Connect with us

Researching a Franchise

The Disclosure Document – Your New Best Friend!

Are you considering investing in a franchise? If so, we have good news for you.

Mark Rose

Published

on

Franchise_Disclosure_Document

Since the introduction of the CPA, every franchisor is legally obliged to issue serious prospects with a disclosure document and grant a cooling-off period. This should go a long way towards protecting those who are over-eager to get started from making a life-changing decision they may come to regret. This article explains.

Definition and background

It is no exaggeration to say that the disclosure document is the prospective franchisee’s new best friend. It provides all the information needed to assess the franchise opportunity, warts and all. It follows that the decision to join a franchise brand will be based on facts rather than marketing hype.

FASA recognised the need for a disclosure document early on. Unfortunately, this organisation’s appeal to members to provide a disclosure document met with mixed success. Those who had nothing to hide complied willingly, others were less diligent. To tighten up on this vital requirement, FASA made it a condition of membership in 1994. The only problem was that FASA could not enforce the requirement. In any event, not every franchisor was a member of FASA, leaving a large portion of prospective franchisees open to misrepresentation and even fraud.

The introduction of the CPA put a stop to this. Whilst originally, having a disclosure document was a requirement imposed on franchisors who wanted FASA membership, non-members were unaffected and FASA’s ability to impose sanctions for non-compliance by members was limited to termination of membership. Now, making a disclosure document available to qualified franchise prospects and their professional advisors has become a legal obligation.

Prescribed content

The Regulations to the CPA are fairly specific regarding the minimum information the disclosure document must contain. For example, the franchisor is obliged to:

  • Disclose the total number of franchised outlets in operation, the number of outlets franchised during the preceding year, turnover growth and net profit.
  • Provide a statement to the effect that the franchisor company’s financial status has not changed significantly since the date the most recent financial reports were drawn up by the franchisor’s accounting officer.
  • State that there are reasonable grounds to believe that it will be able to meet its financial obligations arising over the foreseeable future as they fall due.
  • Provide written projections stating the level of potential sales, income, gross or net profits for the franchised business. Alternatively, figures achieved by similar existing franchises of the network may be given but this must be disclosed and full particulars of assumptions made must be given.

Attach a certificate written on the official letterhead of the franchisor company’s accounting officer whereby the accounting officer certifies that:

  • The business is a going concern.
  • To the best of his/her knowledge the franchisor is able to meet its current and contingent liabilities.
  • The franchisor’s audited financial statements have been drawn up in accordance with accounting standards that are generally accepted in South Africa and reflect fairly the financial position of the franchisor for the period covered.

Prescribed appendices

  • A complete list of current franchisees with full contact details and a statement to the effect that the prospect is entitled to contact any existing franchisee to assess the accuracy of the information contained in the disclosure document.
  • An organogram showing the franchisee support system that is in place within the franchisor’s operation.

Other important considerations

  • Cooling-off period

The CPA states that a qualified prospect must receive a disclosure document at least 14 days prior to the signing of a franchise agreement. This requirement should effectively put paid to the “sign now, regret later” approach to entering into a franchise agreement.

  • Confidentiality requirements

Given the confidential nature of the information the disclosure document contains, franchisors are concerned that this information could fall into the wrong hands. This is understandable but not addressed by the CPA or the Regulations. However, legal practitioners believe that franchisors are entitled to demand the signing of a Secrecy Undertaking or similar document prior to handing over the disclosure document. Signing such a document must not obligate the prospect to anything beyond treating the information they are about to receive in the strictest confidence, and not to use it for any purpose beyond assessing the viability of the specific opportunity.

Conclusion

The CPA imposes an obligation on franchisors to make full disclosure of salient facts and grant prospects sufficient time to assess the viability of their offer. These are two very important steps towards ensuring ethical dealings in franchising. In this context, it is noteworthy that FASA’s disclosure requirements are stronger than the CPA’s minimum requirements. This means that prospects about to join a brand that is a FASA member enjoy double protection. The CPA ensures that the disclosure document provides specified minimum information and FASA’s Code of Ethics adds additional protection. Visit www.fasa.co.za for more.

“Written by Mark Rose of Nedbank and Eric Parker of Franchising Plus.”

Mark Rose is the Head of New Business Development at Nedbank Business Banking. He holds a Masters in Business Administration (MBA) from the Oxford Brooks University, as well as various business qualifications from the Gordon Institute of Business Science (GIBS), the University of Stellenbosch Graduate School of Business, and the University of South Africa Graduate School of Business. Nedbank’s New Business Development unit develops customised industry specialised offerings to the medium sized business market, including Franchising, Agriculture, Professional – including Financial and Legal Practices, and the Medical Fraternity. This unit has also developed a unique Enterprise Development proposition. For specialist advice and more information on the Nedbank Franchising proposition visit the website or send an email to franchising@nedbank.co.za

Company Posts

Smoothie Franchise Opportunity: Puré Frooty Is A One-Of-A-Kind Smoothie Franchise Business

Looking for the next greatest franchise opportunity? Puré Frooty Smoothie is a highly perfected Australian business model launching in the South African market that doesn’t require extensive shop fitting or a large workforce.

Pure Frooty Smoothie

Published

on

saying-no

Vital Stats

Puré Frooty Smoothie is a unique business model to the South African market. A delicious, fruit filled smoothie will be created at the touch of a few buttons.

An Innovative Franchising Concept

This innovation in the healthy smoothie industry is ground breaking for South Africa. The machine is manufactured in Australia by a highly skilled team. It took six years to perfect this business model for the consumer market.

The vision of Puré Frooty Smoothie is to offer convenient on-the-go smoothies for anyone. The experience and quality will always be of the highest standard. We aim to be a staple convenience in malls, schools, office parks and hospitals. This is a platform that will allow for self-growth for passionate entrepreneurs.

Our mission is to create a unique customer experience. We want to satisfy the nutritional needs of customers by providing quality smoothies. Puré Frooty Smoothie will be packed with all the goodness a smoothie should offer.

Related: Why Your Franchise Should Adopt A Shared Value Business Model

The four values we pride ourselves in are:

  1. Convenience
  2. Consistency
  3. Quality
  4. Customer Satisfaction.

Why Consider This Franchising Opportunity

healthy-smoothie-franchise

Extensive research into the business model and market

Puré Frooty Smoothie was an idea, researched widely, by people looking to simplify the business process for the consumer and business owner. There was a gap in the market for simplified customer service and a demand for a quicker turnaround time.

Simplified process for setting up a business

For an entrepreneur it can be very overwhelming to start or buy a new or existing business. There are so many crucial decisions that need to be made from the beginning and new concepts to adapt to.

Puré Frooty Smoothie simplifies that drastically:

  • Free-standing machines: The business model revolves around a free-standing vending machine which needs to be visited to refill and maintenance.
  • No shop-fitting required: There is no need for shop fittings or a large work force. All that is required is an inside space for the machine with a power supply.
  • Minimal human resources needed: In terms of a work force, you could either do it yourself or have one person to assist you. There is also a part time involvement where refill station teams can refill and maintain the machine.
  • Cashless business: The business is completely cashless so there are no worries of a note jam, full cash canister or insufficient denomination rand values. More importantly the machines would do a higher turnover than an ordinary vending machine so safety of no cash is important.
  • Easy tracking of stock and performance: A cloud-based system is linked to the point of sale which allows you to monitor your performance and stock from the back-office platform at any given time.
  • Efficient handling of maintenance: With a live point of sale system, the business is linked to a software which monitors the operations of the machine. Should anything malfunction an immediate notification will be sent with a diagnostics report.
  • Human error is eliminated: Everything is done with a computer which leaves little to no room for errors. It is self-order and very user friendly.

Related: SA Fast Food Franchising On The Rise

Why Will Customers Love It

Puré Frooty Smoothie offers a vending machine that can produce a delicious smoothie in forty seconds. An informative touch screen ordering panel which displays all the nutritional information of the smoothie ordered and has the current news and weather.

No time wasted for the consumer. In fact, it’s a learning session disguised as a waiting period. The machine has two wash cycles after every smoothie is made to be freshly prepared for the next smoothie, business hygiene is important.

Consumers live in the fast lane. We are looking for something quick and most times we would like to be healthier. With the hustle and bustle of today’s life every little bit helps. Puré Frooty Smoothie fills that gap in the market.

Interested in Becoming A Franchisee?

Visit our Franchise Info Page for everything you need to know about how to become information a Puré Frooty Smoothie Franchisee owner.

You can also call or write to us:

Phone / 012-942 6360
Email / info@purefrooty.co.za 

Want to know more about this franchise? Watch the video below for more.

 

ent_mag_6-11-18

Continue Reading

Researching a Franchise

4 Top Tips To Find Your Best Franchise Opportunity

The President’s recent Job Summit highlighted the critical need to reduce unemployment. The franchise sector employs 369 573 people, 93 percent employed by individual franchisees rather than franchisors.

Richard Mukheibir

Published

on

franchise-opportunity

Several years of strong sectoral growth combined with business opportunities that are often backed by an investor safety net is making franchising the top choice for many who want to own their own business.  This assessment is based on the strong foundations of my own experience of establishing Cash Converters nearly a quarter century ago and the recent results of Franchise Association of South Africa (FASA) annual industry survey.

These figures show that the SA franchise industry has grown its turnover by 55 percent from R465 billion in 2014, when FASA conducted its first survey, to R721 billion in 2017. Alongside this, the sector’s contribution to South Africa’s GDP has expanded by 62 percent, from 9.7 percent in 2014 to 15.7 percent in 2017.

The President’s recent Job Summit highlighted the critical need to reduce unemployment and boost the national economy by growing business and stimulating job creation. The franchise sector employs 369 573 people, 93 percent employed by individual franchisees rather than franchisors.

Franchising can be a win-win for franchisees. It enables you to make your dream of running your own business come true as well as contributing to providing much-needed new jobs.

These factors make franchising a particularly attractive option for those wishing to start their own business. But with 865 different franchise systems active in the country last year, the huge range of choice can be confusing.

Related: Key Phases Of The Franchising Relationship

To prevent analysis paralysis and ensure you can get set to make the most of franchising, I can offer four top tips for selecting the best franchise opportunity for you:

1. Choose a credible brand

As you shortlist franchisors that appeal to you, go beyond what they tell you about themselves and find out about what people are saying about them. Do social media searches to find out how consumers are reacting to the product or service offered, pricing and customer service. Your franchise fee should buy you a halo effect thanks to your franchisor’s good reputation. Too much negativity around the brand will affect the potential success of your franchise, from your ability to attract customers and the turnover and profit you can hope to generate.

2. Look for a proven business model

A worthwhile franchise shares with franchisees the intellectual property it has developed over the years. It has created and grown this business model over time, knocking off rough edges and fine-tuning systems for mistakes as they become apparent. Check the brand’s news history online as well as its own sales material. Be wary of any franchise that claims to be perfect or invincible.

Nobody is – so either it has something to hide or it is fooling itself. Either way, such a brand is not keeping its eyes open to navigate the brand and its franchisees through the changing fortunes of business.

Related: Thinking Of Going Into Franchising?

3. Check the support systems

Getting relationships and systems right is vital in business success. They have become even more important since we founded Cash Converters nearly 25 years ago because the volume of legal compliance has mushroomed. Make sure that the franchises you shortlist offer you support in coping with this and that those running the brand are in touch with what happens on the ground in the franchisees’ stores. At Cash Converters, for example, our front-end support staff are in stores every day and the directors devote three days each month to visiting stores. This ensures that our expertise is available to guide the franchisees through any business issues they face.

4. Follow the recipe

When you sign up with a franchisor, you receive access to its business model, including the “recipe” for running your franchise. This forms a kind of safety net so you do not need to reinvent a wheel when setting up your business. But you cannot complain that the business model does not work if you do not implement it. This is one of those times when you must follow the recipe to bake the cake successfully. If you are not the kind of person who wants to do that, then think again about whether franchising is for you.

Continue Reading

Company Posts

Don’t Tread On Toes – Why Investing In A HIQ Franchise Will Offer You More Opportunities

Are you looking at investing in a tyre replacement and service industry? Look no further than the Hi-Q franchise.

HI-Q

Published

on

By

grosvenor-crossing-hiq

Vital Stats

Established in 1999, Hi-Q is a successful and diverse multi-product, multi-brand leader in the tyre replacement and service industry with a network of over 130 franchisees nationwide.

With the support of international tyre giant Goodyear, Hi-Q has established a solid reputation of ‘the one you can trust’, and the Hi-Q approach and philosophy is embedded in this.  We have the trust of our customers, our network and our suppliers – that’s why you can trust us to take you and your business to the next level.

When you’re working with people’s safety, trust forms the most significant part of the equation

Hi-Q introduced the original and innovative TyreSurance initiative – the only aftermarket tyre damage guarantee product that backs the consumer no matter the brand of tyre. Each Hi-Q Franchise offers a broad range of brands within the different product and service categories that customers know they can trust, and at prices they can afford. Product and services include tyres, exhausts, shocks, batteries or brakes, wheel alignment or balancing, and a 10-point safety check.

We have identified areas of opportunity to extend our Franchise footprint growth. If you are looking to join a new franchise and you share in our values and vision, we would like to hear from you.

For further information on how to become a franchisee, call us on +27 11 394 3150.

tyresurance-visual

Related: We Want To Invite You To Join Us On The Hi-Q Journey And Become A Franchisee

Continue Reading
Advertisement

SPOTLIGHT

Advertisement

Recent Posts

Follow Us

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

Trending