Connect with us

Franchisee Advice

The Legalities Of Shutting Down Your Business

Circumstances may lead to you deciding that it’s time to shut down your business. This is not unusual in the entrepreneurship lifecycle, but do you know what the legal consequences are?

Monisha Prem

Published

on

closed-sign-customer-sign

The main approaches of legally shutting down your business are through deregistration and liquidation.

When can your business be deregistration?

A company and close corporation may be deregistered by the Companies and Intellectual Property Commission (CIPC) in the following instances:

  1. Non-compliance with requirements: The CIPC will deregister the company if
    1. The business failed to lodge annual returns for two successive years.
    2. The CIPC believes that the business has been inactive for a period of seven years.
  2. Voluntary deregistration when trading has ceased: The business itself may request deregistration if it can show that it has ceased to carry on business and has no assets or, because of the inadequacy of its assets, there is no reasonable probability of the business being liquidated. According to the South African Revenue Services (SARS), this effectively means that the company or close corporation is not doing any business nor has any assets or liabilities.

Related: Closing Deals In Africa – Keep It Flexible

If a business wishes to apply for voluntary deregistration, it is required to write a letter to the CIPC confirming that it is not carrying on business or is dormant and has no assets, or because of the inadequacy of its assets, that there is no reasonable probability of the close corporation being liquidated. This letter must be signed by each active member of the business.

The finalisation of deregistration is dependent on the statutory advertisement process which is three months. After completion of the deregistration process, the final deregistration notice will be posted.

When can your business be liquidated?

Liquidation is the process by which a company or close corporation effectively declares itself insolvent as it is unable to pay its debts. A business can undergo voluntary liquidation, where the owners of the business choose to voluntarily liquidate, or compulsory liquidation through actionby creditors.

Once the business has been placed under liquidation, either voluntarily or by creditors’ court application, the business will cease to carry on its business activities except in so far as may be required for the winding-up. A liquidator is furthermore appointed to sell all the assets, pay off creditors, divide any residue amongst the former shareholders, and then close the business.

The main legal consequences of ceasing to trade are contractual, shareholder, employee and tax obligations. Let’s consider the consequences of contractual obligations during deregistration and liquidation.

Related: Closing the Deal Is as Easy as Smiling

Contractual Obligation

contractual-obligations-for-franchises

1The effects of deregistration:

The effect of deregistration is that the business is dissolved, consequently being deprived of its legal existence, and upon such deregistration all its property passes automatically into the ownership of the state as bona vacantia (ownerless goods). All rights and obligations that once vested in the entity are brought to an end, meaning that contacts are terminated, and any debt due is rendered unenforceable against the business.

In the event of voluntary deregistration, the company will have no contractual liabilities and no outstanding debts, as voluntary deregistration is only possible if the business has no assets or liabilities.

If the business is deregistered due to non-compliance and has outstanding debts, the only available option for a creditor is to apply to the CIPC for the restoration of the registration of the company. The CIPC requirements for restoration, however, are very onerous rendering a successful outcome to the application unlikely.

2The impact of liquidation:

When a business is liquidated, all contracts concluded with the business remain in effect. The liquidator is then tasked with making a decision, within a reasonable period of time, whether or not he or she intends to abide by the contract or terminate it, depending on what would be most beneficial to the creditors.

Should the liquidator elect to terminate the contract, the other contracting party has a monetary claim against the insolvent estate as a concurrent creditor (creditors who do not hold any security).

Monisha is a corporate advisor, admitted attorney at M. Prem Inc, and author with over 14 years deal-making experience. Monisha litigated for several years before joining an investment banking firm specialising in mergers and acquisitions. Monisha has owned and operated several businesses, is passionate about business development, commercial and corporate law.

Franchisee Advice

3 Ways To Ensure Your Loyalty Programme is Working Hard For You

Plastic cards are making way for app-based loyalty programmes. Is your franchise keeping up with the digitally savvy consumer?

Diana Albertyn

Published

on

loyalty-programme

The average consumer today is a member of at least five of the 100-plus loyalty programmes in South Africa, according to a 2017 study by Nielsen. As the loyalty playing field becomes more cluttered and competitive, what are you doing to ensure each one of your franchisees are catering to customer needs when it comes to loyalty?

Mobility. It’s not the newest buzzword, but it is useful for attracting customers who don’t want to lose loyalty points because their card is lost or not with them. Ailsa Wingfield, Nielsen’s Head of Emerging Markets: Thought Leadership, says that as adoption of non-traditional payment methods increases, loyalty programmes also need to introduce payment type flexibility.

“Mobile payment platforms will increasingly deliver an opportunity for loyalty-programme engagement with consumers, providing a convenient and personalised way for programme members and retailers to engage with one another all along the path to purchase.” – Ailsa Wingfield Nielsen Head of Emerging Markets Thought Leadership.

Related: 11 Ways To Double Your Customers In 4 Weeks

Have you considered what role tech could play in your current loyalty programme? Here are three ways to apply digital enhancements that appeal to present and potential customers: 

1. Offer differentiation through more options

Research has concluded that the loyalty programmes devised by retailers and franchises are not innovative enough to capture the attention of the youth – Millennials and Gen Z. it’s time to diversify your rewards offering. But how?

If your customer base is predominantly younger, being omni-present is key, according to the Truth Loyalty Whitepaper: “An omni-channel approach will not only meet the demands of the younger customer, it will also allow your business to combine intelligence on shopping, search and web behaviour history to assist you in identifying when to offer an in-store promotion, extend a seasonal offer or make a product recommendation through the appropriate channels.”

Implementing a digital loyalty campaign is also a smart way to reduce costs. Coffee shop franchise Mugg & Bean’s Generous Rewards App and partnership with Vitality Active Rewards, means members can earn cash-back rewards to spend on their favourites. Just downloading the app earns you a R25 voucher.

2. Use your tools to engage more

A crucial mistake most franchisors make is not communicating consistently with their loyalty programme members once they’ve signed up and increased numbers. They spend a lot of time recruiting customers to join, but expect them to prompt cashiers for points’ balances and produce their cards independently in their various locations.

“You have gained permission to talk to your customers and created the opportunity to collect enormous amounts of valuable data. Use this to your advantage by creating meaningful and relevant engagement initiatives and communications across your customers’ lifecycle,” advises Truth, a boutique consultancy business specialising in customer centricity and loyalty programme strategy and design.

When enhancing your engagement strategy, Accenture advises that you keep the following in mind:

  • 54% of South African consumers are loyal to brands that actively engage them to help design or co-create products or services.
  • 57% are loyal to organisations that present them with new experiences, products or services.
  • 47% are loyal to brands that engage them in ‘multi-sensory’ experiences, using new technologies such as virtual reality or augmented reality.

Related: 3 Ways To Stop Taking Your Most Loyal Customers For Granted

3. Keep the experience simple

Review your loyalty programme. Honestly. Then ask yourself if you’ve made your programme too complicated for the layman. If your answer is ‘no’ or even ‘maybe’, how can your target consumer ever reap the full rewards of this programme if they don’t understand the rewards on offer and how to redeem them?

Changing rules too often is the first complication to go. No matter which one of your stores they choose to shop at, the redemption and earning process should be simple enough to keep members interested and engaged in the programme. Make sure you keep your programme simple and transparent.

“Clicks made a simple but fundamental change to its redemption process – paper-vouchers were replaced with virtual points that can be redeemed as cash-back when you swipe your card at the till. While Clicks and Dis-Chem are among only a handful of brands that do this, it’s a sure-fire mechanism for increasing redemption,” said Amanda Cromhout, founder and CEO of Truth.

Continue Reading

Franchisee Advice

3 Crucial Considerations For New Multi-unit Franchisees

Your marked success as a single-unit franchisee has led to the choice to multiply your achievement. But do you know what it really takes to move from owner-operator, to multi-outlet operator?

Diana Albertyn

Published

on

multi-unit-franchise

Multi-unit franchise ownership is a brilliant way to grow your business portfolio, once you’re successfully running your single location. Once you get the hang of being franchise business owner, adding one or a few more units could be the next logical step.

“The risk with having one store is higher than if you have more than one store, as the stores support one another. When the one is down the other one is up,” says multi-unit Montagu franchise owner Pierre Lombard.

You’ve probably already realised this lucrative option and are getting acquainted with multi-unit franchising. As this is new territory, you may want to consider these methods to multiply your success.

1. Make more discerning recruitment choices

When you opened shop at your first location, you were probably warned against hiring a manager, because they may not be as invested in the success of your business as you are. Now that you growing, you have no choice, so you need to be selective in your decision of who’s going to run the show when you’re not around.

Related: 3 Employment Best Practices To Apply In Your Franchise

The best way to ensure consistency in service and quality in each location is to always put culture fit over ability. While a certain level of skill is required to carry out the tasks required of a manager, attitude trumps aptitude when selecting capability running your locations.

“Place one of your outstanding managers or staff from your current store in the new one and have them train up any new staff,” suggests Francesca Nicasio, Retail Expert at Vend.

“That way the practices and attitude that you’ve cultivated in your business will continue into your new store.”

2. You need tech to help you be everywhere

Not only are Cloud technologies enabling franchise owners to scale quickly, easily and more affordably compared to on-site solutions, but these advancements mean you can remotely optimise inventory across all your locations, get a more accurate assessment each store’s performance and better understand your business – all you need is an Internet connection.

With the variety of Cloud-based solutions available today, you’re also able to connect your sales, staff, and customer information to give customers a seamless experience at all locations. You’re also able to receive alerts on low stock levels and automatically have it.

3. Set and stick to a specific standard

As a franchisee, consistency is standard practice. But that’s easy done as a single-unit owner than when running multiple locations. To make your mini network more manageable, ensure all your store understand brand standards beyond the operation manual.

Related: Multi-Unit Franchising Growing In South Africa

“Naturally, you have your franchise systems’ operations manual and procedures but the way you personally want to stamp your mark on customer experience, for instance, needs to be documented too,” experts at Inside Franchise Business advise.

Doing this reduces the stress of continually keeping tabs on staff, and frees you up to collect and collate the data you need to make smarter decisions faster.

Continue Reading

Franchisee Advice

Effective Ways To Bring Customers To Your Door

Here are a few tips from Local Area Marketing Manager of Cash Converters, Juan Botha, to assist you in bringing customers to knock on your door.

Richard Mukheibir

Published

on

franchise-customers

Retail, craft, artisan and service businesses can’t rely on only carrying on trade online – you also need people coming through the door and engaging with your product. But how do they find you? Are you the neighbourhood’s “best-kept secret” – and not in a good way?

Your premises, the surrounding area and the audience for your brand are a unique combination. Get to know both inside out so that you can hone your products and your marketing to appeal to potential local customers. With all the pressure to run a website, Facebook page or maintain other online presence, it’s easy to forget the basics and fail to reach your closest customers – those on your doorstep.

Our Local Area Marketing Manager, Juan Botha, previously worked in advertising with local and multinational brands and he taught us how each store needs to make sure its marketing lives up to the pointer, “Act global, think local”.

Related: How Your Fast Food Franchise Can Attract Quality-Conscious Consumers

Here are a few of his tips:

Position yourself

If customers know about you but can’t find you, they’re likely to get frustrated looking for you and give up. If they don’t even know you’re there to find, your chances of using your sales skills with them or getting them to fall in love with your product are zero.

Remember the times you’ve spent searching for a bar or a restaurant hidden in a maze of city streets or a B&B somewhere along a never-ending country road? Those businesses have forgotten that first-time customers can’t be sure where they are. Draw up directions to include on your website or online page. Make sure a friend who doesn’t know the area well test drives them.

Brand yourself

People won’t notice you until they need or want what you are offering so keep reminding them of your existence. Being visible is key. Your fascia signage is part of your marketing mission to attract and influence potential customers.

Nobody walking to work or taking their dog out should think, “I wonder what that new place is about?”

As well as giving your business’s name and contact details, your signage must succinctly indicate what your business offers. If you have a display window, use this second important opportunity to sum up your offering – keep it interesting and updated.

Be a customer magnet

If you wait to build a business on passing trade, you could wait forever. Get on the radar with potential customers in the neighbourhood so they all know you exist and where to find you. Each time they’re reminded that you exist and how to find you, they will be prompted to come and seek you out.

You can achieve this – and help new customers trying to find you – by making a modest investment in lamp-post signage. Check local regulations with your municipality and ensure this signage reflects your brand visually. This is a win-win, reinforcing your brand in a potential customer’s mind and helping them recognise your premises as they approach.

Related: Why Your Franchise Brand Should Be Culturally Relevant

Connect locally

Part of marketing is making people interested in and attracted to your business long before their first direct contact with you. Embed yourself in the community by forming alliances.

If security is an issue, bond with the local SAPS, Community Policing Forum and security companies by offering them free coffee. If you have a huge bargain order of toys to shift, offer a few prizes to the local Moms ‘n Tots group. Plug into local business networks and offer to host a speaker or sponsor the audio equipment for a forthcoming meeting.

You’ll be harnessing the incomparable power of word-of-mouth and setting your business growing in a great direction.

Continue Reading
Advertisement

SPOTLIGHT

Advertisement

Recent Posts

Follow Us

Entrepreneur-Newsletters
*
We respect your privacy. 
* indicates required.
Advertisement

Trending