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.
How To Start A Funeral Business
Running a funeral business can be lucrative, but you must determine whether it’s the right venture for you.
In South Africa, burial remains the most popular end-of-life choice.
“Just how many burials take place is difficult to measure because there is a formal and an informal funeral industry in South Africa,” says Rey von Ronge, secretary of the National Funeral Directors’ Association, an industry watchdog organisation specialising in resolving disputes between undertakers and the public.
Franchise vs independent operators
In South Africa, the funeral industry operates through two channels – independent companies and franchises.
The two franchise players are Martins Funerals and 21st Century Funerals, both members of the Franchise Association of South Africa (FASA).
A Martins Funerals franchise costs upwards of R485 000. This includes start-up stock. Royalties are paid on gross monthly turnover at 7%, working on a sliding scale. The franchise contract is renewable after ten years and full training and ongoing support is included.
There are independent operators in the market, but setting up a well run business that complies with the laws of the country is expensive. “The problem we face is that there are many fly-by-night funeral businesses in South Africa,” says Von Ronge.
Fly-by-night undertakers do not provide proper services and are in the business purely to make money. Fly-by-nights operate without a licence and do not comply with the industry’s rules. People are buried in the wrong graves and health requirements are not met.
Some smaller private funeral homes make use of government crematoriums and store bodies at private and government mortuaries until it is time for the burial or cremation. It’s the responsibility of local municipalities to ensure the proper management of cemeteries, crematoria and funeral undertakers within their areas of jurisdiction.
The cost of running a fully functional private funeral home
“Most people think that the funeral business is an easy way to make money, but it isn’t,” says Theo Rix, MD of Independent Crematoriums of SA.
He says the cost to set up a fully functional crematorium in South Africa is around R7 million. A cremation furnace costs around R1,5 million and you need at least two to run a profitable business. Other costs include smoke extractors and their installation, protective clothing for radiant heat and so on.
A typical start-up
Consider a typical existing upmarket funeral home based in Johannesburg:
- Sales revenue: R4 million
- Cash flow: R1,2 million
- Employees: 7
- Hearses: 3
- Leasehold rent: R108 000 per annum
- Size of the premises: 300 m2
It can take up to two years to get the necessary permits and permission to run a funeral home from local municipalities and government authorities.
“Because the paperwork is so extensive, we don’t attempt to do it ourselves. We employ attorneys to get the process going on our behalf,” says Rix.
Are you the right person for the job?
Starting a funeral home is not for everyone. Here are some points to consider:
- Because of the nature of the business funeral directors must be able to work at odd times of the day.
- A person who runs or owns a funeral home should be an excellent communicator and a good listener. People from various cultures and traditions will have to be managed with equal ease.
- An understanding and caring attitude is a must, while at the same time the funeral director has to be emotionally strong and not shaken by other people’s distress.
Usual tasks include:
- Speaking to the bereaved in order to make funeral arrangements.
- Liaise with others such as the clergy and cemetery workers, and even write obituaries.
- Keep records, such as lists of items that come with the body.
- Obtain all clearances and adhering to regulations associated with the event, he or she will need to be well versed in procedures and legal issues.
- Have extensive knowledge and respect for the religious sentiments and beliefs of various cultures and communities and will also need to know about different customs and rituals followed by various religious groups during the funeral service.
Study the art of funeral directing
Many funeral home owners seem to view training and personal development as more optional than essential; that is all set to change with the opening of the very first funeral director training school in Gauteng.
The Funeral Academy for Africa (FAfA) offers a Certificate in Funeral Service (NQF Level 3) which has been introduced for the first time in South Africa and Africa. The course teaches students to prepare and present funeral services and manage funeral logistics and administration. FAfA also offers a variety of short courses and has opened campuses in Durban and Cape Town.
For more information, visit www.fafa.co.za
Regulation for burial societies on the cards
The burial society business in South Africa is largely unregulated. But this is set to change with the establishment of a new, overarching regulatory body – the Burial Society of South Africa. By Gill Abraham
What is a burial society?
A burial society is an informal self-insurance scheme. It absorbs the costs of social activities and cultural requirements of funerals. The total amount invested annually in burial societies is said to be around R6,4 billion
“Burial societies have massive potential for wealth creation within South Africa’s poor and vulnerable communities, given the right assistance. Research has shown that more than 20% of the South African adult population are members of a burial society – so the importance of this sector must not be underestimated. Burial societies also represent a significant spend with members prioritising 15% of their income for this financial product,” says Inseta’s CEO Sandra Dunn.
“The aim of the newly formed Burial Society of South Africa (BSSA) is to unite all the burial societies that operate in the informal sector under one umbrella,” says secretary general of the BSSA, Zulu Ratswana. “Each burial society has about 30 members and each member contributes R50 a month. This money is then deposited into a bank account where it stays until it is needed.”
Banks and insurance companies need to change
Tradition and belief influences the decision-making of a burial fund member when arranging a funeral for a member of the family. “Banks offer policies, but they have never consulted with the burial societies and they do not appear to understand their needs,” explains Ratswana. All causes of death are covered by burial societies with no questions asked, whereas formal insurers exclude (or at least make it difficult to claim on) certain deaths such as HIV/Aids or suicide. The banks do not include the needs of the extended family, whereas burial societies do.
“We also want to provide a free last will and testament to those who join the BSSA,” he says. The membership fee is R100 per year. The BSSA will also seek to mass produce coffins in order to keep costs down.
“We want to assist with pauper funerals and we believe ‘a human being is a human being’, meaning that even if someone is destitute, that person deserves a decent funeral. So we would adopt the corpse, and by giving that person a proper funeral; they will be able to rest in peace,” explains Ratswana.
Another aim is to allow members to borrow money at very low interest rates. Ratswana says the BSSA plans to include education and training for the industry as well, and will offer bursaries to deserving students.
A need to unite
Because the industry is unregulated, Ratswana explains that burial societies need to organise themselves, which is why the BSSA has been formed. Ratswana sees the insurance companies and banks as a possible threat because the burial societies lack the skills and resources to provide their growing market with the right products and services at the right price.
“If we organise the players in this industry we will be able to compete with the formal funeral insurance sector. We will be able to provide proper control and manage fraud as well as the many problems that HIV/Aids has created. Once we are united, it will be much easier.
“We intend to establish offices in all provinces of South Africa and we will impose standards. We will become the watchdog of the industry,” he says.
“As the informal market becomes more sophisticated, and companies include funeral insurance in salary packages, the market will change,” says Dr Chris Molynex, past president of the National Funeral Directors’ Association.
Registering burial societies as co-operatives
Inseta is pushing for burial societies to register as co-operatives in an endeavour to become more professional. Inseta has committed to provide capacity building workshops that will be held nationally.
Contact Inseta’s call centre on 0860 113 0013 for dates and venues for these workshops.
Pros and cons of funeral businesses
“R5 billion is spent on funerals annually in South Africa,” says Inseta’s CEO, Sandra Dunn.
Threats to the industry as a whole include the lack of burial land. At Avalon cemetery in Soweto, for example, it has been reported that over 200 funerals take place every weekend. This is Johannesburg’s biggest and busiest cemetery, accounting for 40% of burials.
Another threat to the sector is emissions caused by cremation. Cremation spews about 400 kg of carbon dioxide – a greenhouse gas blamed for global warming – into the air, along with other pollutants like dioxins and mercury vapour which are emitted if the deceased have silver tooth fillings.
But these threats to the industry also can and have created opportunities. Internationally, there are many new practices which are being used to deal with these problems. In Japan, most deceased people are cremated. According to a recent BBC report, it has become extremely difficult for the Japanese to find places to store ashes, especially in big cities. The solution has been to save space and money by converting old warehouses into storage facilities for the ashes of family members.
Because Israel is such a small country and tradition dictates that the dead are buried, a simple solution has been devised where two family members are placed in a single grave that is dug deeper by an extra metre. Israel has also designed above-ground niche burials, in which the niches are pre-cast concrete units. However, the most significant innovation is the multi-level cemetery. It allows for single and double conventional graves as well as niche burial, on at least two levels.
Sub-contracting is a good way to make money
“A funeral director is in fact an events manager, but one who doesn’t have as much time to organise an event,” says Dr Chris Molynex, past president, National Funeral Directors Association Southern Africa. Funeral directors sub-contract services such as catering, fresh flower arrangements, rental of tents and chairs, transport for mourners, tombstones, coffin name plates and wreaths.
A popular tribute at a funeral can be a dove or butterfly release at the graveside. Another appealing choice is a bagpiper or a ‘live’ jazz band to play at the end of the ceremony. These services are all spin-off revenue earners. Other business opportunities include the manufacture of casket trimmings, linings and handles.
In some parts of the world, and especially in the United Kingdom, the increasingly popular green or natural burial movement is working hard to reform how the dead are returned to the earth. With natural burial, bodies are not embalmed; coffins are simple and made of easily decomposable, non-toxic materials.
Sonja Smith, CEO of Sonja Smith Funerals for Pretoria, has been awarded the franchise rights in South Africa for natural woven coffins. “I want to help the funeral industry in this country to become a friend of the environment,” says Smith. “I started my research two years ago when I read an article about natural woven coffins in a British publication called The Funeral Journal.
“I was convinced that this concept would work well in South Africa and started to liaise with the company in England. I was offered the sole mandate for South Africa and Africa. The range features coffins woven from natural fibres like seagrass and cocostick. They are bio-degradable and made from easily renewable resources that don’t pollute the atmosphere when they are burnt in crematoriums.”
Smith’s first consignment of adult woven coffins arrived in April and she was overwhelmed by the response from funeral directors across South Africa. More than 80 funeral homes took a keen interest and wanted more information.
In South Africa a coffin should be manufactured to SABS standards. Coffins are generally made from wood, while caskets are produced from wood or metal. Most importantly, a coffin must be sturdily constructed in order to protect the dead and safeguard the health of the living, which is why the SABS has set strict standards.
There is a growing demand for coffins and training centres where coffin making is taught. Courses are available throughout South Africa and they provide the necessary practical knowledge to start a coffin and casket manufacturing business. Online business coffins.co.za was formed eight years ago due to the huge demand for affordable funeral products.
The Pros & Cons Of Owning A Restaurant Franchise
Do you have what it takes to be a successful restaurateur? Our franchise expert offers some words of wisdom.
There are many different types of business format franchises, but when most people think of a franchise business, their first thought is of food. The success and growth of the many big brand-name fast-food franchises makes this a logical first stop in the thinking process.
When evaluating restaurant franchises, you must focus on the characteristics of the business from a franchisee’s perspective to determine whether this industry is the right one for you.
There are some wonderful advantages to having a food business, but there are also some challenges you need to be aware of before proceeding in this industry.
In assessing a food business, the main advantages are typically considered to be:
Consumers have been trained to look for franchise food outlets, which can represent a big advantage for a start-up. You need to make sure the product offering of the food franchise has “staying power” in the marketplace rather than being a fad or fringe product.
Ease in Financing
Traditional lending sources are very familiar with the real estate and equipment needs of a prepared food operation, which may ease the challenge of obtaining start-up financing. These sources also like the relatively high revenue production of a typical food franchise.
Track Record of Success
Many food franchises have multiple units and have been operating for a while, making it fairly simple to determine and verify their track record of success. That can help you make an informed decision about the business prior to getting involved.
Whether valid or not, many people associate a high degree of glamour with a person who owns a food franchise business. The fairly high degree of status associated with this occupation is important to many prospective franchisees.
In assessing a food business, the main disadvantages typically include:
High Initial Investment
Most food franchises require a significant investment to get started. Food preparation stations, sinks, stoves and ovens, grease disposal systems, venting requirements, customer seating and bathroom areas – the list goes on.
Zoning and Code Compliance
The government tries to ensure that any food business meets numerous codes and guidelines so the food product is safe for the public to consume. Complying with these regulations can initially can be time consuming.
Virtually any food franchisor will provide extensive assistance to a new franchisee in terms of dealing with zoning, permits, code compliance and all other site-related issues, because the new franchisee probably doesn’t have a clue how to do this whereas the franchisor has lots of experience on these matters.
If a food franchisor doesn’t offer extensive support on these matters (you can determine this during your conversations with existing franchisees), pick a different one.
Related: 10 Business Ideas Ready To Launch!
Most food businesses require the services of a significant number of low paid employees to conduct their business. Turnover of these employee positions is normally very high, and recruiting and retaining a sufficient number of acceptable quality employees is typically listed as the number-one challenge in any food franchise.
Relatively Low Margins
In food operations, the franchisee has both the cost of goods sold and Labour costs to contend with in an environment that is very price sensitive, especially in fast-food outlets. The net margins of most food businesses are not nearly as high as other (particularly service-related) franchises, and you’re also dealing with spoilage, theft and other issues that you don’t find in many other types of franchise businesses.
Quality of Life
As mentioned above, many people associate a high level of status with owning a food business, at least until they understand the facts of a typical food franchisee’s life. The hours can be very long, as you’re often the first to arrive and the last to go home. The Labour challenges can be very frustrating and are the main reason owners cite for wanting to leave this industry. Then there’s also the issue of what a person smells like after spending long hours each day in a food franchise.
The obvious question, assuming you don’t have previous experience running a food business, is “how do you know whether you have these skills and aptitudes?” The best answer, and one that is actually required by a few of the most successful food franchises, is to go to work in an existing unit and shadow the present owner until you’ve gained enough experience to know for sure.
This isn’t going to be a process involving an hour or two – more likely it’ll take at least a few weeks to know for sure. The time commitment involved may seem high, but it is infinitely better for you to find out early (and without risking your life savings) if this business is not for you.
A final consideration related to food franchises is this: Some food franchises run very simplified operations and can provide a business model that avoids a number of the disadvantages listed above. These are typically businesses that don’t involve cooking a product, at least not on site. They may use a commissary system to deliver ready-to-serve products, or products that only have to be assembled in order to serve, to the franchise outlet. These types of businesses, like a Subway outlet, can avoid many issues but almost always still have to deal with the employee issues discussed above.
Give some serious thought to the franchisee role in terms of the tasks required in a typical day or week, the hours worked, the investment and the possible returns. Make sure you know what it takes to succeed and that you possess those qualities. Then you’ll know whether being a restaurateur is right for you.
The secret to success in evaluating any food franchise (or any franchise for that matter) is to clearly identify the skills necessary to succeed, then make sure you either have them or go do something else. The food business can be very rewarding to a person who has the special blend of skills and aptitude to make the business work, and these operators are among the most respected in all of franchising because of their success.
Restaurant franchises are overcoming the challenges presented by the economic downturn, high operating costs and increasing competition.
Although the economic woes are subsiding for some South African consumers, many are still watching their spending. One would expect that this means less eating out and takeaways, yet the restaurant industry says this isn’t the case.
Tyrone Herdman-Grant, MD of of the Spur Group says South Africans are most definitely starting to eat out more as a result of the current economy. He explains: “I believe that our customers are still scared of committing to buying assets like houses and cars and are still fearful of a second recession. This has resulted in more disposable income which they spend on food and entertainment.” Sean Holmes, marketing and operations,
Primi Piatti, believes people find comfort in food and as a result when they have some form of disposable income they choose to spoil themselves by eating out.
Michael Terespolsky, director, Col’Cacchio pizzeria, confirms that there has been a growth in the number of South Africans eating out over the last year. He adds: “That being said, the economic climate is still tough, and people aren’t willing to part with their hard-earned money for an average dining experience.
Customers demand a high standard of food quality and service at an affordable price. Customer perception of value is the most important thing to bear in mind!”
Opt for a franchise
Herdman-Grant believes franchised restaurant brands have a stronger future in the sector than independently-owned outlets. He says: “Independents usually cut their marketing budget when times are tough, while top brands increase their marketing spend.
The strength of a good brand cannot be valued enough – especially if the franchisor provides the franchisee with ongoing support and guidance to improve and streamline their business, but never at the expense of the customer.” Herdman-Grant says good franchises offer a proven business formula – they have learnt most of the lessons that need to be learnt.
Holmes says franchise businesses have proven themselves internationally. He adds: “A franchise offers less risk and stands a greater chance of success and survival than independent start-up businesses. They say a franchise business has 80% more chance of succeeding than an independent start-up.”
However, Terespolsky is of the opinion that a franchise does not necessarily have a stronger future in the restaurant sector than an independent. “It depends on the strength of the franchise and its ability to be responsive and appealing to the market.
Nothing comes without hard work though and the restaurants that are the most successful (franchised or independent) are the ones that are owner run and managed.”
He says that if restaurant franchises can offer consistently high quality and service and the brand name is held high then they’ll be likely to succeed.
The advantages of franchised restaurant brands such as strong brand awareness, cost advantages through economies of scale and constant support means that the likelihood of success with a franchise brand should be greater than with an independent.
Terespolsky says a franchise offers a “tested and proven” method which mitigates the risk of your offerings not being accepted in the market.
“Ease in financing is also a benefit of investing in a restaurant franchise. Traditional lending sources like banks are familiar with restaurant- related costs which may ease the challenge of obtaining start-up financing,” he concludes.
Andries Strydom of Wiesenhoff highlights some of the advantages of choosing to invest in a franchise, including bulk negotiating influence, sharing of information between franchisees and being able to offer the consumer peace of mind with a familiar brand.
He adds: “Many people in the brand focus on different segments necessary for growth. Independent operators have too much to think about and focus on. Franchisees focus on running their stores while franchisors focus on running the brand.”
Herdman-Grant says that restaurants can remain competitive by improving the value proposition and investing in the people who run their businesses. Other measures include upgrading sites and continually staying ahead of the game in a constantly changing market.
For Holmes, remaining competitive requires the business to evolve continuously and stay closely connected to customers’ wants and needs.
“We remain competitive through the use of well-planned strategies. Being a competitor in the food and hospitality industry requires constant monitoring of your situation and the events that are taking place around you. To remain profitable, you need to have strategies available to stay competitive in the marketplace,” says Terespolsky.
He adds that restaurants need to remain abreast of current trends in the industry and look for ways to innovate and stand out. “If there’s nothing special or unique about your offering, customers are bound to feel the same way.
Making meaningful connections with customers through well-managed and engaging websites and social media pages is also a competitive advantage at this point in time.”
The weather factor
Some franchises are more successful in the summer months when consumers are more active and upbeat, but restaurants aren’t negatively affected by the cold winter period.
“South Africa is a very sport-orientated country and when the weather is good, South Africans prefer being outdoors and braaiing. When the weather is bad, we definitely see an increase in the number of customers who support our restaurants,” says Herdman-Grant.
Holmes advises that during quieter months, restaurants need to look at their overhead structure and trim in line with winter sales trends. “The introduction of specials or ‘value adds’ will also help entice customers out of their homes to wine and dine,” he says.
This is echoed by Terespolsky who says for some restaurants there is a drop off in sales. He says: “Store owners need to work hard to ensure they keep foot traffic through their doors with a great product and service offering. Increased marketing initiatives and special value adds are introduced during the winter months to encourage more customer visits.”
According to Herdman-Grant, customers are now voting with their feet and chosing where to spend their hard earned money.
The independents and the brands that offer the best-quality service in a wholesome environment will be the ones that survive. “The trend is definitely leaning towards quality and good service; you are only as good as the last meal you serve,” he adds.
“A ‘value for money’ offering is definitely popular in the current economic climate,” says Terespolsky. He says consumers seek good quality food and great service at an affordable price.
“The SA market is becoming increasingly sensitive to growing health issues and as a result people are looking to make more healthy food choices. Restaurants that cater for all dietary requirements and offer healthy, freshly prepared food at a competitive price will flourish. “
Holmes says a popular dining experience at the moment is where there is transparency between the food being served and consumed and the original source.
Making it work
According to Herdman-Grant, restaurants that offer the best customer experience and continually reinvest in their business by upgrading and improving the quality of their product and service, will survive.
He says that some of the biggest challenges restaurant owners currently face include the increase in labour and energy costs, as well as “unrealistic rentals expected by some landlords.”
To retain customers, Holmes says restaurant owners need to stay connected. “Service and quality is a must and expected, it’s the connectivity and relationship built between the restaurant operator and their customer that will ensure a long-term loyal customer.”
Some of the challenges he highlights include maintaining the dedication and motivation to efficiently operate the business, controlling costs and in turn motivating staff to do the same.
“Keeping a keen focus on customer service is key,” says Terespolsky. He explains that if customers are continually delighted by the dining experience they’ll be more likely to remain loyal to your brand and tell their friends and family about it.
“Invest in training and the up-skilling of staff as they are the closest touch point to your customers. Warm, sincere staff will make customers feel welcome and comfortable. Customer relationship marketing should be well managed to keep up the contact and value offer to returning customers,” he advises.
“There are a number of challenges that affect all restaurant owners such as growing food, electricity and rental costs. Those who are successful will be the store owners who learn to utilise space and manpower the best.”
Strydom says to remain competitive, restaurants need to be unique, offer great service, quality products, great staff, good training and have a suitable location. Some of the challenges, he says, include staff retention, quality of staff, supply chain and food inflation, but he adds that the advantages of a restaurant franchise are ROI that outweighs that of other businesses, and daily cash flow.
What it takes
Michael Terespolsky, director of Col’Cacchio pizzeria says that in the current market the greatest challenges are finding suitable franchisees who have the financial means to buy into the brand.
In order to be a Col’Cacchio pizzeria franchise owner you should possess:
- An entrepreneurial spirit and a desire to own your own business
- A great work ethic and the willingness to spend time in your business
- The ability to deal with pressure
- A ‘don’t quit’ attitude
- Leadership and management skills
- Business acumen
- Customer service orientation
- The same kind of passion as the rest of the Col’Cacchio pizzeria team.
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