about the products and the business so when I fully take over, I will be able to run it better.'

The transition period in such a franchise business model can be anywhere from two weeks to a month, depending on the franchisee.

'It's a win-win situation I'm striving to achieve and it makes it less painful for the franchisee,' states Mr Chua.

He believes in the success of this model and intends to further expand and stabilise it in Singapore.

'I will continue to expand franchises here. That will free up some of my manpower to develop more outlets,' said Mr Chua.

He also has plans to take the brand beyond local shores but, for now, it's inward consolidation locally before outward expansion to the region for him.

When franchisors go the extra mile to help franchisees, the third party of consumers also stand to benefit from a consistent level of service and brand reputation.

In the client-centric retail world, it is important not to risk consumers suffering a compromised experience and risk brand reputation.

This article was first published in The Business Times.