If you are thinking about starting your own business, a children’s service franchise might be the best way to take your first steps into the world of entrepreneurship.
Children’s service franchises vary greatly and the choices can be overwhelming. There is so much more on offer than the obvious options such as after-school care or party shops. South African entrepreneurs in this sector are very innovative and business opportunities range from day-care centres and pre-schools, to services in art and entertainment, education, science and nature, toys, hobbies and crafts, as well as sports and recreation. There are pamper parlours for teens (great for parties), baby sitting services, cooking clubs, transport companies and dance schools. On a more serious note, Kumon, Master Maths, Active English and various other tuition programmes offer support that schools simply do not have the capacity to provide.
A booming education sector
According to President Jacob Zuma, “The most important investment in the future of any nation is in education. No legacy could be higher than that.” Social research has found that the most important years in a child’s development are those from one to six. Thus, the exposure to the world in which they live, the instruction they receive, and the habits they form during those years, affect their ability to learn and adjust as they progress through formal education.
“Kumon is the biggest and most successful educational franchise in South Africa, boasting over 400 franchises country-wide,” says Franchize Directions MD Lindy Barbour. Kumon offers maths and English extra-curricular education. Students from pre-school age upwards can benefit and improve or extend numeracy and literacy skills.
What the experts say about the childcare industry
Many experts expect the demand to increase in the children’s franchise market. They base their forecasts on the fact that more and more young parents have to work as a single income simply doesn’t make ends meet.
“This sector is growing quickly. The growth is predominately within education. Even in these difficult times, parents consider their children’s needs as a priority and will cut back on luxury items to provide the help they require,” says Barbour. “This sector will continue to grow for a number of reasons. These services are always needed and parents – particularly new ones – tend to cut back in other areas to be in a position to provide their children with the best they can, from stimulation classes, to tuition, birthday parties, extramural activities and basic services like school collection,” she explains.
The advantage of child service franchises
Franchises and business opportunities in this sector range from investments as low as R7 000 to over R450 000. These franchises are typically well below the franchise industry average in terms of capital investment. “The barrier to entry is low,” says Barbour. “The advantage of this type of business opportunity is that it becomes an attractive way to supplement income whilst having the flexibility and time for one’s own kids.”
“I believe that franchisors in this category do think out of the box, mostly because they have to. For example, they develop new activities and curriculums, party themes, accessories and so on,” explains Barbour. “As the barriers to entry and exit are low, franchisors must have a ‘pull factor’ in order to ensure the network is sustainable.
“The difficulty facing franchisors is funding the right franchisees. The motivation to buy these franchises is typically based on lifestyle requirements.” She says franchisors have to be more disciplined in selecting business orientated franchisees in order to ensure longevity of the business and lower the turnover rate of franchisees.
To extract the most value from this franchise category you must have an intimate understanding of the local community. Local area community marketing offers the biggest opportunity for success in this category. If your financial management acumen is not up to scratch, attend financial management training. It is essential to understand the numbers.
“I think the biggest threat that franchisees have to face is funding. They generally do not have access to formal funding facilities, as most are intellectual property and training based,” says Barbour.
What type of personality do you need to work with children?
Starting a business in the child services industry and making a success of it will require certain specific strengths. For example, good communication skills are vital. You need excellent organisational skills to manage paperwork, as you need to keep accurate information about the children in your care. Ask yourself these questions:
- Do you like children?
- Are you a people person?
- Do you have experience working with children?
- Are you a self-starter, responsible and reliable?
- Are you willing to put in long hours, at least at first?
- Can you lead well?
If you answered yes to all of the above, you could consider the children’s service franchise sector.
Will you set up the business at home or from commercial premises?
The franchisor may have specific conditions for the location of the business. This would depend on the type of franchise. If it is a simple business producing party packs it is easy to work from home.
What are the childcare needs of the community you aim to serve?
Before you decide to buy a franchise it is crucial that you identify the needs of the community you are part of. You also have a tremendous amount of flexibility when it comes to the exact services you choose to offer. You may limit your clientele to children in certain age groups or tailor your operating hours to meet the needs of a particular market segment.
Safety and health issues
Caring for someone else’s children bears a tremendous amount of responsibility and requires a serious commitment. When children are in your custody, you are responsible for their safety and wellbeing. It’s vital that you take out public liability and professional indemnity cover, to protect yourself against customers taking you to court for damages or accidents.
Abiding by the regulations
A bona fide franchise is supposed to deliver a potentially profitable business concept, a trademark and extensive initial and ongoing support in all facets of operating the business. This includes all the necessary operating permits. If this information is not recorded in the franchise agreement, problems may arise.
Franchise fees are usually divided into upfront and ongoing fees. The upfront or initial fee is a joining fee. It grants franchisees access to the network and its intellectual property as well as entitling them to training and ongoing assistance in all facets of setting up the business.
Management services fee
This fee pays primarily for ongoing franchisee support. It is usually calculated as a percentage of the franchisee’s sales and is payable either weekly or monthly in arrears. Fee levels vary from as little as 1% to 7%, depending on the type of business.
If a franchisor purchases products in bulk on the network’s behalf and distributes them to franchisees, a mark-up, purchasing or handling fee may be charged.
How to tell a fly-by-night operator
In South Africa, the franchise industry is not yet regulated. According to franchise consultant Eric Parker, “The reputation of franchising is poor worldwide and ignorance about franchising opens people up to being taken for a ride.” However, as a franchisee, as long as you are thorough and you conduct an extensive background check, you should not encounter any problems.
Warning signs (of fly-by-night operators) include:
- Franchisors who want to collect deposits before interviews and profile testing
- Non-existent disclosure documents and operations manual
- Guaranteed promises of unreasonably high profits
- No pilot operation
- Reluctance to supply information
- Franchisors who refuse to meet you at their offices – an indication of no infrastructure
- Franchisors who pressure you by telling you there is a queue of prospective franchisees and push you to conclude the deal immediately
Membership of FASA
Always check if the franchise is a member of the Franchise Association of South Africa (FASA)
Vera Valasis, executive director of FASA, believes that franchisors who take the trouble to join the association must be prepared to go through FASA’s rigorous scrutiny of their franchise package (disclosure document, operations manual and franchise agreement) so that members can prove that they have taken the trouble to research and set up their franchises according to internationally accepted guidelines.
“We insist that FASA members have a pilot store operating for at least a year before being able to join the association and with strict rules on disclosure, we believe we can offer the public some degree of protection. As a result, FASA has had few fly-by-night members,” says Valassis.
The lingo of success
A home-grown franchise is teaching a love of English to local children.
Antionette Slabbert launched the Active English franchise in Vereeniging and is recognised by FASA as one of the industry’s top entrepreneurs. “An Active English franchise delivers more benefits than expected. This franchise is a sustainable, long-term extramural activity that teaches a love for the English language. All you need is excellent English language skills, an ability to adapt to new ideas and a fun personality with a passion for teaching,” says Slabbert.
“Your overheads are really low as it is a work from home opportunity or you can travel to nursery schools and use their facilities. So, it’s basically travelling expenses and then your craft, glue and stationery expenses. If you’re setting up a classroom at home, you would need to furnish and decorate. You would also need to invest generously in suitable reading material, as one of our main aims is to foster a love for reading,” explains Slabbert.
The selection process
“Franchisees are required to complete all the necessary application documents. Once these have been reviewed and the applicant has all the necessary qualifications, they are contacted and invited to attend an interview where they are screened again. If this interview is successful, they attend classes. They can contact any Active English franchisees for references. They need to be 100% passionate that this is the right business opportunity suited to their lifestyle and needs,” says Slabbert.
Our system is realistic
“Our set royalties are very realistic; in fact, for your first year of operation you only pay R800 per month, this is to give you the opportunity to grow the business, thereafter it is set at R1 500 per month, increasing at 10% per annum,” explains Slabbert.
Advice to entrepreneurs who wish to start a business
“Use a reputable auditor; register your business as well as your logo and trademarks with lawyers who specialise in franchise registrations. Become a member of FASA to lend credibility to your business and protect your franchisees in terms of business ethics that you as a franchisor have to uphold,” recommends Slabbert.
“To survive in business today you need to offer value for money and outstanding service. My motto is ‘work hard, go the extra mile, offer something special. Deliver on your promises and do each task with energy and perfection’. Remember that actions speak louder than words,” she advises.
Playing by the rules
Ensure that the franchisor has all the regulations and permits in place.
It’s important to read the small print of the franchise contract carefully so that the eventual outcome of the agreement is fully understood by both parties.
Do research of your own
In the franchising business, franchisors are required to provide franchisees with a substantially complete business infrastructure. Even if the franchisor has included all the permits and complied with the necessary regulations, for your own peace of mind, do some research of your own. Each province has its own guidelines. It is important to check with the appropriate regulatory agencies, which in South Africa are the local municipalities and local divisions of the Health, Education and Social Development Departments, who can explain what’s involved in providing particular services to the public.
Regulations are strict
Each local municipality must follow the regulations laid down by the Department of Social Development in accordance with the Childcare Act, 1983 (Act No 74 of 1983).
Certain permits are required
Permits are required for most childcare services. For example, businesses that fall under the City of Johannesburg Metropolitan Municipality require various permits depending on the type of children’s service offered. Permits are required for hairdressing, beauty and cosmetology services, swimming pools and spa-baths (swimming tuition) and childcare services (day-care centres, crèches and transport services). Each municipality will have different by-laws so it is necessary to check with your local council.
Environmental Health Permit
In the case of a crèche or crèche-cum-nursery, the franchise has to comply with health by-laws to the satisfaction of a Medical Officer of Health who issues an Environmental Health Permit.
SA swim star launches franchise
Ryk Neethling has one motto: work hard to achieve your goal. It’s a principle he has applied to an exciting new franchise concept. By Gill Abrahams
Ryk Neethling is one of the most successful swimmers in South African swimming history. He attended Grey College in Bloemfontein and quickly became a national force in swimming, but sanctions put a damper on Neethling’s athletic dreams. Unable to compete internationally, he was forced to attend an American university so he could race against the best in the world.
Neethling has held over 20 junior national records and 22 South African national titles. He has represented South Africa and received medals in three Commonwealth Games, the most in South African history. He has also been a five-time finalist in the Olympics and the World Championships, participating in the 1996, 2000 and 2004 Olympic Games.
It has not been an easy ride for Neethling, who had to endure the pain of dealing with his older sister’s terminal illness while he was living in the US, and having to choose between going back home to South Africa or pursuing his dream in the world of swimming. Nevertheless, all this has made him the man he is today and given him the will to create a swimming empire.
“I am aggressive and ambitious in business,” says Neethling.
Ryk Neethling Swimming Stars is a franchise system that teaches everyone from babies to adults to swim. We asked him about it.
Why is teaching swimming so close to your heart?
At the age of six, my mother sent me for water safety lessons after a near fatal drowning incident at a neighbour’s house. Because of this experience, the need to keep children water safe is a priority in my life. By applying my skills and knowledge to Swimming Stars, I can contribute hugely.
Did you know that 90% of children who drown are under some sort of supervision at the time? One of the scariest statistics is that for every five children who recover from drowning, one is left with permanent brain damage because of the prolonged lack of oxygen. It takes four minutes without oxygen for irreversible brain damage to occur.
How much research did you do before launching Swimming Stars?
Since 2004, I have done a great deal of in-depth research on best practice learn-to-swim programmes that are offered around the world. The best programme I found was from Australia. Swimming Stars has the rights for Africa from the Australian Swimming Coaches and Teachers Association (ASCTA). This organisation is responsible for developing swimming in Australia, primarily through swimming lessons by teachers and coaches.
When did you feel that it was time to make your dream a reality?
In 2008, I combined forces with two South African partners, Betty Roets, an internationally trained swimming coach and Chris Meintjies, a CA, and our financial partner. Our aim is to take learn-to-swim instruction to a completely new level of professionalism. I have put my name and reputation on the line, so I will ensure that Swimming Stars offers franchisees the highest standards possible on an ongoing basis.
What were your most critical areas of concern in establishing the franchise?
After intensive research into all the usual things, like establishing a target market and carefully considering demographics, I applied a lesson learned when I worked in real estate in the States.
For any service business such as Swimming Stars to be successful, you must make sure that there is plenty of easy, safe and convenient parking at the venue and that you are closely located to a shopping mall. While the kids are learning to swim and in safe hands, moms can pop into the mall and do their shopping.
Are there other conveniences that you feel are important to the success of a franchise?
Work around your market’s needs. Many parents work and simply cannot get time off to take their children to swimming lessons. I have planned around that and included reliable buses which collect children from pre-schools and primary schools and then take them back.
I am fortunate in that Sandown Motors sponsored our first bus. The children are carefully supervised on and off the bus and staff are trained and screened regardless of whether they are the bus driver, assistants, child minders or instructors.
How many franchises have you opened?
So far, there are two operations, one in Faerie Glen, Pretoria and the other in Paarl at Val de Vie Sport and Leisure Centre. Both are running at capacity and in Pretoria, we have 800 students and a long waiting list. The next Swimming Stars Franchise will open for summer 2011 in Sandton.
Locations are extremely important in the business plan. How will you roll out new franchises?
We will limit franchises in certain areas. I will ensure that I control quality and high standards and to do that we will first roll out in Gauteng where I can keep a close eye on the new operations. Other areas will follow.
What makes Swimming Stars different from regular swimming tuition?
Firstly, we spend a great deal of time and money training instructors. Each franchise works as a team – all with specified roles. We run centralised accounting and we try to make our online booking system as easy as possible for our customers. Each facility has to have two indoor pools, good parking, change rooms, toilet facilities, baby-changing areas and an office. Each registered student gets Swimming Stars kit – a costume, t-shirt, swimming cap and kit bag. Babies get a Swimming Stars hooded blanket included in their kit.
How are franchisees trained?
Full training and support is included in the franchise but some business experience in the sector will be an advantage. Instructors start their training with an instruction DVD followed by an extensive training course. Once the course is over, instructors have to log a set amount of hours before they are qualified to teach.
As a potential franchisee what do they need to qualify for a franchise?
Each application is considered individually with regard to the site, property development and set-up costs.
What will the franchisee get in return?
- The right to trade and market under the respected Ryk Neethling brand
- Valuable advice and support in site selection, development and branding of the facility
- Comprehensive operations manual
- The Swimming Stars unique, custom designed web-based data and scheduling programme
- Pre-opening consultation
- Training of the franchisee, as well as the initial staff and instructors
How do you select a franchisee?
When we select a franchisee, we work with a franchise consultant and do emotional testing. In essence, we look for individuals who are energetic, and are customer and service oriented. The franchisee must share our company values. Preference is given to those who love children and will enjoy dealing with parents. They must display good leadership and management skills, and have the ability to communicate clearly and be professional in their approach.
How many instructors are needed?
Ideally, there should be one instructor per 100 students. Instructors do not have to be employed full-time. A part-time instructor who works three hours a day, four to five times a week can earn between R4 000 and R6 000 a month.
Liability for clients must be a big concern
Security is very important. Part of the agreement is that security personnel must operate the gate and the parking areas. In terms of insurance, it’s not as complicated as one might think. Liability insurance and permits are included in the franchise agreement.
Do you think you can make a difference in South African society?
Swimming Stars is aligned with the Jacaranda Children’s Home. The home cares for 250 children between the ages of three and 18 years. The children are usually placed in the home by the children’s court due to neglect, abandonment, physical or emotional abuse. The home runs a number of therapeutic programmes to prepare these children for a better future. Swimming works wonders. We teach small groups of younger children from the home. This is our way of giving give back to South Africa.