SA Franchise Warehouse

Acquisition of Perfect 10 poises Imbalie Beauty for long-term sustained success

2012-03-06T00:29:00.000-08:00

6 March 2012, Johannesburg. JSE-listed Skinwell Holdings Limited has announced its acquisition of the Perfect 10 franchise. The announcement was made simultaneous to Skinwell launching its new name and brand, notably that of “Imbalie Beauty”.

Speaking at the Johannesburg Stock Exchange (JSE), CEO of the newly named Imbalie Beauty Esna Colyn explained how the group’s new name would better reflect its status as a multiple-branded beauty franchisor. “The word ‘Imbalie’ is derived from the Zulu word for flower. As such, it is appropriately symbolic of our group’s holistic and comprehensive beauty offering which encompasses skincare, nail care, hair care and various other beauty products and services.”

She added that the new name and brand also spoke of the potential inherent to the group, “While we’ve been able to announce very positive developments today, we remain extremely cognisant of the fact that our journey towards sustainable and profitable success is still in its early stages. Our achievements up to this point speak of the commitment and long-term focus within the group, captured in the promise of our new name and logo: a flower poised to bloom.”

Colyn reflected that it was the ideal time to launch the new Imbalie Beauty brand, especially whilst welcoming Perfect 10 to the stable. “The acquisition of Perfect 10 will bring us that much closer to achieving our vision of being the best and most desirable beauty franchise company in South Africa. By adding these 55 salons to our national footprint, we will immediately make Imbalie Beauty the largest beauty franchise company in the country, complementing our current Placecol skin care clinics, Dream Nails beauty salons and World of Beauty salons. We will also significantly enhance our presence in KwaZulu-Natal.”

Beyond being an earnings-enhancing acquisition, Colyn added that Perfect 10 will provide the group with the critical mass necessary to negotiate better fee structures from suppliers and financial institutions. “We will additionally be able to take advantage of synergies between it and other salons in the group with respect to training, marketing and advertising, as well as leverage our national gift and loyalty card systems, enabling further cross-selling.”

As the rollout of the new brand gets underway this month, Perfect 10 franchisees can also look forward to a tailor-made roadshow that will welcome them to the stable. “We will be using our roadshow as an opportunity to establish mutually beneficial relationships and build on our collective strengths. With both parties bringing significant value to this acquisition, it’s critical that we use this additional momentum to drive synergies and catalyse the achievement of our long-term objectives,” said Colyn. “This will enable us to move ever closer to our mission of making a positive change in the world through self-improvement and self-empowerment, and by increasing the self-esteem of our customers.”

by Kyla Derrick

LETSEMA Commiunications

SUCCESSFUL FRANCHISING – A QUESTION OF RELATIONSHIPS

2012-03-05T06:27:00.002-08:00

(Part 4 of a 4 part series)

Advice on franchising by Pieter Scholtz, Master Licensee for ActionCOACH SA. ActionCOACH is one of the fastest growing and most successful business coaching franchises in the world today.

In the first three segments of this four part series on customer relationships we discussed external relationships, ideal customers, satisfying customers, the concept of winning customer service, a customer plan and the ladder of loyalty. In this last segment we turn our attention to internal relationships.

Many business people hold the misguided view that because what goes on inside their business is not visible to the public, it has no impact or relevance on their customers or clients. This is where they go wrong. Like having a healthy heart, just because it is inside your body and can’t be seen, does not mean it can be ignored. The way you interact with your staff is vitally important to the well-being of your business.

Let us look at some of the important factors you need to consider to ensure that you establish internal relationships that are conducive to developing a healthy, vibrant business.

CULTURE

When buying or establishing a new business, deciding on the culture you would like the business to adopt is an important strategic decision.

It is important that your staff feel comfortable and happy in their working environment. Asking team members to contribute to the decision making process secures their buy-in and affords them the opportunity to identify with the business on a day-to-day basis. Once you have reached a consensus, write it down and display it prominently at key locations in your workplace.

Every business has a culture. Sometimes, however, the culture develops on its own with nobody directing the outcome, and chances are that these haphazard cultures do not contribute positively to the business. Without direction it is probable that many counterproductive elements, like a propensity for gossip, office politics and bullying, have been absorbed into the culture.

The scary thing about company culture is that once established, it is exceedingly difficult to change. Usually the only way to effect a change is by getting rid of your team, or most of them anyway, and starting again. This is a very expensive option.

STAKEHOLDERS

Internal stakeholders are people or organizations with a direct interest in your business. They are not clients or customers, but are “insiders” by virtue of their relationship with you.

So who then can you classify as internal stakeholders? The list includes:

· Staff members

· Shareholders

· Directors

· Contractors and subcontractors

· Suppliers

· Your franchisor or franchisees

· Affiliates

Depending on your situation there may be more. Make a note of those who apply to your business by putting names next to the categories and weight them according to importance. Some, like team members, franchisees and possibly contractors, will rate 100 percent, while others may only be rated at ten or 20 percent.

Going through this exercise will reveal an interesting relationship graph that you can use to tailor your communication efforts. It will also help you to ensure that you aren’t leaving anyone out of the communication loop.

INTERNAL COMMUNICATION

Communication is the lifeblood of any company. As a healthy body requires blood to flow through clear open veins, so too would a company benefit from an open communication channels policy. Furthermore, in order to facilitate effective communications, a good, trusting, and non-threatening relationship must exist between all parties.

Internal communication occurs within a system, whereas external communication occurs between external systems. Internal communication also exists on various levels, the interpersonal level, the intra-group level and the intra-organizational level.

What is the purpose of internal communications and why is it so important? Why can’t we just communicate as and when we need to?

Internal communication has four main functions:

- To manage information

- To manage the identification of problems and solutions

- To manage conflict

- To manage and regulate behaviour.

Internal communication covers a wide range of important areas, get it wrong and you can expect problems on a wide front. Get it right and you will join an exclusive group of companies who enjoy fantastic working relationships with all their stakeholders. Internal harmony leads to greatly increased productivity and efficiency, which in turn will manifest itself on your bottom line.

FRANCHISE RELATIONSHIPS

In the franchise industry, relationships play an important and prominent role in the success of any franchise system. There are some considerations to bear in mind that don’t apply to other types of businesses.

The relationship between franchisor and franchisee is unique in that it incorporates both a business and legal relationship, making it more complicated than an ordinary business relationship.

Apart from all the usual considerations that apply to internal and external relationships, overlay your franchise relationship with these special considerations and you will be well on your way to running a successful franchise operation.

1. Keep your relationship with your franchisor or franchisee cordial. The unique nature of the franchise relationship lends itself to developing close relationships with the inherent temptation to develop friendships. Crossing this line my in time compromise the franchise business model. It is the nature of business that disagreements are certain to arise and you may have to resort to mediation. Also, friendships can be abused. For example: Franchisee: “Come on John, don’t worry about it. It is going to be just fine. Remember last year when sales were down and I missed two royalty payments in a row? I came good then didn’t I?” As a business owner, taking advantage of a friendship is one of the most dangerous things you can do. Fall-outs will be nastier and more traumatic than if you maintained a strictly business relationship.

2. Don’t procrastinate. Make decisions quickly and be firm. Remember, the buck really does stop with you. Avoid the temptation to bump challenges up or down the line by passing it on to your franchisor or franchisees.

3. Business must be fun. Insist on open communication channels and work on balancing your business, private and spiritual life. Don’t allow your business life to dominate to the detriment of your private and spiritual life.

4. Try new things. Don’t stagnate. A franchise business must be dynamic in order to survive. What works today might not work tomorrow. If you try something new and it proves successful, let others in your system know. If you are a franchisee, pass this information on to your franchisor who might want to incorporate it into the system for the benefit of others. If you are a franchisor, actively try new things so that your franchisees can remain at the cutting edge of their industry. Constantly provide them with new ammunition and they’ll love you forever.

5. Don’t think you have all the answers. Business is a two-way street, be willing to listen and learn. Knowledge is one of your best weapons and we can all learn something new every day if only we wanted to. Abide by the system. Remember that it has been tried and tested and do what the system requires of you. A franchise system can be likened to baking. If you want to bake a chocolate cake, follow the recipe and you’ll end up with the chocolate cake, but deviate or leave out any of the ingredients and the result will not be what you were after. Remember, when you buy a franchise, you are buying a system, so use it. If you don’t, you’d be better off starting your own business from scratch.

6. Learn to ask for help. Pride comes before the fall. Being too proud to ask for assistance will get you nowhere.

7. Be the victor, not a victim. Focus on your own success rather than finding fault with your franchisor, as doing so will make you no friends. Also, don’t be one of the noisy people who finds fault with everything. In avoiding responsibility and blaming others for your own shortcomings you will become the victim of a self-fulfilling prophecy and fall into the trap of digging your own grave.

8. Lastly, one of the keys to success in franchising is to select your franchisees with care.

ActionCOACH Business Coaching

086 122 6224

www.actioncoachsa.co.za

Maister (a bridge Wealth product) announced as the SA Franchise Warehouse 2011 Business Opportunity of the Year

2012-03-02T01:26:00.000-08:00

1 March 2012

bridge Wealth, a division of the bridge group founded in 1994, was established to take advantage of the lucrative profits generated in the R43 billion per annum South African short term loans market.

The bridge group consists of 11 companies, including the 175+ SA MultiLoans branches. The bridge group head office is situated in Lynnwood Glen, Pretoria, from where they run their R150million-per-month-turnover companies.

Due to major success in 2011 and tremendous expansion plans for this year, the group has undergone a complete revamp on 1 March 2012.The loans division consolidated into one and rebranded under the name of bridge.

Therefore, Oneserv rebranded to bridge Wealth , and the well-known Money Masters business opportunity rebranded to Maister.

This rebranding allows the companies to streamline their marketing campaigns and operate the loans divisions uniformly.

With the Maister business opportunity, bridge Wealth invites entrepreneurs to become credit providers in the short-term loans industry. For a minimum capital input of R1 000 000 the Maister business owners earn 19% on their capital.

With 186 business owners registering last year and the business opportunity not requiring any office premise, equipment, staff, marketing, skills or experience (with absolute minimal risk and less than an hour per day business involvement), Maister has been voted the best business opportunity in 2011.

SA Franchise Warehouse CEO and former chairman of the Franchise Association of South Africa (FASA), Kobus Oosthuizen, congratulates the bridge Wealth team on their success.

“Being involved with bridge Wealth and contributing to their incredible growth throughout 2011 has been a fascinating journey, which we are very proud of being associated with.”

Oosthuizen says that any brand that can boast over 200% growth and a 100% success rate in one year, deserves to be acknowledged. The fact that each individual that bought a business opportunity received their return on investment adds to this incredible achievement. He adds that it is also worth noting that of the 186 business opportunities sold, not one business changed hands, which also makes a powerful statement towards the credibility and service levels of the bridge Wealth team.

The bridge Marketing Director, Johan van Wyk, proudly acknowledges the SA Franchise Warehouse Award.

“bridge Wealth is extremely proud to receive the SA Franchise Warehouse 2011 Business Opportunity of the Year award and we have enjoyed partnering with an organisation that has contributed to the success of our brand. We look forward to seeing the partnership continue for years to come.”

Van Wyk has the following to say about Maister.

“The reason for the success of the Maister product is much bigger than what it appears. It takes a lot of hard work, planning and time to establish an infrastructure capable of creating and sustaining this level of demand. We have become industry leaders in matching supply and demand in the loans industry.”

The official presentation of the award will be done at the rebranding event held on 16 March. Says Oosthuizen: “I look forward to acknowledging the efforts of bridge Wealth and presenting them with the SA Franchise Warehouse 2011 Business Opportunity of the Year award.”

For more information on SA Franchise Warehouse, please visit their website at www.safw.co.za

/Ends

Issued by : Nelson Camara

SA Franchise Warehouse

012 6618678 / 072 287 3796

On behalf of : Kobus Oosthuizen

SA Franchise Warehouse

012 661 8678

INTRODUING A FIRST IN FRANCHISING: THE TOWNSHIPS PROJECT’S MICRO FRANCHISING LAUNCH, - TRADE SHOW & WORKSHOPS

2012-03-01T06:32:00.002-08:00

The Townships Project was created in late 1998 as the brainchild of Martha Deacon, a Canadian national, in response to then President Nelson Mandela’s call to action to do something about the poverty in his country.
Since its inception The Townships Project has been tireless in its fight against poverty, working to extend small loans to start or expand small businesses, while also exploring how to make these loans more effective. In this light The Townships Project is exploring evidence that microloans are more effective when combined with Asset-Based Community Development (ABCD), Corporate Social Investment, Enterprise Development and Micro Franchising. During 2009 steps were taken to develop informal partnerships in these areas of interest and as South Africa searches for ways to rapidly scale business ownership amongst the 40% of its population subsisting on $2 a day, these partnerships have grown in strength.

It has long been known that people at the base of the pyramid have the same needs and aspirations as those higher up. Deacon decided to formulate a strategy that, with the help of key industry role players, could tap into the bottom rung of the pyramid to develop micro-franchises that would be accepted by communities and stimulate job creation. With this in mind she approached Dr Mike Herrington, the Director for the Centre of Innovation and Entrepreneurship at The University of Cape Town’s Graduate School of Business, to explore the possibility of launching a micro-franchising initiative.

The result of their collaboration is the Micro Franchising Launch - Trade Show and Workshops. Based on a 4 wheel drive approach, the four important drivers are asset-based community driven development, finance, Corporate Social Investment and Enterprise Development and Micro Franchising . Mobile Technology is also integrated in this process.

Asset Based Community Driven Development

Asset-based community driven development encourages communities to assess their own assets. In the process of evaluating their social connections, knowledge, skills, natural, institutional and business rights and entitlements from the state, they start to understand their strengths. As part of the assessment they tally all income flowing into the community, be it from wages, diaspora or government transfers or other sources, and then trace how it is spent. For many communities the asset and income assessment exercises provide a “lightbulb” experience, prompting exclamations such as: “Wow! We didn’t realize how much we had and how much we earned, and we certainly didn’t realize how much we were spending OUTSIDE our community.”
When communities truly understand what they have, they can plan how to use it to get what they need. The assessment then provides the basis for creating a plan to keep the income circulating in their community, ultimately creating more wealth in their own community. This plan may involve starting or supporting small businesses relating to poultry and egg production, goat’s milk, dressmaking, bicycle repair, health services and other areas fundamental to the community’s welfare.
Micro Franchising
Micro Franchising recognizes that franchising is, quite simply, the most successful business model ever created. Franchising takes a successful business and replicates it using consistent, well-defined processes and procedures, creating a brand while procuring inputs, recruiting and training franchisees, and continuously improving the business model.
Micro Franchising offers this model to the poor, bringing affordable business ownership and training, reliable systems and supply links as well as family employment to many of the businesses communities recognize they need.
Through the involvement of reputable national and international franchise experts, lending their vast knowledge and influence to the Micro Franchising Launch project, The Townships Project is set to break new ground in the franchising arena.
Finance

Getting the ball rolling invariably requires the involvement of micro financiers who have well established relations with communities across the country. Micro financiers such as Women’s Development Businesses Group (WDB) and the National Youth Development Agency (NYDA) have long since known that stimulating micro Enterprise Development within communities, stimulates growth opportunities. The Townships Project is grateful for the support of such organizations as Thetla Finance, Women’s Development Business Microfinance (WDB), Phakamani and Tutuwa Community Investment Fund and the Standard Bank Group.

Corporate Social Investment and Enterprise Development

The corporate sector, through Corporate Social Investment or Enterprise Development funds, enables the micro enterprise owner/operator to receive the necessary support required to make a success of their business. The support from Standard Bank, Legalwise, the Rand Water Foundation, Scorpion Insurance, the Department of Social Development and the Department of Trade and Industry (DTI), who all believe in this strategic approach to replicating successful micro-franchises, has been invaluable.

The first Micro Franchising Launch -Trade Show and Workshops, sponsored by Standard Bank, Legalwise, Rand Water, Scorpion Insurance, The Townships Project Canada and the Comart Foundation, was held in Khayelitsha, just outside Cape Town, during August and September 2011. The launch was attended by several Corporate Social Investment and Enterprise Development managers, franchise experts and key role players from Government. Delegates were party to several plenary sessions where they were able to gain valuable information and knowledge from the experts. Legalwise assisted in creating a shortlist of 15 businesses from amongst the launch participants, from which five were selected to be franchised. Allowance has also been made for existing businesses who wish to downscale their current operations, so they may be applied to townships and other rural communities in affordable micro packages.

We look forward to bringing you news about The Townships Project’s progress and successes with each issue of SA Franchise Warehouse.

For more information about The Townships Project you are invited to contact Jayshree Padayatchey at padaytcheyj@telkomsa.net

New pizza man scoots into town

2012-03-01T06:27:00.002-08:00

1 March 2012

Ferndale will once again have hot, tasty and fast pizza served to them, as Scooters Pizza Ferndale has reopened under the new ownership of Sizwe Dhlomo.

The stores oven doors reopened on 27 February at the Tokai Shopping Centre on Malibongwe Drive, Ferndale.

Taste Holdings Food Division CEO, Christo Calitz asserts that Scooters Pizza Ferndale is ready and excited to be serving local residents again.

“We are excited to be operating in Ferndale once again, and as customers have come to expect, we will continue to offer them supreme meal offerings and quality service which patrons have become accustomed to.

“Further, the stores location in the bustling shopping centre provides consumers with a convenient and quality option to curb their appetites after a long day.“

Calitz adds that Dhlomo’s new approach and management style will help the store flourish.

“I have full confidence that Sizwe’s fresh, innovative and unique approach to management will ensure that Scooters Pizza Ferndale not only lives up to our franchise’s high standards, but will also entices many people to become regular customers at the store.“

As with all the franchise’s outlets, Scooters Pizza Ferndale will offer customers a wide range of tasty meal options, including specialty and gourmet pizzas, subs, pizones and desserts.

Calitz concludes that Scooters Pizza aims to create long term success for its Ferndale store.

“We are confident that Scooters Pizza will quickly become a firm favourite in Ferndale, and will enjoy many years of success.”

For more information on Scooters Pizza, visit their website at www.scooterspizza.co.za

Issued by : Madelain Roscher

PR Worx

011 896-1818 / 083 468 6819

On behalf of : Christo Calitz

Taste Holdings

011 608 1999

Maxi’s Three Rivers has new owners and a new look

2012-02-28T21:50:00.000-08:00

28 February 2012

Maxi’s Three Rivers, located at the River Square Shopping Centre in Three Rivers, Vereeniging, has recently undergone a physical and managerial transformation. With a stylish new look to complement the delicious meal offerings, new owners Morne and Luzaan Britz are confident that the store will continue to flourish by serving the community’s needs.

The restaurant’s fresh and modern appearance is sure to attract consumers who have an appetite for tasteful décor and mouthwatering meals.

Morne Britz says that the revamp will greatly benefit the store.

“I believe that the make-over to Maxi’s Three Rivers will immensely improve the ambience and general perception of the restaurant as consumers will be welcomed in a friendly and more attractive atmosphere. I am confident that these changes will help retain existing customers and attract new ones, as they will embrace the design changes that the store has undergone.”

Taste Holdings Food Division CEO, Christo Calitz embraces the new owners.

“I would like to welcome Morne and Luzaan to the Maxi’s family. Undoubtedly, their engaging and dynamic style of management will prove highly beneficial to Maxi’s Three Rivers, and result in an outstanding service offered to our existing client base.”

Britz says that he believes in a hands-on style of management, and will therefore try to involve himself in the everyday intricacies of operating the store. He adds that he will also pay attention to community relations, and is planning to implement a variety of initiatives in the near future.

Calitz concludes that the change of ownership and store revamp will reap long term success for Maxi’s Three Rivers.

“Morne and Luzaan will provide a fresh perspective to Maxi’s Three Rivers, and I am positive that their relevant experience, as well as the revamped design, will help ensure that the restaurant establishes itself as a firm favourite in the Vaal area.”

For more information on Maxi’s, please visit their website at www.maxis.co.za.

Issued by : Madelain Roscher

PR Worx

011 896-1818 / 083 468 6819

On behalf of : Christo Calitz

Taste Holdings

011 608 1999

Don’t go into business with your head in the clouds...

2012-02-27T07:13:00.002-08:00

be aware of the problems and pitfalls that await the unwary new business owner

By Bob Power

In this first segment we look at the major problems typically encountered when entering business. Buying a business and making the move from employee to employer can be extremely stressful, placing financial constraints on the buyer and causing tension amongst the family.

Once you have accepted the challenge you must also accept the risks and liabilities. Get it right and you will be rewarded, but get it wrong and a business that is destined to turn belly up may be where you are headed. At present the failure rate of small businesses is regrettably high, with some estimates suggesting that as many as 70 percent of new businesses go bust in the first two years.

The good news is that many now successful business owners failed in their first, and sometimes subsequent business endeavours. It is in learning from each experience that they eventually achieved their objectives and rewards. Important to remember is that while you may be the boss, not acknowledging that the bank manager and clients/customers control your destiny, is the pathway to disaster.

Well known financier Warren Buffet has stressed that going into business is akin to marriage, and his words of wisdom are “Don’t rush into marriage, take your time”. In approaching a business opportunity “Don’t rush where angels fear to tread” may also be considered good advice.

Whether you are starting or buying a business, consider the following points, bearing in mind that often when a business fails it is because these factors have been ignored:

If you have no understanding of the business, its products/services, or the sector in which it operates, or if you have any doubt, walk away. Also understand the legal entity, such as close corporation, under which the business trades.
Be aware of the jargon and legalese used in legal documents. Let the signer beware - under no circumstances put your signature to a document when you do not understand all the terms. If there is anything you don’t understand, ask for clarification.
The essential requirements necessary for success centre around, but are not limited to, having the necessary business knowledge, sound management skills, adequate capital and access to sufficient resources.
Be honest with yourself. Take the time to submit to an evaluation to satisfy yourself that you have the right mental approach, aptitude and financial resources to enter into business.
Attaching an inflated value to and paying too much for a business.

Q: What is a business worth?

A: Whatever the buyer is prepared to pay and the seller is prepared to accept.

Understanding that the seller will tell you the truth, the whole truth and anything but the truth. Let the buyer beware – the seller will dress up the business to hide vital flaws. Do your homework and with the help of professional advisors conduct a thorough due diligence. Understand what you are buying, and part of that is understanding why the business is for sale. As the saying goes – why sell the goose which lays the golden egg?
Recognise that cash is king, information is power, profit is sanity, turnover is vanity and the spoken word is cheap. Safeguard yourself by noting down agreed upon points and have it signed off by both parties as soon as is reasonable.
Know your competition and how long they have been in existence. A niche market is the ideal, but often there are many businesses in competition to you.
Increasing incidence of crime and fraud in small businesses has rendered it necessary to become knowledgeable about security and implementing prevention measures. You have a legal obligation to protect your staff, family and yourself.
Build good habits, and keep a clear conscience. Be honest with yourself and with others and don’t be afraid to speak your mind. Sadly, many small business owners are guilty of some form of crime, be it tax/VAT evasion, using the business credit card for personal use, or overcharging for fees.
Negotiation skills can either cost or make you a lot of money. Negotiate everything, but be prepared and avoid committing to costly concessions on your part.
From a financial perspective it is necessary to –

ü know how to earn money, cost products, prepare a budget, control spending, and manage income, expenses and profit.

ü keep to the business plan and understand the difference between income and cash flow.

You are in trouble if your profits or dividends don’t cover you loan repayments.
Don’t be penny wise and pound foolish. Pay for advice when it is necessary.
Cultural differences, especially in BEE partnerships, can cause discontent.

There is no doubt that the rewards for running a business can be great, far greater in fact than anything you can achieve as an employee. However, you must know the risks you are taking. If you are prudent in building your business it will gain in value, and when the time comes you will be able to sell it at a good price. At the same time, the experience gained will qualify you to move onto bigger things, or perhaps even expand your existing business, if that is your desire.

Bearing the above overview in mind, one needs to know how to enter business successfully and then how to stay in business, manage, succeed and expand.

In following segments we look at how to manage, succeed in or expand your business, in short, we reflect on the “how to” of how to stay in business.

Power Corporate Consultants

+27 11 880 7850

www.powerconsulting.co.za

Maxi’s The Bridge incurs significant damage due to violent storm

2012-02-23T05:09:00.000-08:00

23 February 2012

Taste Holdings today released a statement regarding the significant damage caused to Maxi’s The Bridge on 22 February, due to a violent storm which hit Gauteng between 21:00 and 22:00 last night.

Owing to the damage incurred at the restaurant, Maxi’s The Bridge, located in Midrand at the Caltex Star Stop on the N1 highway, will be temporarily closed for repairs. As per legal regulations, all safety measures were in place, including impregnable glass, which also sustained considerable damage. Thankfully, none of the patrons in the restaurant were injured as a result of the storm damage.

Taste Holdings Food Division CEO, Christo Calitz notes that swift action will be taken to restore the restaurant to its full function.

“The Bridge is one of Maxi’s most popular restaurants as it is not only ideally located for passing travelers, but also offers extended trading hours for customers travelling at night. We therefore understand the importance of promptly ensuring the restaurant is fully operational again. Following the assessment of the initial damage, Maxi’s has already put plans into place to repair the damage and restore the full safety functions of the restaurant. It is our hope that patrons will shortly be able to enjoy the wholesome food and welcoming atmosphere of Maxi’s The Bridge again soon.” Calitz concludes.

For more information on Maxi’s, please visit their website at www.maxis.co.za.

/Ends

Words: [215]

Issued by : Madelain Roscher

PR Worx

011 896-1818 / 083 468 6819

On behalf of : Christo Calitz

Taste Holdings

011 608 1999

Google paid advertising: Your secret low-cost marketing weapon

2012-02-22T07:21:00.004-08:00

Google paid advertising: Your secret low-cost marketing weapon

Wouldn’t you like to place an advertisement in a newspaper and only pay for it, if someone reads it? Let me show you how you can achieve this online.

By Francois Muscat

In this article I will tell you how you can generate instant leads for your franchise business by using the most popular online advertising method, Google AdWords, otherwise known as Pay Per Click (PPC).

With more and more evidence of a spiralling economy and budgets being cut as a consequence, marketers and business owners are searching for ways to do more with less. They are searching for high impact, but cost effective ways to get their message across.

Search advertising is well positioned to sidestep much of the inclement economic weather, by providing you with a means to determine how much you are prepared to spend, when you want to spend it, and who you want to spend it on.

What you need to know

By knowing how to set up and manage a Google PPC campaign you will be able to

· Control your ad spend in-line with your budget;

· Ensure that you get a Return On Investment (ROI);

· With a PPC advertising campaign you can specify the day(s), the time of day and the number of people you want to target.

PPC advertising is the quickest way to send traffic to your website to meet your goals. A PPC advertising campaign is like any other business or marketing decision – you have to start with your intended results in mind. Decide what a “goal” (or conversion) means for your business. Whether it is completing a form on your website, buying a product directly on your site with no further interaction required on your behalf, downloading an e-book or getting somebody to contact you for a meeting.

Regardless of what a conversion means to you, PPC can be set up to meet your goals. PPC can be the most cost effective method of producing consistent results in attracting new clients to your website. By following my guide on PPC advertising campaigns, you will be able to drive valuable traffic right to your online form or landing page.

Wording your ad: Tell your clickers what they can expect

Everyone is exposed to PPC ads on a daily basis. It is the paid search results you see at the top and on the right hand side of Google’s “organic” search results.

PPC ads are small. Consisting of only 95 characters they comprise a heading followed by two short lines. In order to grab attention and draw in traffic they need to be concise, so take care when planning the copy of your PPC ad.

Writing a good PPC ad is almost an art form in the digital marketing world. You need to provide all the necessary information in a limited space, but the most important aspect is writing a good, clear call-to-action. People need to know what is going to happen once they click on your ad. Will they be on a page that lets them buy the product online, fill in a form, get a free trial, download a Whitepaper or receive a discount on a product?

No clear call-to-action, or a lack of follow-through on what was promised, are amongst the main reasons why PPC advertising campaigns fail. Rather than sending them to your website’s Home Page or a page about your company’s history, create a well-designed landing page that takes them through the purchasing process, Whitepaper download, or whatever your particular goal is, and make it easy for them to complete the transaction. It should not be necessary to hunt around for what they are looking for after they clicked on your PPC ad.

Increase conversions with niche ad groups

One-size-fits-all ads don’t work. To target different searchers you need ads that speak directly to their needs. Your ads should be:

· Themed, concise and focused on only one type of keyword phrase;

· Writing ad groups are for organising your ads, not your keywords. A set of ads will have the same theme, but different keywords;

· You need around 15 to 20 keywords for each ad group. These ads will lead clickers to a dedicated landing page that allows them to complete their goal with ease.

The reason small, themed and exclusive ads work well, is because search engine users want to see exactly what they are looking for in search results. Provided you have written an ad that targets searchers based on what they are looking for, clicks happen quickly and easily. When they click on your ad, send them to a landing page that is designed around their specific search criteria. If visitors have to scour your website for information, you will lose conversions.

Why you need long-tail keywords

Long-tail keywords are very targeted, highly relevant to searchers and are less costly than highly competitive, single or double keywords like “bank loans” or “printers”. While long-tail keywords get fewer clicks and impressions, because they are more specific to the searchers criteria, they are more likely to convert a searcher.

People who type in single keywords are looking for broad information and are not necessarily serious buyers – they might be, but converting them will take more time and effort. A searcher who types in a long-tail keyword, like “second hand printing machines Gauteng”, however, will not only be easier to target, but the ad spend on each conversion would cost less.

Dynamic Keyword Insertion: take the guessing out of PPC

Digital marketers employ varied strategies to choose relevant keywords such as keyword research for example, which shows you statistics for phrases that get typed into Google. But what if you could create an ad that mimics the exact phrase the searcher typed in, without any further effort on your part?

Searchers are more likely to click on an ad with the exact same search phrase they typed into a search engine. Dynamic Keyword Insertion, a sophisticated and refined PPC strategy, works by substituting a variable keyword phrase in your ad copy with the keyword the searcher typed in. When your ad comes up on Google, the keyword the searcher typed in will be bolded within your ad copy, making it an extremely effective and appealing paid search strategy.

How to do it:

Say you’re selling printing machines online. Write your first line in this format:

{Keyword: Printing Machines}

For this to work, your ad must be linked to a specific ad group. Forget about broad match phrases, if your ads are too vague and far reaching, you run the risk of creating nonsensical ads. If somebody searched for “second hand print machine” and your ad is served, the first line of your ad will look like this:

Second Hand Print Machine

If your search term is too long (more than 25 characters including spaces), the default from your original ad will appear:

Printing Machines

Tweaking and perfecting your campaign

If you’re looking for a marketing strategy that allows you to generate data quickly, test ideas and promotions while simultaneously giving you the opportunity to continue tweaking your campaign and learn from results, then paid search is for you. The trick to optimising your PPC budget and conversions is continually updating and refining your campaign.

A common mistake people make is launching a paid search ad campaign and then neglecting it. A few days of neglect could easily cause you to lose ad position, drop below your competitors’ position and, most alarmingly, lose conversions.

I often advise marketers to start by writing three or four ads per ad group and let the ads run for ten to 14 days. Google Analytics and AdWords can track your ads’ success rate and show you which two ads had the highest conversions. After two weeks, keep your two top performing ads and rewrite the remaining ads. Repeat. Everyone, from experienced digital marketers to people running their own campaigns, should use this method. It achieves the best results for your PPC campaign because it forces you to continue testing, tweaking and optimising. You will be surprised at how quickly you learn what works and what doesn’t.

When should you outsource your PPC campaign?

By following this guide along with the PPC management table at the end of this article, you will be able to set up a PPC campaign for your franchise. There are, however, certain indicators that will let you know when you should consider outsourcing your PPC campaign to a professional marketer. Outsourcing your campaign to a digital marketing expert ensures that you have experienced people monitoring, tweaking and optimising your clicks and conversions, and it also pays for itself.

Here are some triggers to look out for:

1. You are not able to spend your PPC budget

In traditional marketing, coming in under budget is a good thing. With PPC it is a sure sign of underexposure. A professional digital marketer can take your campaign to the next level and maximise your results by advertising in more places and spreading your advertising more effectively.

2. You have depleted your budget before the end of the month

There are a few culprits that need to be investigated if you are blowing your entire monthly PPC campaign budget in a few weeks. Are your landing pages converting clicks into conversions? This is a common problem – don’t fool yourself into thinking you don’t need to create specific landing pages for your ads. Are your ads descriptive enough to send quality leads to your site?

3. You don’t have time to manage and tweak your campaign on a daily basis

Many of the PPC campaigns we manage are not the first attempts at paid search advertising. More often than not, marketers set up a PPC campaign to “see what happens”. While they get clicks, hits and leads, they fail to convert these into clients and soon the PPC campaign becomes a big black hole of ad spend, with nobody tracking the goals and conversions. A professional can help you establish predefined metrics and identify PPC trends, patterns and opportunities that you can capitalise on.

4. Reviewing your creative elements every week is too time-consuming

Most business owners are too busy to tweak character-restricted ad copy, search for new keywords and group ads every week as is necessary for a successful PPC campaign. Digital marketers will know how to test and change headlines, ads and the design and wording of your landing page to keep testing and optimising your campaign. Even so, weekly maintenance is necessary and if you don’t have the time to attend to this, it is time to consider outsourcing.

5. Your campaign isn’t adapting to your business

As explained in the previous article, your digital marketing campaign should be a perfect reflection of your real-world business. If your PPC campaign is not advertising the promotions your business is running, if you’re still offering a Christmas sale even though it’s February, or if your new products aren’t being broadcasted in your campaign, you are doing it wrong. You don’t want to pay for clicks and website traffic generated based on an out of stock or discontinued product. Working with a professional lets you carry on with your marketing while someone else makes sure your PPC advertising is in sync with your business needs and goals.

In the next issue we discuss how to use Search Engine Optimisation (SEO) to draw your target market to your website.

WSI Online Marketing Specialists

+ 27 11 468 3138

www.wsioms.co.za

Who is killing the restaurant industry?

2012-02-21T07:53:00.000-08:00

By Michael Said

Investigating the suspects – Capitán Franchisor

“Franchising in not a democracy,” boomed the deep voice from across the room. “This is my brand and I will protect it at all costs!”

The statement above could conceivably have been heard at any one of hundreds of franchise meetings held around the country each year. Only names and places have been changed to protect the innocent. The precarious relationship that exists between franchisors and franchisees has been a topic of debate for many years and will likely continue so for years to come.

Is the franchisee to be treated as a partner? Absolutely. Without him/her there would be no income for the franchisor and they are dependent on each other for growth and survival.

Should he be treated as an employee? Well, they are expected to toe the line, to work within the constraints of the franchise agreement and are subject to certain penalties if they step out of line.

Should they be treated as a customer? Well, they do pay the franchisor a monthly fee, in return for which they expect certain deliverables and they did after all, for a hefty fee in some cases, buy the rights to trade under the franchisor’s brand name.

If at this stage you are feeling a little confused or unsure, we say: “Welcome to the wonderful world of franchising”.

Wikipedia defines franchising as follows: ‘Franchising is the practice of using another firm’s successful business model.’ Most franchisors would describe it as: ‘the practice of using another firm’s successful business model just so that you can try and do it completely differently and then blame us when it doesn’t work!’

To sum up the relationship in one short sentence: “A happy franchisee is one who is making money.” And there are not many happy franchisees out there at the moment!

The relationship hasn’t suddenly gone bad. Franchisors haven’t suddenly become money grabbing lowlifes who prey on the innocent. Some might say they have been that way for years, and franchisees haven’t suddenly become independent, lazy, brand-destroying, reprobates with absolutely no foresight or ability to understand the value of the brand. They too have been described that way since time began. Of course I am being facetious and inappropriate, but now that we have that out of the way we can attempt to discover where things are falling short and what can be done about it.

In order for any business, regardless of type, size or years in operation to be successful, you need the following departments in some form or another, and if you are a one man business you are probably trying to do it all.

- A Finance and Accounting division. Finance plans for future growth and long term stability and Accounting takes care of the day-to-day expenses and bookkeeping duties.

- An Engineering and Production division. Engineering plans ahead, developing new products and models and Production will produce these today.

- An HR and a Personnel division. HR is responsible for the future development of your workforce, ensuring that there is adequate manpower and skills for the company to build on while Personnel looks after the day-to-day welfare and attendance of the workforce.

- A Marketing and a Sales division - and they are not the same thing! The marketing department develops the strategy and the medium with which to take your company or product to market and your Sales team will go out there today and sell it to them.

The common thread is that Finance, Engineering, HR and Marketing all take care of the future of the company with the franchisor assuming responsibility for these roles, while Accounting, Production, Personnel and Sales take care of the now side of the business, which is the responsibility of the franchisee. The problems in franchising arise when either one or both parties are not delivering on their side of the bargain.

Let’s face it, as a franchisee, hiring a Finance, Engineering, HR and Marketing department or external consultants would cost you considerably more than the five to seven percent you are paying in royalty or management fees, so perhaps you should ‘shut up’ and get on with executing your side of the deal. If, on the other hand, you are not getting the input and the support you were either promised or were expecting, it is time to speak up and speak up loudly.

So what role is the franchisor playing in the Death of the Restaurant Industry in South Africa? Well, the role is multifaceted and we will start at the very beginning.

There is little or no doubt that a number of the concepts offered as franchises should not even be operating on their own, let alone as a franchise. Stricter laws need to be in force before you can take money from an unsuspecting public. While the Franchise Association of South Africa (FASA) is doing a fantastic job of setting controls and monitoring in place, it is not illegal to start a franchise company without being a FASA member. The Consumer Protection Act, having shifted the burden more firmly onto the shoulders of franchisors, may resolve some of the problems, but the onus rests with the potential franchisee to do his homework before signing.

Next is “the joining fee”. This is the upfront money paid for the right to use the brand name and for the training and preparation that a potential franchisee will undergo. Unfortunately the preparation and training is often not forthcoming and new entrants are left to sink or swim on their own, and regrettably it is often the former. Of course the company has a right to charge an entry fee for joining their organisation and the training they will provide, but if there is no support structure, the manuals and documentation are either nonexistent or outdated and the value of the brand has been overstated, then surely somebody must be held responsible. But please remember the Latin phrase “Caveat emptor” – Let the Buyer Beware!

Now, if charging an upfront fee when you are offering little to no support seems unreasonable, then charging it a second time is surely bordering on criminal. All too often the first poorly vetted, hardly trained, badly prepared and over matched franchisee fails miserably and is left to pick up the pieces of a failed venture. He is left facing financial ruin and wondering why he failed when ‘anyone else’ would have succeeded. Now the franchisor goes out in search of another ‘victim’, sorry I mean franchisee, and the cycle stars anew. No vetting, no training, no support and... no chance. The problem stems from the fact that the franchisor does not have a sustainable business model for himself, and not for his franchisees. Instead he relies entirely on repeat joining fees to sustain his business. Your failure is his success.

I need to state for the record that this is not indicative of all franchisors and there are plenty of excellent companies out there delivering much more than they promise. They offer excellent support, top notch training and ongoing guidance. It is up to the buyer to ensure they are dealing with such a company. If you are thinking of entering the market, do your homework; speak to existing and ex-franchisees and contact FASA.

So you have signed for a store and put down a hefty deposit. What happens next? Well, you wait for a location, and this too is often in the hands of a franchisor who is desperate to get the store opened so he can collect on another joining fee, demonstrate how well his brand is growing and collect on the ‘rebates’ on the set-up costs. Remember that a rand spent is not the same as a rand earned. An extra R100,000 in set-up costs means you need to earn an extra R1 million in turnover to pay it off. Now ask yourself whether it is worth the aggravation of bringing down the set-up cost? Of course it is.

All too often the franchisor has not grasped this simple concept and believes the cost is what it is… hogwash I say! Times are tough and every rand saved is like ten rand earned. The problem is that quite a number of franchisors are earning rebates on every piece of specified equipment and shopfitting going into a store adding as much as 10 percent to the set-up cost that already runs into hundreds of thousands of rands. Remember, it is your money. Insist on a full disclosure of rebates before you sign.

Poor site selection, lack of upfront and ongoing training, no innovation, no sustainable marketing strategy, no vision for the future, no systems and procedures and a total lack of respect for the fact that the franchisee is a bottom line company as opposed to their top-line business model... No, this is not the state of the entire industry, but if you are a franchisor guilty of any or all of these, it is time to shape up or ship out. The industry has enough challenges without your help.

There are a number of other areas relevant to our topic that also cause for concern.

Undisclosed rebates on specified products
Substandard specified products
Increase in fees without increase in deliverables
Hindering the sale of businesses
Lack of understanding of the challenges
No solution to current problems

The list goes on and on and the casualties are mounting fast. While I have much to say on the subject of percentage or fixed royalties/management fees, disclosure of rebates, price fixing, collusion, unscrupulous business practices and the like, we will leave the rest for future discussion.

Once again I will stress that there are many ethical, honest and highly sustainable franchisors in the marketplace doing a fantastic job of empowering people and creating wealth and opportunity for many. I can only hope they will come out in favour of this article and work with FASA to reverse the image the industry is slowly gaining from a few rotten eggs.

We have covered a number of external forces at work in Killing the South African Restaurant Industry and in the next two chapters we move a little closer to home by looking at the role of the staff and the owners themselves.

Michael Said often refers to himself as “Just a Waiter Who Got Lucky!” After 22 years in the hospitality industry Mike brings his own brand of humour and understanding to the weird and wonderful world of marketing and franchising. His company, brandStrategy, specialises in the development and implementation of social media strategy working with companies and individuals from all industry segments, advising them on branding strategy, market development and customer service. You can visit his website at www.brandstrategy.co.za and follow him on twitter at mike_said_what

Chapter five:

Defining key concepts for franchises: Products vs Services

2012-02-16T06:46:00.000-08:00

By Gerhard van Wyk

Products and services are two closely aligned concepts and, in fact, most products have an element of service in them. However, as there is a distinct difference between them it is necessary to establish some working definitions.

Armstrong and Kotler (2005) refer to a product as a key element in the marketing offer, “…anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need”. “Services on the other hand are economic activities offered by one party to another, in exchange for money, time and effort. Service customers expect to obtain value from access to goods, labour, facilities etc, but they do not normally take ownership of any of the physical elements involved.” (Lovelock & Wirtz, 2007).

Franchises marketing products face different challenges to those promoting a service. Understanding the different challenges faced in the marketing of products and services can help franchises establish an effective approach to sales and promotions.

Some of the differences franchises need to consider as set out by Lovelock & Wirtz, 2007 (smallbusiness.chr) are:

Tangibility

Products are tangible, which means customers are able to touch and see the product before deciding to make a purchase, and factors such as packaging and presentation may influence the purchasing decision. Services on the other hand, are more difficult to promote and sell because they are not tangible. Services could, however, be made to feel more tangible by emphasising physical clues.

Relationship and value

Products are inclined to fill a customer's need or want, and this can be used in selling the product. A service on the other hand, is about selling a relationship and the value of the relationship between the buyer and seller of the service. Therefore, the customer needs to perceive the value of the service, which can be harder to communicate. To effectively communicate the perceived value, it is necessary to educate customers on how to make good choices and what to look for. To this end the seller may consider documenting performances and offering guarantees.

One vs many

Marketing products most often involve multiple products that make up the line. For example, motor manufacturers tend to market not just one car. Instead, they have a line of different models to serve the various needs of their customers.

Services typically have a single option. It is often difficult to promote and sell the reputation of one single service over the benefits of many different products.

Comparing quality

If, for example, a customer buys a product to clean his pool, it is easy to judge the value of the product by whether or not it performs effectively. Measuring the value of a service is not so easily achieved.

Return factor

A product that does not perform as promised can be returned whereas a service is consumed as it is offered, lacking the return factor that products offer. Some service providers overcome this by offering money-back guarantees.

Intangibility

Services are intangible. In cleaning, for example, the consumer may not see the cleaning process, making it more difficult for the marketer to leave an impression.

Inseparability

The purchase, production and consumption of a service generally take place at the same time. In an educational environment the relationship between the student and the service provider, i.e. the lecturer, is very important. A student is in the lecture room before, during and sometimes after the lecture and is a factor in the nature of the service. The expectations of the consumption process must be made clearly stated. Let the student know how long the lecture will last, whether additional topics will be covered and what time the lecture will be concluded.

Non-standardisation

How consumers experience a service will vary from person to person. This should be addressed in two steps. First, identify the elements of the service that can be standardised, and then standardise them as much as possible. In this way customers are assured that their consumption experience will meet their expectations. While a customer may need to wait for a table and then wait for his meal, and while the waiting period may vary from occasion to occasion, the food quality should be the same each time. One of the reasons McDonald's is popular across the globe is that the customer knows he is getting a standard burger.

Perishability

Services are deemed “perishable” as it cannot be inventoried. Matching supply and demand is difficult and keeping systems and people “on tap” to provide a service can lead to additional and unnecessary expense, which in turn will increase the cost of the service. For this reason it is necessary that franchisees take care in timing their service offerings.

Regulation

Because services are difficult for consumers to assess, they tend to be more rigidly regulated than products. Moreover, purchasing services, such as legal representation and medical care, are particularly risky endeavours for the consumer. It is imperative that service franchises and their franchisees be aware of the regulations that guide their activities. It may even be necessary to obtain legal counsel which could increase marketing costs.

Word-of-mouth

Word-of-mouth advertising is much more influential in a service purchase than in a goods purchase. This consumer-to-consumer promotion includes Internet communications. The wise marketer will establish a web presence and encourage participation in peer-to-peer web interaction.

While marketing a service is vastly different to marketing a product, in reality, every company has a services business component, even if it is nothing more than customer service. Statistics show that over half of all new start ups, perhaps as high as 75%, provide services only with no product component. Another reality is that angel investors and venture capital groups almost never invest in services-only companies. Their perspective is that these entrepreneurs need only to sell themselves and do not require capital for product development or manufacturing. (www.caycon.com/.../products-vs-services-–-crit....).

FASA’s newly elected chairman issues a challenge

2012-02-13T06:20:00.001-08:00

Are you ready to participate in one of the biggest economic marvels of our time, the sector that contributes almost 12 percent to our country’s GDP?

Are you aware that the South African franchise sector currently offers business opportunities in no less than 17 different business sectors, providing work to approximately 500,000 people in approximately 30,000 franchised outlets? With no less than 550 franchise system to choose from, the good news gets better when we compare the status of our own franchise industry with countries such as the US, UK, Australia and Brazil, and discover that it reveals ample opportunity for expansion into many more business areas.

Personally I believe that the franchise sector can make a marked difference in driving the South African economy. Franchising has the ability to stimulate the economy on so many different levels – from conceiving those brilliant ideas that translate into new franchise concepts, to duplicating those business formats that allow entrepreneurs to invest in their own small businesses. An established franchise network contributes extensively to skills transfer and in turn provides much needed jobs. The resilience of the franchise sector during adverse economic conditions has been proven and we were delighted to note that more than 2,200 new franchised business outlets were established during two of the toughest economic years experienced since the great depression of 1933.

For those considering new business opportunities against the backdrop of the current global economic and financial turmoil, I sincerely hope that the negative press and adverse economic reports have not caused you to become despondent, but rather that you have recognised the myriad of opportunities and solutions presented by the franchise sector. Consider for example, that in its 2011 mid-year estimates, Statistics SA said that the South African population had passed the 50,5 million mark, then consider that all these people, a third of whom are younger than 15, need to live, eat, drink, sleep, dress, work, commute and consume, and that in fact you are surrounded by opportunities and consumers. The question is: “Are you positioned to take advantage of these opportunties?”

On a global front, our changing world is opening up yet more franchise opportunities. As spending patterns change and entrepreneurs look to business sectors where there is an appetite for franchising, we expect that flourishing new industries will emerge. Niche markets are offering one-of-a-kind franchises and an opportunity to get in on the ground floor of a new franchise trend.

Franchising in South Africa has been playing a crucial role in small business development, skills transfer and job creation, a trend that is set to continue as we emerge from the recession. All the while FASA, through its commitment to promoting franchising in line with government’s mandate to encourage economic development, continues to safeguard the environment for franchising to flourish.

Having proven that it can fulfil the criteria for small business expansion and job creation, franchising may well be one of the most important keys in solving some of our country’s biggest problems, including the lack of education, unemployment and poverty. While formal sector employment fell alarmingly in the two years from 2008 to 2010, the franchise sector created 2,300 new business outlets and more than 28,000 new jobs. Government and business should pay more attention to franchising and small business development, giving it a bigger role in their planning for economic growth and employment creation.

Franchising can indeed go a long way in stimulating entrepreneurship and job creation by helping people establish the successful small businesses that form the backbone of the economy. Franchising employs inexpensive, measurable mechanisms to provide training, facilitate skills transfer and unlock opportunities in local communities.

Banks and would-be business owners must appreciate that a tried and tested franchise system allows for well-informed decisions to be made based on realistic financial projections, while also mitigating risk better than in the case of an independently owned business. There is no question that, no matter how good the business plan, when compared to an untested new business, a franchise is the safer option for both the borrower and the lender.

While not immune to the impact of the current economic climate, or the banks’ conservative lending policies, the biggest challenge faced by the franchising sector today, is in communicating the important role franchising can and does play in the economy, and to expand the concept into other industries. Countries such as Australia, Brazil, the UK and US have many more franchised industries than we do. In considering some of our country’s current challenges, I think that energy and water saving solutions, waste-recycling, health care and education, for example, offer excellent opportunities for franchise development. It is even possible that we will see the development of public-private franchise systems for the delivery of government services in the not too distant future.

In my capacity as the newly elected Chairman of the Franchise Association of South Africa, a voluntary organisation that has been representing the interests and growth of franchising in South Africa for the past 33 years, I invite all bona fide franchisors out there to join FASA and become part of what is undoubtedly one of the key representative associations in the country and be recognised as an ethical franchisor that is contributing to our country’s economic growth.

Aspiring business owners who are contemplating investing in a franchise system and business owners who dream of franchising their current business system, are invited to contact FASA, either by calling our offices on 011 615 0359 or emailing fasa@fasa.co.za, or by visiting our website at www.fasa.co.za to find out more about this incredible business format. To guide you through the maze of acquiring a franchise, FASA’s invaluable annual directory contains articles by leading experts who share advice and information on topics which all entrepreneurs should consider prior to taking their next business decision. It also contains a comprehensive listing of all FASA’s members with a snapshot of their profiles and value propositions. For more one-on-one interaction why not diarise the International Franchise Exposition (IFE) proudly hosted by FASA at the Sandton Convention Centre from the 17^th to the 19^th of May 2012. IFE is the biggest franchise exhibition on the African continent, showcasing both local and international franchise opportunities. When visiting IFE you will be able to engage in friendly conversations with franchise experts and seasoned entrepreneurs in an informal environment. For more information on the Franchise Expo, kindly visit www.ife.co.za.

On behalf of FASA’s Council and its Executive Committee for 2012, I wish you success in your franchise business ventures.

Jan Davel

Chairman

+27 11 615 0359

fasa@fasa.co.za

www.fasa.co.za

What is the future of the Real Estate Industry?

2012-02-13T04:26:00.001-08:00

Looking at expectations, market impact and legal considerations

By Jan Davel

During 2012 and beyond, real estate agents can expect a continuing escalation in consumer demand for better service, better information and better value for money. As the Consumer Protection Act becomes more widely known and applied, the proverbial bar will inevitably be raised by consumer behaviour, in the real estate as well as other economic sectors. The ever increasing levels of professionalism demanded of estate agents will require that they give credence to ongoing training and skills development and that they improve their efficiency by embracing new business practices and technologies.

Real estate agents should also consider the more conservative criteria applied by lenders against the backdrop of a global economic recession. Many consumers are also inclined to keep a tight rein on expenditure, as they rebuild their credit records and more importantly, lower their debt exposure. Although real estate offers an underlying asset and remains an excellent long term investment commodity, unlike most other commodities bought on credit, we believe that for some time to come, the challenge faced by real estate agents to convert the bulk of their offers to purchase to successful registrations of transfer, will continue.

To make matters even worse, lenders and other industry commentators are predicting single digit house price growth, slightly below the rate of inflation (around 6%) for most of 2012. In real terms this means a deflation of house prices, except perhaps in isolated pockets of the market where specific circumstances could cause demand to exceed supply.

Now, more than ever before in the South African real estate industry, the benefits of a tried and tested franchise model that allows agents to focus on sales, can be brought into play. All real estate practitioners require, amongst other things, general business skills such as financial management, personnel management and training skills as well as a sound knowledge of the local real estate environment, the legal and transfer processes, finance mechanisms and of course, branding, marketing and advertising.

Visibility, availability, credibility, market share and most of all, profitability, are the basic pillars on which a successful real estate agency should be built during 2012. Since time is an estate agent’s scarcest resource, it makes sense for those who want to focus on sales to subscribe to a well-established and reputable franchise business model. Under the umbrella of a well-positioned and well respected brand, such a model will offer state of the art information technology, compliant contracts and other template legal documentation, up to date and high quality training courses, proven communication, marketing and advertising systems, discounted marketing and advertising material, as well as on-site support provided by experienced real estate specialists.

Each real estate franchisee’s business is still his or her own business with its own fidelity fund certificate, trust account, business account and in the case of some franchisors such as RealNet, even certain elements of its own identity. However, once a franchisee, the real estate agent is no longer operating alone as an independent operator in a very tough real estate market, but as a member of a greater, like-minded family.

Since the real estate industry is a highly regulated industry with various barriers to entry, all credible real estate franchisors evaluate prospective franchisees’ applications against its own selection and recruitment policy. Ensuring that the applicant meets certain minimum criteria will assist in safeguarding the brand against reputational risk. The more stringent the franchisor’s selection and recruitment policies are, the safer the franchisee’s investment in that particular brand.

Now for the good news. Since the franchised sector is now also governed by the Consumer Protection Act, all franchisors are “suppliers” and all franchisees are “consumers”, which means that franchisees now enjoy more rights and privileges, and also have recourse against unscrupulous franchisors. The real estate industry is no exception, and in addition to the already stringent requirements of the real estate industry, real estate franchisors must now also comply with the provisions of the Consumer Protection Act which calls for specific disclosures and mandatory terms and conditions in the franchise agreements, for the benefit of the franchisee.

Further good news for prospective real estate franchisees is the fact that there are real estate franchisors, such as RealNet, who are long-standing members of the Franchise Association of South Africa (FASA), subscribing to this acknowledged authority’s Code of Ethics in pursuit of the promotion and protection of ethical franchise business principles in South Africa, in accordance with internationally accepted standards.

Real estate agents who want to consider a franchised system can now make well-informed decisions prior to committing to any long term business relationships, and they can choose who they want to associate with. For more information on ethical franchising in general, please contact FASA on 011 615 0359 or visit their website at www.fasa.co.za, and for more information on RealNet franchise opportunities, please contact 012 460 4605 or visit www.realnet.co.za.

As a final thought and true to the words of Margaret Mead: “Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.”

RealNet

+27 12 460 4605

www.realnet.co.za

Retirement starts in your working years

2012-02-10T05:11:00.001-08:00

Werner Odendaal, Head of Employee Benefits at Momentum Corporate Consultants, tackles the scary reality of South Africa’s pitfalls when it comes to retirement and what you can do now to ensure you retire financially independent.

By Bronwyn Burns

When dreaming of our golden years, no one dreams of financial hardship and uncertainty. Yet with our economic belts still tight post-recession, only six percent of South Africans are actively able to retire with the security of financial independence.

“The figures show that South African retirement savings rates are now at an all time low”, says Werner Odendaal, CFP and Head of Employee Benefits at Momentum Corporate Consultants. “A vast majority of South Africans find themselves reaching retirement without having done any preparation or planning through their working years.”

Most will have to rely on government pension schemes or be dependent on other family members to provide for them through old age. Many more will have no choice but to work till death. “It is a dire situation in anyone’s language”, says Odendaal, “but it is never too late to start saving. It is important to realise that we have the control to change our mindsets and our thinking about retirement savings.”

It is clear that as individuals we have to take a more active responsibility for the reality of our own retirement needs. A simple and easy-to-follow process for retirement planning is to sit down with a qualified financial planner and construct a proper workable plan. Precise and accurate planning will lay the platform on which to build the future. “No one can, or has ever achieved anything without first designing a plan and then following through with the implementation of that plan. Even if our plans are not the best to begin with, at least it refocuses our thinking on the goal that we are trying to achieve.”

Odendaal explains that having a clear and well thought out goal is the first step to a good financial plan. This goal is essentially a calculation of the amount of capital that you will need at retirement in order to live financially independent. “It is normally described as a ratio, which is referred to as a net replacement ratio. This is the ratio of your replacement income that your capital can provide as a percentage of your last income immediately before retirement,” he adds. “It is generally accepted that we need a replacement ratio of around 60% in order to be financially independent, however, this ratio is very much dependent on an individual’s specific circumstances and needs.”

While Odendaal says that constructing a financial plan requires a far more in-depth discussion, he also believes that one of the reasons people fall short at retirement is because they do not pay enough attention to their long-term financial arrangements and suddenly they realise time is running short to build a buffer to carry them when their pay cheques stop. “Once you have a plan, you then need to implement and monitor the plan”, he explains.

Retirement plans should be reviewed regularly and as part of your current financial planning. There is value in using a regulated financial adviser who should offer you annual reviews and guidance as part of their service.

Taking active and pre-emptive steps for those golden years should clearly be a priority for individuals, but business owners have an additional undertaking to bear. “If you are a business owner and an employer of fellow South Africans, you also have a responsibility towards your employees to assist them with saving for their retirement.”

“This argument is echoed by Government, who are in the process of constructing the long-awaited National Social Security Reforms. One of these reforms is the establishment of a National Social Security Fund. This is a fund to which all formally employed individuals will have to belong,” Odendaal advises.

As a business owner it will soon become essential to gain insight and assistance from a qualified employee benefits professional to understand the implications of such measures. They will also assist you, in a similar manner to the individual approach, to understand the needs of your staff and to put together a retirement savings scheme to meet those needs.

He adds, “The starting point in this exercise is the calculation of net replacement ratios and subsequent contribution and net return requirements for the staff in your company. Once the contribution and net return requirements have been established, an investment portfolio can be constructed or selected to meet the specified needs, which is the net return requirement.”

What is important in this process is to understand that not all staff members will have the same needs. As a result business owners and employers need a product solution that can cater for the various different needs identified. This process is quite complex, and is best managed by qualified employee benefit and investment consultants.

“Whether we are talking about individuals or groups, I have no doubt that we can do a lot to improve our thinking about retirement savings and retiring financially independent. Everyone can have a financially independent retirement phase of our life. It all starts with analysis of your needs, constructing a plan, implementing the plan and monitoring the plan”, concludes Odendaal.

Nothing costs more dearly than the cost of delay – the lost contributions and compound interest that would have been earned if the vast majority of South Africans stopped putting off till tomorrow the vital decision to start saving for tomorrow.

Speak to a qualified adviser today.

If you would like to explore financial independence at retirement for your personal needs, or those of your employees contact Werner Odendaal on 012 684 4282 or at werner.odendaal@momentum.co.za.

"There Is No Such Thing as A Free Breakfast" - Wimpy's Breakfast Gamble

2012-01-20T06:43:00.000-08:00

by Michael Said

Woke up this morning to find Wimpy trending on Twitter, comments and pics on Facebook and even a couple of Foursquare check-ins. What had they done? Stolen someone’s Cinnamon Cola recipe, asked a lady and her guide dog to leave one of their stores, offended the ruling party in Zimbabwe, just invented a cure for cancer or “E” all of the above?

Turns out it was none of the above, all they had to do to get the stores full and everyone talking about them was give away a couple of million Rands worth of breakfasts country wide. Suddenly my inbox started to fill up with questions and comments about this ploy… Why where they doing it, how could they do it, will it work, how long will they keep it up and who was going to pay for all that.

I am not employed by Famous Brands, never have been and am pretty certain I never will be, so the opinions expressed herein are entirely my own and based on nothing more than 25 years of experience in the food industry. I make no claim that my assumptions or opinions are fact and would like to stress that they are just that… Assumptions and Opinions. With that said, here we go. PS I am not employed by Spur either.

So let me begin with the why… that is pretty simple, Spur’s Unreal R19.95 Breakfast has been giving them sleepless nights and empty tables. You get 2 fried eggs, 2 rashers of bacon, fried tomato, chips, two slices of toast with jam and butter. Actually unbeatable and if there is any profit in that I will eat humble pie (available for R19.95 anytime BUT breakfast). Back to Wimpy, you see when you are not sleeping at night you have lots and lots of time to dream up stuff like “Hey, let’s give the breakfast away! Nobody can beat that price. We’ll teach Spur a lesson”

Do you remember the movie “Out Of Africa”? There is a scene where Karen Blixon has just chased a lion away from one of her cows and her man servant Farah says to her “Msabu’s bleeding. She does not have this ox. This lion is hungry. He does not have this ox. This wagon is heavy. It doesn’t have this ox. God is happy, msabu. He plays with us.”

So Spur is not happy, they do not have this business, the Wimpy Franchisees are not happy, they do not have this money, many other restaurants are not happy, they don’t have any customers, the waiters are not happy, they don’t have any tips but the public has breakfast, they are happy!

Many moons ago when Mugg & Bean was but a young upstart finding its way in the world, I held the position of marketing manager and I too used to “dream stuff up.” I once dreamed up a promotion with MasterCard that cost me my sanity and almost cost me my life. Use your MasterCard to pay and you walk off with a FREE bottomless coffee on your next visit. The logic behind it was quite simple “We would rather have you sitting in our restaurant drinking free coffee than sitting in the competition paying for it” You see while you were sitting in the Mugg, you could not see the other restaurants menus. Waitresses, food, specials etc

Customers loved it, Franchisees hated it but Mugg & Bean was soon a household name and everyone was “meeting at The Mugg”. Wimpy on the other hand are already a household name, there is surely not a single Souf Effriken who has not eaten in one, passed one on the road or at least heard of one. So this cannot be seen as a brand building exercise. There is an old cowboy expression, when you go out looking for revenge Dig Two Graves… Nobody wins a price war!

Now, the $64 000 question is, who is gonna pay for this? And if you, as the general breakfast eating public, are not asking this question, trust me, the Wimpy franchisees are! At a guess (an educated one, I think) head office have probably done a MAJOR deal with a couple of suppliers and will reimburse the franchisees at cost price (at least that’s how I would have tried to set it up.) So although this MAY not cost the franchisees anything in raw material there is still the question of staff and operating costs to take into account. How will the whole operation be handled from a VAT point of view?

Now I am a fan of Wimpy’s and my favourite on the road meal is the toasted cheese, hold the tomato on white bread with chips, BUT I can only eat in a Wimpy once a day and if I get to choose it will be when I am not getting a bill. So my thought is that anyone who had the Free Breakfast did not come back again today and maybe not even tomorrow unless it is for the Free Breakfast again. So there is all that lost revenue to account for.

What will happen when the promotion ends, will I suddenly be prepared to pay for my breakfast again? Not at your old price I won’t. Even if I was prepared to forego my Spur R19.95 breakfast for a free one, I sure aint gonna forego it for a more expensive one. What next Wimpy, you are going to have to match the Spur breakfast after this… for ever. Spur’s ticket average throughout the day must make Wimpy’s pale into insignificance so they can afford to break even on breakfast and make up for it at lunch and dinner. I am not certain Wimpy has the same margin for discount.

If you are wondering how long they will keep this up, I would guess (again) that it will run until the end of the month… Just kidding! Any more than one day and there will be blood on the streets, I honestly don’t think they could possibly keep it up any longer without a Franchisee Revolt. I would love to be a fly on the wall the next time a couple of Wimpy franchisees share a moment together (maybe over a Spur UNREAL Breakfast… Just kidding). In fact I just had an evil thought, Spur sends 1000’s of waiters to eat at Wimpy as a thank you.

Anyway, evil thoughts aside, desperate times call for desperate measures and no one is really sure how this will play out in the long run. It is a gutsy move and I take my hat off to the management team who made the decision and to the field consultants who have had to deal with it. Well done Wimpy, breakfast may never be the same again.

Michael Said

http://www.brandstrategy.co.za/

Franchising is flying the flag of sustainable job creation

2012-01-18T07:39:00.000-08:00

The franchise mechanism has been widely used by a range of businesses as a means to expand their operations, and over the years franchising has made a significant contribution to the economy.

By Bendeta Gordon

By creating a number of small businesses (franchisees), supported by the franchisors, franchising has afforded many people the opportunity to pursue self-employment. The franchisees, in turn, create sustainable employment opportunities.

To a certain degree, franchising is able to accommodate the inherent weaknesses within our economy, business infrastructure, business and government mind-set, work force and so forth, to meet the need for job creation.

The current challenges and issues we are facing in South Africa:

· Insufficient numbers of entrepreneurs and managers;

· A young, unskilled and inexperienced unemployed workforce;

· Low investment levels; and

· Insufficient training systems.

These issues can be addressed through the franchise mechanism.

Franchising operates on the basis that a proven business and operational format of distributing/manufacturing goods and/or services exists. In a franchise system:

· The business system is formalized and packaged into a structure that can be replicated;

· Licensed to third parties (who may have no skill or experience in the business format);

· These licensees and their staff are trained by the licensor to manage and operate the business format;

· The licensor provides ongoing mentoring, business support and training to the licensees;

· The licensor markets the products and/or services.

The franchise mechanism addresses the issues raised above by:

· its ability to replicate proven business formats

· its ability to address the specific skill set required for the manufacture or distribution of goods as required by the franchise model;

· providing training and ongoing support to the unskilled licensee;

· facilitating job creation with each new operation unit established;

· the licensor taking responsibility for developing the market to receive the products/services.

The research information provided herein is based on the Franchise Factor® survey, an extensive quantitative research project undertaken by Bendeta Gordon and Franchize Directions since 1994. As at 28 February 2010 there were 29,206 business units operating as franchised brands. Of key interest is the noticeable sustainability of these businesses. During the research period, March 2008 to February 2010, South Africa experienced a slowdown in GDP growth and job losses. According to the Franchise Factor® 2010, there were approximately three business unit closures recorded per brand, between March 2008 and February 2009, and two business unit closures per brand between March 2009 and February 2010.

The low failure rate is a testament to the advantages of franchising, which include:

· Proven business systems

· Well developed brands

· Proven operational systems and procedures

· Proven business management systems and processes

· Support from franchisors in terms of training and ongoing support

· Better access to funding

Employment

Direct employment in the franchise sector includes the management teams and staff employed by franchisors, as well as the management and staff employed in each franchise. The Franchise Factor® research reveals that franchising as a whole has displayed a steady growth in the number of parties employed.

Period ending	Parties
	employed
28 February 2006	390 500
28 February 2008	461 218
28 February 2010	477 623

The continued growth in the number of franchised business units and the direct employment opportunities created, is indicative of the franchising model’s resilience to changes in the economy and fluctuating business confidence.

Transformation

Franchising is widely accepted as a favourable entry point into the realm of business ownership as it naturally creates a positive transformation as far as business ownership development is concerned.

· 36.73% of franchises are owned by previously disadvantaged individuals, and

· 23.28% of franchisees are women.

Myths about franchising

The franchise mechanism is not necessarily well understood by the larger business community. The mechanism, however, offers enormous potential for the provision of services where replication, standardization and geographical dispersion for the distribution of products and services exist. Many believe that control is compromised in a franchise distribution network, when in fact, if structured correctly, operational control is optimal. Franchising is also perceived as only being applicable to fast food outlets and restaurants when, in reality, it operates in a wide range of business categories.

The franchise mechanism can also be adapted to allow the free market requirement for profit to operate on a social enterprise basis. In so doing, there exists the possibility for the provision of state and municipal services in a more productive manner.

Examples of the possible application of franchising in South Africa

Agriculture

In other countries, small scale farming in a structured format has contributed to sustainable employment. Small tracts of land are licensed to farmers who operate in accordance with the licensor’s intellectual know-how to cultivate plant and animal products, while sharing equipment and facilities.

Waste recycling

In areas where waste separation is undertaken by residential homes, licensees can be appointed to collect the waste from these homes and distribute it to waste recycling facilities. The waste recycling facilities can also be franchised and products manufactured from recycled waste allows for a possible third franchised mechanism.

Provision of primary health care

Establishing mobile clinics, in accordance with an ideal operational format, will extend the geographical reach for the provision of primary health care.

Road maintenance in urban areas

This has been executed effectively in China where families are given the opportunity to maintain a certain stretch of road. The maintenance of roads and surrounding gardens can be allocated to licensees who, in turn, are provided with necessary equipment and skills to do so.

Garment production

Garment production can be separated into component parts with each franchisor handling a different aspect of the production process. While one franchisee is responsible for design, pattern development and sample making, another may focus on spreading and cutting fabric, sewing and assembly and finishing.

While this article only scratches the surface as to the extensive possible applications of the franchise mechanism, real application requires resources, intellectual know-how and identifying business/social franchise opportunities to name but a few.

Bendeta is a chartered accountant and co-founder of Franchize Directions which provides development services and training to franchisors and franchisees. She initiated The Franchise Factor in 1994, which is the only formal research initiative determining the economic contribution of the franchise sector in South Africa.

Franchize Directions

Franchise Development & Training Specialists

www.franchize.co.za

(011) 803 0665

THE 10 MOST MEANINGFUL COMPETITIVE ADVANTAGES TO BEING A FRANCHISEE

2012-01-17T07:06:00.000-08:00

By Gerhard van Wyk

A sustainable competitive advantage creates the basis for superior performance and the long-term survival of an organisation in the marketplace, as well as delivering value to the customer. It is important that franchises understand the various ways in which a competitive advantage can be structured. Jooste et al, (2009) and Gilligan et al, (2009) listed the ten, most meaningful, competitive advantages an organisation / franchise must focus on.

A superior product benefit

National Panasonic developed a range of electronic equipment perceived as superior products in the market and are now considered the benchmark against which competitive products in these categories are measured.

A perceived advantage or superiority

Camel cigarettes, with their aggressively masculine image of the “Camel Man”, were able to sell their product at a premium in South Africa. This advantage was lost when legislation with regards to cigarette advertising in South Africa changed, however the same perceived advantage or superiority could be drawn to other product categories.

Low-cost operations

Low overheads, limited product range, low cost distribution and high productivity are factors that could deliver such an advantage.

Legal advantage

Legal advantages are achieved through patents, exclusive distribution channels, copyright or government protection such as tariff and trade restrictions to protect the activities of the business.

Global experience, skills, coverage and training

McDonald’s Restaurants is a global brand that has learnt to adapt its products to the local cultures in each market it penetrates. Many large companies offer specialized training, either free or at cost, empowering franchisees to run their business better. McDonald’s runs its own academy where new franchisees learn how to avoid common pitfalls and maximize their return on investment. Drawing on the experiences of their many franchisees across the globe, they share this vital knowledge with new franchisees.

Superior contracts and relationships

Building superior relationships with customers, government or suppliers can lead to privileged access to important stakeholders with ensuing competitive advantages.

Superior competencies

Superior competencies require that organisations be responsive to the unique and rapidly changing needs of customers. This can be achieved through further market research, superior information systems and employing the best technical personnel. In Business @ the Speed of Thought (Warner, 1999), Bill Gates writes: “The most meaningful way to differentiate your company from your competition, the best way to put distance between you and the crowd, is to do an outstanding job with information. How you gather, manage, and use information will determine whether you win or lose.”

Scale advantages

The cost per unit of manufactured products for example can be reduced by long production runs.

Offensive attitudes

The will to win and competitive toughness in cut-throat markets can be considered under this heading.

Superior assets

Here we consider physical assets such as the latest machinery and intangible assets such as advertising and overheads. A South African example is the petroleum manufacturer SASOL, who has a superior asset advantage in the form of direct access to coal from its mines used in the petroleum making process.

Customers, or would-be customers, must be informed and reminded of the value-add an organisation offers, the extras that save them money, time and aggravation. Yet too many business owners and managers are ignorant of exactly what those competitive advantages are. It is possible that organisations are providing a lot of “extras” without realizing their true impact. Organizations not providing meaningful extras might consider adopting them, considering the critical competitive advantages to be gained (www.tlainc.com/ articl39.htm)Gekas - Soortgelyk.

Dr Gerhard van Wyk’s area of expertise relates to Marketing and Sales Management with specific focus on Business to Business marketing and Franchising. Gerhard’s working experience exceeds twenty years in the petrochemical and chemical sectors. He is involved in the identification of growth opportunities and the development of marketing and sales strategies to unlock sustainable wealth. Gerhard is also an accomplished author of several academic and other articles on marketing, B2B and franchising.

Guidelines for writing a job description

2012-01-11T07:34:00.001-08:00

By James Price

Whether you are creating a new position, filling an old one, or setting expectations for an employee, writing a job description can seem like a tedious undertaking.

A well-written job description can be an extremely powerful document. It can give employees a strong sense of duty, provide necessary structure in the workplace, protect employers from the onslaught of employment law, and most importantly, provide properly-placed room for creativity. On the other hand, the legal ramifications of getting it wrong, of improperly stating requirements, can cause a tangle of bureaucratic tape that can tie you up for months.

Here is a quick guideline on how to transform that old, tired job description into one that clearly defines expectations and sets your employees up for success.

Be relevantThe problem with job descriptions in the 21st century is that some duties or skills required become out-of-date almost immediately. We see this in our daily lives. Right after you bought that new market-changing phone, an even better one with twice the memory and speed takes its place. Computer skills are a vital part to the requirements in many office jobs. Revamp this section of all job descriptions when your company adopts new software. By staying up-to-date you reinforce the need to stay relevant with your present and future employees.

Be clear
How many unnecessary issues have occurred as a result of flawed communication? As an employer, it is essential to be clear about your expectations. If an employee does not understand parts of his/her job description, it may need to be rewritten. Every one of the duties and expectations should answer to the “what, why and how” rule. For example: (What) administrative duties. (Why) in order to keep an organised, fast-paced workplace free of complications. (How) by answering phones and dealing with issues or directing the calls to specific departments, handling incoming and outgoing faxes in a timely manner, and scheduling appointments and meetings.

Be legal
Unbeknownst to many, a job description is a legal document. Anything you say or do can be held against you in a court of law. Okay, so it’s not as serious as all that, but what is written can be used either to prosecute or protect your company. If the position requires heavy lifting, verbal skills, or unpaid overtime, your company is legally obligated to present these requirements in the description. It is also important to ensure all job descriptions do not discriminate against race, sex, national origin or disabilities.

Be specific

Writing that the work requires computer skills, communication skills, higher education or a good work ethic is not specific enough to screen for qualified candidates. Instead of computer skills, explain which specific programs or software skills are required, or explain how many words per minute are desired for an assistant to type. Providing every little detail as to what you want in an employee will give you a greater chance of finding exactly what you need.

Be outside the box
Several companies and organisations are against job descriptions, not to the point of abandoning them altogether mind you, but they are frustrated with the format and implications thereof. The biggest complaint about job descriptions is that they can compartmentalise the employee, boxing-in the employee’s creativity. In most offices, business leaders try tirelessly to evoke a spirit of creativity and entrepreneurship in their employees, and often they feel that job descriptions are counterproductive. If you keep that spirit while writing the description, you can achieve this sentiment with your employees. Creativity occurs when expertise, motivation, and creative-thinking skills are blended. Make sure not to overwhelm the position with unnecessary duties, but rather encourage opportunities for volunteering in other team’s projects, cross-training in other departments and thinking of new ways to perform routine duties.

A NEW YEAR BRINGS NEW HOPE

2012-01-10T07:23:00.000-08:00

A MESSAGE FROM FASA’S EXECUTIVE DIRECTOR

In South Africa’s new era of promoting entrepreneurship, small business development and skills transfer as envisioned / proposed by our present government, FASA has a crucial role to play. Encouraged by government’s quest to provide five million jobs by 2020, FASA has taken up the challenge of growing the small business sector by playing an active role in ensuring that franchising remains a viable and accessible option for anyone wanting to go into business for themselves, but not by themselves. The position of franchising as one of the strongest business formats in the world today was highlighted and confirmed during the recent recession. Although franchises certainly have been affected by the economic downturn, it has proven its resilience by faring better than independent businesses.

The future growth potential for franchising in South Africa is enormous. Franchising locally is represented in only 17 business sectors compared to between 25 to over 50 business sectors in developed countries. As the economy recovers, the franchise sector will undoubtedly rise to the challenge of providing entrepreneurial opportunities to aspiring small business owners, facilitating much needed skills transfer and contributing to job creation.

FASA has been a member of the World Franchise Council for many years, and for the past 33 years has encouraged local franchisors to adopt international franchise best practices. Indeed FASA’s own Code of Ethics complies with global franchise requirements. The new Consumer Protection Act (CPA), which came into force in April 2011, now clearly governs franchising in terms of its franchise agreement, its disclosure document and by extension, its operations manual. The new regulations will go a long way to separating the ‘wheat from the chaff’ when it comes to weeding out unscrupulous franchisors who do not abide by best franchise practices, or provide reasonable value for their franchisees.

FASA’s 2012 Directory, available from FASA or through selected bookstores from January, features all those franchisors who run ethical operations and have voluntarily elected to join the association and who have passed its rigorous membership criteria. Vera Valasis, Executive Director of FASA, has a strong message for the over 500 franchisors operating in the marketplace, some ethically and some who are rather suspect. “The enforcement of the Consumer Protection Act as it applies to franchising has already begun. Authorities are targeting franchisors to check that they comply with the regulations as laid out in the Act. To facilitate compliance and get FASA’s stamp of approval, we strongly urge all franchisors to become members of FASA. In addition to benefitting from the guidance the association can provide in terms of the requirements of the Act, from networking events to unique marketing opportunities, members also enjoy many other benefits offered by the association.”

To those prospective franchisees who dream of owning their own franchise and are eager to join the 30,000 already successful franchisees in the marketplace, Vera Valasis also offers words of caution. “It has become imperative that you seriously consider only buying a franchise from a FASA member. Members are required to comply with FASA’s strict membership criteria and abide by FASA’s Code of Ethics. Furthermore, after the implementation of the Consumer Protection Act on 1 April 2011, it has become law that franchise companies comply with the franchise requirements of the Act and Regulations. Through its membership vetting process, FASA ensures that members not only comply with the CPA, but all other legal requirements applicable in South Africa.”

Recent economic conditions globally and locally have not been conducive to growth, and a number of businesses were forced to scale down and retrench employees. Some of these employees are now considering self employment, and while the franchise industry offers a number of opportunities, Vera Valasis has these words of caution: “Before you go any further I cannot stress enough how important it is to conduct thorough market research before you decide to sign on the dotted line. A guide like the FASA Directory should be your first port of call as it contains many interesting articles that will assist you in making up your mind, but do not be scared to ask as many questions as is necessary for your own peace of mind. Spend time with some of the existing franchisees of the franchise company you are interested in and find out if they are happy with their investment and whether the franchisor keeps his/her promises.”

Regrettably there are always unscrupulous individuals who operate franchise scams waiting to pounce on unsuspecting potential franchisees. While it is not always easy to spot a scam, here are some points to look out for:

not being a member of FASA,
claims that you can make lots of money quickly without much effort,
reluctance to give details of existing franchisees,
requiring payment upfront before any information is given,
inconsistent or absence of financial information of a typical franchised outlet, and
franchisor not having a physical or office address, only a postal address.

If you pick up on any of these points during your research, proceed with caution, as these companies could be unethical and will only bring you hardship. Before making your final selection, it is always a great idea to speak to franchisors firsthand and pay a visit to the largest franchise expo on the African continent, the International Franchise Expo (IFE) 2012. FASA’s staff look forward to welcoming you to IFE 2012, at the Sandton Convention Centre from 17 to 19 May 2012. For more information about IFE 2012 visit www.ife.co.za.

“Remember, a well informed decision is your safeguard against a bad decision!”

Vera Valasis

Executive Director

To obtain a copy of FASA’s 2012 Directory, e-mail fasa@fasa.co.za

SUCCESSFUL FRANCHISING – A QUESTION OF RELATIONSHIPS

2011-12-22T23:02:00.000-08:00

(Part 3 of a 4 part series)

Advice on franchising by Pieter Scholtz, Master Licensee for ActionCOACH SA. ActionCOACH is one of the fastest growing and most successful business coaching franchises in the world today.

In part one and two of this four part series on customer relationships we discussed external relationships, ideal customers, satisfying customers and explored the concept of winning customer service. In this article we will discuss a customer plan and the ladder of loyalty.

Any business owner knows they need to do more than just provide great customer service. To be truly effective you need to implement a customer service plan, and an effective customer service plan will incorporate the following points:

· Identify your ideal customers. Find out who they are.

· Create a customer service vision. Remember, customer service is about understanding that little things are important. You need to make an impression on your customers.

· Conduct market research by asking your ideal customers what they would regard as excellent customer service.

· Now create your customers’ customer service vision.

· Combine the two visions above to create the ultimate customer service vision.

· Decide what it is you can promise your customers. This must be something you can deliver each and every time. My rule is, under promise and over deliver.

· Involve your team by presenting them with the vision and ask for their ideas on how it can be delivered. Work consistently with them on this.

· Make sure you have continual “checkups” to ensure that you are delivering on your promises.

· As your level of service improves, move the goal posts and keep improving.

· Always give your customers more than they expect, like surprising them with a free gift.

· Always smile, people love to feel special.

People are willing to pay for service when it’s the service they desire. If the service exceeds their expectations, they will stay with you and they will say good things about your business. However, if you deliver poor service, they’ll walk away never to return and speak negatively about your business.

The Ladder of Loyalty

In an effort to generate repeat business, most good businesses spend time and money in the pursuit of good customer service. Understand, however, that good customer service in itself does not foster customer loyalty. Let’s say that out of two competing businesses the first delivers average customer service and the second prides itself of delivering good customer service. The first business, however, writes a follow-up letter to its customers inviting them to shop there again, whereas the second does not. Where do you think the customers are more likely to shop next?

So let’s take a closer look at this very important concept of customer loyalty.

How do you develop loyal customers? I like to explain this using the Loyalty Ladder concept. Think of it as an ordinary ladder. If you were to step up onto the first rung of the ladder, would you just hang around there? No, you would want to climb up right away or get off. You have to move your customers up this ladder, and you need to keep them moving upward all the time.

Now ask yourself why it is you want to build a Loyalty Ladder for your business. I’d suggest it is because the first sale you make to a customer is made at a loss. Statistics show that after you have accounted for advertising and marketing costs, overheads and maybe even commission, nine out of ten first sales are made at a loss. Unless that same customer comes back to buy again, you have not profited from that customer.

Let’s now consider the various stages of the Loyalty Ladder. There are six.

6. Raving Fan

5. Advocate

4. Member

3. Customer

2. Prospect

1. Suspect

1. SUSPECT

When they first start out on the Loyalty Ladder, right at the bottom rung, people are called suspects. How do you identify them? They are only potential customers at this stage; they fit within your target market and they are willing to buy from you if they are in your geographic area.

2. PROSPECT

We then move up the ladder to prospects. Prospects are suspects who have taken some sort of action like phoning in or visiting your business. Collect their details so you can stay in touch. This is an important step as building customer loyalty is all about prospects. You now use all your sales skills to move your prospect one rung up the ladder to the next stage, that of a customer.

3. CUSTOMER

To be classified as a customer, your prospect needs to have spent money and you need to have recorded the sale in your records. While this last step may seem strange it is necessary to distinguish between your prospects and your customers in your database. If you are planning to send a letter to your prospects offering them an incentive to buy, you don’t want to also send it to people who are already customers. This record will also tell you when they last bought, how often they buy and what their average rand purchase is. Interestingly most businesses put up a huge ‘STOP’ sign at his level. The salespeople seem to sit back and wait for these customers to return instead of being proactive about inviting them back. Understand that at this level the customer has cost you money, and if you are content to stop at this level, chances are your business will eventually go broke. I have eaten out at many restaurants and guess what, I am not on any database. I’ve never received a letter from them saying we would love to have you back. This is, in my opinion, insane. They seem to be saying: “You’ve bought, now I am going to just hope you come back”. The ‘STOP’ sign is the scariest thing I’ve come across in any business. You need to eliminate it and do so fast.

4 MEMBER

When your customers make their second purchase, they move up another rung to the member level. They now have a feeling of belonging. Understand that customers who make two purchases are ten times more likely to make more purchases than someone who has only purchased once. So, put some extra effort into your members and perhaps give them a membership card and a membership pack. Chances are that very few of your customers know all your products, so consider including a product catalogue and samples or vouchers in the membership pack.

5. ADVOCATE

Members must be moved up the ladder to the next level of advocate. An advocate is someone who sells you to their friends and acquaintances. The criteria for advocates is that they give referrals, promote your business and continue buying. Advocates are one of your major capital assets.

6. RAVING FAN

The next step is the top of the ladder, known as raving fans. While an advocate is someone who will sell for you, a raving fan is someone who can’t stop selling for you. The exciting thing about a Raving Fan is that they can almost be regarded as part of your team. They want to see you succeed. Of course, they continue buying from you.

Remember, the aim of the game is to move people up the ladder of loyalty from Customer to Raving Fan. This is where you begin to make profit. And remember, people are prepared to pay for service.

We have now looked at your external relationships in some detail, but this is just one aspect of the business relationships you will need to concentrate on. Internal relationships are also important. The way you interact with your internal stakeholders, your staff and your franchisor is just as important as your relationship with your customers.

In the next issue of SA Franchise Warehouse I will be discussing the importance of good internal relationships.

Pieter Scholtz is the Master Licensee for ActionCOACH in South Africa. Pieter acquired the master license in 2007 and successfully launched what was an unknown brand into the South African market, establishing 18 franchises in only four years. In 2008, Pieter was honoured with the ActionMAN award at the ActionCOACH EMEA Conference. Pieter is a member of the International Business Coach Institute and COMENSA.

Phone: 086 122 6224

www.actionscoachsa.co.za

The smaller the business, the bigger the fall

2011-12-21T22:46:00.000-08:00

White collar crime is not only a corporate concern

Contributed by The Orange

Many entrepreneurs are under the mistaken impression that white collar crime, such as fraud, is exclusively reserved for large corporate companies. Despite fewer employees and smaller revenues, small businesses are more susceptible to falling prey to the criminal activities committed by those they employ. Fraud and corruption are rife across the continent and while big corporates have the capacity to bear the brunt of such cases, for small and medium enterprises it is a very different story. Incidents of fraud could force small and medium businesses to shut down.

Jenny Reid of iFacts, one of the original South African employee screening companies, says that it is possible for companies, even small to medium enterprises, to institute safeguard procedures that will reduce the possibility of employees committing crimes. Below, iFacts provides small to medium business owners with a few tips on how to prevent fraud and corruption within the working environment.

1. Hire trustworthy personnel

Ensure that thorough background checks and screening processes are in place. Checking a potential employee’s criminal record, credit history, qualifications, ID number and driver’s license will reduce the possibility of bringing questionable individuals into your business unit.

2. Company policies & procedures

Many small to medium businesses don’t implement policies and procedures and manage issues as and when they arise. Ensuring that your employees, whether it is one or 25, are familiar with your business policies and procedures from the get-go, will prevent damaging incidents from occurring.

3. Authorization procedures

Employees must understand what their job description, responsibilities and reporting procedures entail. The absence of such procedures makes it easy to commit fraud and crime.

4. Set an example

Managers should lead by example. Employees will willingly follow managers who do so. Create an ethics statement and instil these values within the workplace.

5. Training

Provide your employees with relevant training and encourage them to explore external channels to seek further knowledge. This will create empowerment and job satisfaction.

6. A little extra

Never forget that personnel are a company’s greatest asset. Nurturing your staff can only be deemed an investment. Offering incentives and wellness assistance such as nutritional, exercise, lifestyle and personal financial advice will instil a feeling of value, creating loyal, honest and productive employees.

Prevention is one of the most cost-effective means to reduce the criminal costs of doing business. Employees at all levels might commit crimes against their employers. Small to medium enterprises can and need to prevent criminal activity to limit its impact on their profitability.

A recent development in application of an employee recruitment policy is the introduction of employee screening. However, in addition to employee screening companies should employ programmes that encourage ethical, honest, loyal and productive employees. iFacts t/a The Orange is able to provide programmes to assist with this.

Contact: Jenny Reid

Phone: +27 82 600 8225

jenny@orangebusinessboost.co.za

www.orangebusinessboost.co.za

SUCCESSFUL FRANCHISING – A QUESTION OF RELATIONSHIPS

2011-12-21T06:04:00.001-08:00

Part 2 of a 4 part series)

Advice on franchising by Pieter Scholtz, Master Licensee for ActionCOACH SA. ActionCOACH is one of the fastest growing and most successful business coaching franchises in the world today.

In part one of this four part series on customer relationships, we discussed external relationships and ideal customers. In this article we investigate the concept of winning customer service and how to achieve this state.

Ask yourself this question, how do your customers feel about doing business with you? Do they leave your establishment feeing satisfied, dissatisfied or delighted? This is an important question that requires a great deal of consideration.

The first thing to understand is that customers expect to be satisfied. They have identified a need, have gone to the trouble of finding out which business can satisfy their need and followed through either by phoning or calling on you at your place of business. What happens next will determine the impression they are left with and whether or not they will ever return. Remember that while customers expect satisfaction, they will actually talk to others about your business if they get more than they expect. So give them something to talk about.

Good customer service is proactive. Actively seek ways give your customers something more than they expect and don’t wait until a problem arises before you act. This is the first step in creating great customer relationships that will result in their becoming, what I call, longstanding ‘Raving Fans’.

The search for new ways to satisfy your customers and get them talking, should become a way of life and part of your routine. Brainstorm, consult with your salespeople and be innovative. Think outside the box. Customers actually expect you to keep getting better, so keep your eyes open, watch what other businesses are doing and keep innovating.

‘Moments of truth’ are those occasions when it really counts to impress someone with your service. Do you know what yours might be? Take the time now to list as many of them as you can. Start with your customer interactions and be ruthless. Once you have jotted down some of your “moments of truth”, you will start to develop an idea of why it is that customers jump ship you for a competitor, and what to do to stop it in its tracks.

Before we go any further, here are some statistics about why customers leave that may startle you:

· One percent due to death

· 3 percent due to a house move

· 5 percent due to support a friend by buying from them

· 9 percent to buy from a competitor

· 14 percent found a better product or price

· 68 percent due to perceived indifference on your part

Sixty eight percent of your customers leave because they perceive your business as being indifferent to their needs. They feel you just don’t care.

Comparatively, the number leaving because of your opposition’s efforts is so small it is almost negligible. Only nine percent were swayed by the active efforts of your competitors, while a mere 14 percent found a more attractive deal elsewhere.

Remember the 80/20 rule? If you were to really look after only 20 percent of your customers, you’d be looking after those that account for 80 percent of your revenue.

So, how hard would it be to hang on to the 68 percent of customers who leave due to your perceived indifference for their wellbeing? Put another way, how easy would it be to retain the 20 percent of customers who contribute the most to your bottom line, just by showing you care? Why embark on difficult and costly exercises to shore up your bottom line, when simply offering great customer service will remedy the situation for you?

Winning Customer Service

So you have decided that the level of service your business delivers could be better. Now, how do you go about making it the talk of the town?

Here are three steps:

1. Aim for consistency. Customers want to be assured of receiving the same exceptional service every time they visit your store.

2. Build trust. Consistency breeds trust. Build consistency into your sales process and you will systematically surpass your customers’ expectations every time they buy from you. If customers receive the same pleasant greeting, the same efficient and courteous service, their questions are answered accurately and honestly and there are no unpleasant surprises, they will begin to trust your business. Do everything you can every time a customer visits, and they will return again and again.

3. Now introduce the WOW factor to create ‘Raving Fans’. Having satisfied customers implies you have given them all they’ve wanted and nothing more. Surpassing their expectations requires systematically going beyond what is expected. It requires that you commit to improving your service every day. The Japanese have a good term for this. They call it Kaizen - constant and never-ending improvement.

In the next issue we discuss customer service plans and the ladder of loyalty.

Phone: 086 122 6224

www.actionscoachsa.co.za

ADVICE: FRANCHISING – A QUESTION OF RELATIONSHIPS

2011-12-19T01:10:00.000-08:00

(Part 1 of a four part series)

Advice on franchising by Pieter Scholtz, Master Licensee for ActionCOACH SA. ActionCOACH is one of the fastest growing and most successful business coaching franchises in the world today.

Franchising, really, is all about relationships. Successful franchising boils down to making sure you develop great, lasting relationships at every level of your business. By building successful relationships you are significantly increasing your chances of success.

Let’s dig a little deeper. Why is it that most networkers are also successful in business? Why is it they always seem to have great relationships with friends and colleagues? Networkers who build successful relationships have perfected the craft of surrounding themselves with people and then listening, really listening, to what they have to say. They have developed these relationships to the point where they have earned the right to ask others for advice.

Good relationships are the lifeblood of business. When it comes to examining the types of relationships within a business, it is convenient to categorize them into external relationships and internal relationships.

External relationships

The most basic form of relationship any business develops is with those it comes into contact with. The first manifestation thereof is through the well-known, but often poorly executed concept of customer service. It is through the service they receive that customers begin to form their first impression of you or your business, and it is these first impressions that drive your future relationships.

So, let’s take a closer look at the concept of customer service. Who is the customer? There are four classes of customers and they are all equally important.

· The Owners: The business must serve them by delivering an acceptable profit.

· The Team: The business must serve them by providing salary, recognition and rewards.

· The Suppliers: The business must serve them by paying their invoices.

· The Customers: The business must serve them by meeting their needs.

As you can see, the term “customer” embraces a diverse group of people with widely differing relationships with the business. The commonality between the different groups of customers, is that they all have needs that the business must meet. It is the job of the business to uncover those needs and then meet them.

As each group has vastly different needs, so the relationships you build will be differ. Although you have to ‘sell’ you business to each one of the customer groups, selling your concept to an employee is rather different than selling it to a customer. If your team does not believe in the future of the business, they will seek better opportunities and eventually jump ship. Suppliers wouldn’t offer generous credit terms or prices if the business wasn’t ‘sold’ to them correctly at the outset.

Great customer service is all about relationships, and great relationships in turn are all about good communication. As with any other relationship, a business relationship is a two-way street that operates on a give and take basis. Managing a successful relationship entails operating an Emotional Bank Account. You establish your Emotional Bank Account and accumulate emotional credits by showing trust, or offering goodwill or price incentives. Later, you will be able to draw against your emotional credits as you call on customers to help you achieve your own goals.

So who is your ideal customer?

It’s often said that there are customers, and there are customers. While there are those you would love to welcome back every day, there are some you wish would never come back. Typically, customers fall into one of the following categories:

A = Awesome

B = Basic

C = Can’t deal with

D = Dead

You may want to only deal with the A’s and B’s, in which case you may as well get rid of the rest. “How?”, do you ask. It is quite simple, you tell them. Establish rules for doing business, then contact everyone in your database and explain that you are repositioning your business and communicate the rules for doing business.

An alternative strategy is to change your pricing policy or the décor of your premises, making it unsuitable for those you are hoping to discourage. An excellent example of such a strategy is a video store that deterred the young hooligans who had taken to gathering there and in the process changed their client base by playing only classical music in store.

In-depth analysis of your business should confirm the 80/20 principle, with 20 percent of your customers accounting for 80 percent of your business. Can you identify your income-generating 20 percent? These are the ones you should be concentrating your efforts on.

In next month’s issue we look at the concept of “winning customer service”, how to achieve customer satisfaction, and how to attain the ladder of loyalty with your customers.

Phone: 086 122 6224

www.actionscoachsa.co.za

Nashua Limited appoints David Coutinho as Managing Director

2011-12-07T07:02:00.000-08:00

Johannesburg, 22 November 2011 - Following the announcement of possible restructuring within the Reunert group, and the confirmation that the Nashua group of companies will no longer be consolidated, David Coutinho has been appointed as Managing Director of Nashua Limited, effective November 2011.

Commenting on the appointment, Coutinho says that he plans to maintain Nashua’s established success in the office automation market.

“Nashua is currently in a strong position, as we are number one in the South African office automation market. I plan to ensure that the company continues to live up to these high standards, leads the way in innovation, service and document management solutions, and performs smarter and better in all our endeavours.”

Coutinho has been employed by Nashua Limited by for over 25 years. He started off as a technician and has since fulfilled a number of roles, including Sales Manager for franchises, and most recently, Sales Director.

He says that he plans to utilise the lessons he has learnt during his employment in his new role and engage with employees at a grassroots level.

“Having gained an intimate knowledge of, and passion for the Nashua brand during my time with the company, I have realised that a hands on approach reaps the most rewards. Therefore, I intend to lead by example, remain close to the ground and support my team consistently.”

Coutinho notes that his appointment also presents a viable opportunity to leverage value across Nashua Limited.

“I want to ensure that there is more collaboration between the three Nashua brands, Nashua Limited, Nashua Communications and Nashua Mobile, which will allow us to cross share ideas, and leverage the established customer relationships that have been built on good service, and a solid, reliable product.

“Further, the opportunity also exists to leverage savings at an operational level, and drive better synergies through marketing strategies such as branding and sharing of sponsored events. Ultimately, these actions will add bottom line value to Nashua and brand equity.”

He adds that the company plans to engage with its corporate accounts at a CIO, CEO and CFO level, in order to deliver more strategic and sustainable results for its clientele. This action, he says, will assist Nashua Limited’s progression from a predominantly copier based company to a trusted printing solutions partner.

Coutinho concludes that his leadership will be defined by teamwork.

“Nashua’s standing as a company is truly a collaborative effort, and all our success can be attributed to the hard work and dedicated service of Nashua employees. Moving forward, these same people will prove to be crucial in our drive to provide our customers with enhanced solutions which save them time and money, and put them first.”

Editors’ Notes:

About Nashua:

Nashua Ltd is the leading distributor of digital office automation equipment and document output solutions in Southern Africa. Through its 60 offices based in various regions in South Africa, they supply and service a wide range of products which include black and white and colour multifunction devices and software solutions to the South African market.

For more information visit www.nashua.co.za.

Issued by : Madelain Roscher

PR Worx

011 896-1818 / 083 468 6819

madelain@prworx.co.za

On behalf of : David Hallas

Marketing Director

Nashua Limited

011 232 8000

daveh@nashua.co.za

The business of small business valuation

2011-11-16T07:30:00.000-08:00

By Kobus Oosthuizen

Businesses are valued for different reasons and the method applied in determining the value will largely depend on the reason for the valuation.

Buyers, sellers, franchisors, brokers and banks may all be interested in the value of a particular business, but as the reasons for their interests differ, all are likely to arrive at different values.

For the purpose of this article, let us assume that you are the business owner and are desirous of selling. You will need to establish the value at which you are going to put your business on the market.

The most common method employed in business valuation, is to apply an earnings multiple to current profit and then make certain adjustments depending on circumstance. This method, also referred to as the price earnings method, implies that the value of a business is primarily based on the aggregate of the profit anticipated over a certain period.

Gross valuation = current profit x earnings multiple

Current profits

If the management accounts of the business have been maintained regularly and contain sufficient detail, determining the current profit is a fairly objective exercise. In calculating the value of the business it is prudent to use annual profit or an average monthly profit for at least a period of six months, rather than using only the last month or two. It may happen that a marginal business generates special attention for a limited period through the operator’s personal efforts and some additional marketing expense, resulting in a “spike” in business income.

If the price earnings valuation method is applied in determining the selling price of a business, you are in fact “selling” the value of your future profits. It is necessary therefore to question whether the current performance levels can be sustained over the next two or three years.

Although the profit in the last two months are more important in relation to the profits in the prior months, there may be isolated circumstances contributing to higher or lower profits in recent months. Using profit numbers for a period of less than 12 months ignores the effect of seasonality and is not advisable in an industry with cyclical tendencies.

Before making calculations based on the net profit, the income statement for those months should be “cleaned out”. Ad-hoc income and expense items that are likely to re-occur, such as maintenance costs, should be adjusted to an average over the period, while such items as penalties or grants that are unlikely to re-occur, should be ignored for the purposes of the calculation.

Earnings multiple

The earnings multiple, in principle, indicates how many months profit a business is worth selling for. Differently put, how long will the business have to operate at an assumed level of profitability in order to repay itself? The value of the business at the end of the “self-repayment term” is the upside for the buyer and rewards him for the risk he took in accepting the assumed level of profitability.

With a myriad of factors impacting the decision on what earnings multiple should be used, reaching a decision is more an art than a science. As the earnings multiple number has such a significant effect on the valuation outcome, it is justified to provide sufficient supporting arguments for the specific multiple used.

A high earnings multiple is indicative of the fact that the buyer is taking less risk and that there are fewer factors with the potential to derail the future profitability assumptions. A low earnings multiple means the opposite, but may present a more lucrative investment for the buyer.

Gross valuation

This number is arrived at by multiplying current earnings with the correct earnings multiple. Circumstances may require adjusting the gross valuation in order to arrive at a net valuation. The net valuation is the figure used in the agreement between the buyer and the seller.

Certain soft issues, such as urgency of the parties and the funding position of the buyer may impact the extent of the adjustment between the gross and net valuation.

In coming articles we will further investigate the soft issues influencing the value adjustment and the extent of their impact. We will also touch on the different valuation models used and their suitability in small business valuations. □

Kobus Oosthuizen, after having qualified as a Chartered Accountant in 1992, becomes one of King Pie’s first franchisees. In 1996 he co-founded and managed the Butterfield brand until 2005 when it boasted 120 franchised bakery outlets and also received FASA’s Franchisor of the Year award. Kobus served as the Chairman of the FASA until 2009 and founded SA Franchise Warehouse thereafter.

Looking for a franchise opportunity visit http://www.safw.co.za/ NOW and turn your dreams into reality.