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Sector Focus

Investing in an Evolving Industry

If you have a passion for cars and are looking for an opportunity to become your own boss, you should be considering an automotive franchise.

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The size of the automotive industry makes it an ideal space for investors to be involved. If the trends and economy are anything to go by, there will constantly be new opportunities for anyone with a passion for the automotive sector.

The franchising model is well suited to the automotive industry as bigger brands have more buying power and consumers trust well-established franchises. Starting an automotive business independently can be expensive and overwhelming, but by joining a franchise you are assisted in starting up and running your business. A well-known franchise with a trusted brand name will also help you secure customers from the get-go.

Potential for Growth

Morné Cronje, FNB head of franchising, believes this is one of the categories in franchising that still has a lot of growth potential. “There has been growth in new products such as window tinting or protective film and windscreen repair or replacement,” he says, adding that the current state of the country’s roads in general gives rise to growth in automotive business opportunities, for example wheel rim repair services. “Lifestyle products such as 4×4 accessories also show potential for growth, and the amount of accidents on the roads, especially bumper bashings, increases the potential for non-structural repair franchise concepts.”

Before You Buy

As a potential franchisee, you need to do thorough research on the brand you are interested in joining. You should not only look at the price, but also the history of the brand and the training and support provided.

“Automotive franchises have traditionally been more focused on trade name franchising and less on business format franchising where the franchisor gives the franchisee a proven business model and system,” says Cronje. He advises entrepreneurs interested in this category to find out what level of support the franchisor will provide on an ongoing basis. “From our experience, many of the franchises in this category are now looking at enhancing their systems to provide more franchisee support and to standardise the customer experience of products and services,” he says.

What it Takes

According to Jane Perie of Mayfair Gearbox Centre, the type of person best suited to owning a franchise in the automotive sector is someone who is tough and reliable.

She says that in order to be successful, it helps if a franchisee has motor industry knowledge. Other attributes include understanding the technical basics, as well as having an entrepreneurial spirit. She advises that franchisees ensure their franchisor is established and can offer 24/7 back-up.

A Bright Future

The automobile industry is by no means getting any smaller, and will continue to grow with the global population. As it grows, there are both old and new opportunities available for those looking at investing in a franchise.

Car repairs, maintenance and body services will be in demand regardless of whether people are buying new cars or keeping their existing ones. One of the topics constantly being addressed is the green movement. Many car manufacturers are focusing their attention on producing environmentally friendly, fuel efficient vehicles. As this trend increases, it creates demand for businesses that understand green issues and can offer the relevant services or products.

New Challenges

Romano Daniels, MD of Bridgestone South Africa says the move by OEMs to produce more efficient products that last longer has led to a decline in turnover in certain product categories for aftermarket franchisees. The same can be said for Government’s move to reduce the sulphur content in fuel which leads to less corrosion.

Growing Entrepreneurs

The AIDC (Automotive Industry Development Centre) has been lobbying for automotive parks in the Eastern Cape for SMEs based on a micro-franchising model to promote new business opportunities. Grant Minnie, supply chain development senior project manager, AIDC, said implementing such a business zone, mainly for the aftermarket, would build a bridge between the formal and informal sectors.

The automotive parks would contain businesses such as windscreen repair, body repair, seat repair, tyre services, vehicle parts, valet services and others. The businesses would be supported by the formal supply chain ensuring supplies were sourced from established entities and brands. These parks would provide the support currently lacking to entrepreneurs, including limited infrastructure, fixed capacity, innovation and access to finance and markets.

[FAST FACTS]

  • Ford was the first OEM to establish a subsidiary company in 1924 in Port Elizabeth and began to assemble CBU vehicles
  • All the major OEMs in the world are represented in South Africa
  • South Africa’s motor vehicle population is concentrated in Gauteng, comprising 38% of vehicles, followed by the Western Cape with 17%, KwaZulu Natal with 14% and the other provinces with less than 10% each
  • The automotive industry accounts for 12% of exports
  • Approximately 90 000 people are directly employed in auto manufacturing, approximately 200 000 are employed in retail and aftermarket activities
  • South Africa’s auto production grew by 59% between 2000 and 2011 compared to the global growth of 35%.

Entrepreneur Magazine is South Africa's top read business publication with the highest readership per month according to AMPS. The title has won seven major publishing excellence awards since it's launch in 2006. Entrepreneur Magazine is the "how-to" handbook for growing companies. Find us on Google+ here.

Sector Focus

3 Tech Trends Your Franchise Should To Keep Up With During The 2018 Restaurant Revolution

For the first time in history, the majority of consumers are – arguably – more interested in how they buy instead of what they buy, according to research. Catch up quickly by responding to this in three ways.

Diana Albertyn

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How many ways can you customers choose an item, order it and pay for it in your restaurant? Mike’s Kitchen, Spur, The Baron, and other sit-down restaurant franchises across South Africa have widely started accepting mobile payments using the Zapper app. If you have too, you’re on the right track, because convenience reigns in the restaurant industry, especially where trends are concerned, for your current and future customers.

“In the last two years, there’s been a 50% increase in restaurants using technology. Almost 80% of guests say restaurant tech improves their guest experience, especially when it makes service faster,” according to a recent study focusing on diners and technology.

Here are three of the top trends influenced by consumers’ mounting affinity for experience over your menu items, décor or prices:

1. Self-service via touchscreen kiosks

Who wouldn’t appreciate skipping the queue and enjoying a consistent enhanced ordering experience? Add rich imagery and food customisation capabilities and you can see why self-service is poised to make a huge impact on the QSR industry in 2018.

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

While kiosk aren’t a new form of technology, combined with loyalty programmes, touchscreens for mobile order pick-up and – in the near future – facial recognition to identify and service customers accordingly, they’re about to become a mainstream addition.

What’s in it for you though? Well, besides happy repeat customers, your order accuracy will improve and staff will be free to attend to more strategic activities within the business.

2. App-enabled ordering and pick-up

Research by QSR Web found that digital restaurant ordering is growing 300% faster than dine-in traffic.

Because “restaurant consumers are aggressively gravitating toward concepts that offer the greatest level of convenience and control across ordering, payment and distribution,” according to analysts from Wells Fargo, mobile ordering technology requires your franchise to go a level higher than its current system.

Consider implementing features such as dedicated drive-thru lanes to for app orders. Or what about outdoor locker systems activated by a mobile phone, enabling a customers to receive their order without interacting with restaurant staff?

3. Analytics aiding personalisation

Even better than mobile ordering though, is using AI to leverage apps including Facebook Messenger or simple SMS to take customers’ orders, for a personal touch. Not only does the chatbot record orders, but based on individual customer data, it’s able to predict what they may choose to eat based on various factors including age, gender and even mood.

Related: The Only How-To You’ll Need To Start A Restaurant

If you’re wondering how the mood is detected, fried chicken giant and search engine firm Baidu have established the answer: Facial recognition technology piloted in Beijing that predicts customer orders based on their face displayed in the kiosk screen.

“Restaurant technologies that capture data, such as customer orders and preference will businesses better understand their target audience. Hence, they will be used extensively in 2018,” according to Indiez, the company that developed Domino’s pizza’s app.

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Sector Focus

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.

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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.

This following guide explains how you can open your own funeral home in South Africa and covers these topics:

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Sector Focus

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.

Jeff Elgin

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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.

The advantages

restaurant-layout

In assessing a food business, the main advantages are typically considered to be:

Built-in Demand

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.

Related: The Only How-To You’ll Need To Start A Restaurant

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.

Prestige

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.

The disadvantages

restaurant-plating

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!

Labour Challenges

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.

In conclusion

south-african-restaurant

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.

Evaluation Tip

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.

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