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Sector Focus

Keeping Up Appearances

Comprising a diverse range of business lines, the beauty industry aims to help us feel, look and smell our best.

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Increasingly, people are taking a more holistic view of their health. Today’s beauty rituals now include massages, a full-day trip to the spa where we can relax and unwind, or spoiling ourselves with a luxury high-end product. Beauty rituals are seen as an escape from the hustle and bustle of life in the information age. The demands of work and family have in many ways contributed to the ongoing development of the industry and to the diversification of personal services on offer. For the entrepreneur this continuing growth and evolution offers a varied menu of opportunity.

Products and Services

Beauty industry opportunities can be broadly separated between products and services, though many providers offer both. Within both products and services, there exists a wide range of business models based on target market, production processes and location.

From exfoliating soaps and volumising shampoos to anti-wrinkle creams, the beauty industry provides us with choices galore that fuel our drive to keep looking youthful, attractive and healthy. Cosmetics exist for every style and taste, as well as every skin tone, texture and even allergy. Certain businesses also distinguish themselves through manufacturing processes such as using all natural ingredients or a refusal to test products on animals.
Indeed, it’s in the product or retail division that face and body treatment franchise Sorbet, which launched in 2005, has seen the biggest growth. “Development in the industry has been consistent, but where we have seen the most amazing growth is on the retail side,” says Jade Kirkel, brand manager at Sorbet. “Where once our business was 60% treatments and 40% retail, those figures have changed. Today, at least 60% of our business is selling products.”

Sorbet products include the Dermalogica and Environ skincare ranges, OPI, Essie and Incoco nail care, and Sorbet’s own range of nail and body care products.
“Our focus on retail has seen Sorbet perform extremely well in the last two years and we will be opening our 40th branch this month. Around half our branches are owned by franchisees, and the plan is to open another four before the end of 2012.”

Beauty Industry Trends

Diversity and innovation exists because consumers demand it. The beauty industry continues to expand globally, with some projections claiming 8,5% growth by 2014.
Several trends support this expansion and promise continued profitability into the future.

Globally, rising per capita incomes and greater access to international markets are increasing spending on discretionary items such as perfumes and cosmetics. Though the recent economic turmoil had decreased spending on some discretionary products, purchasing of beauty products has remained strong.

Targeting Male Customers

Unsurprisingly, one of the fastest growing segments of the beauty industry is the range of products and services aimed at men. Where once the beauty industry targeted female consumers, metrosexuals (usually urban males who pay attention to their personal appearance and style) are gaining increasing attention from the industry. Men are being targeted for body sprays, specialised hair products, lotions and even nail care. Salons offer a menu of pampering services for men, including massages, facials, manicures and pedicures.

“We’ve definitely seen our male customer database grow rapidly,” says Kirkel. “The way to attract men to beauty salons is to ensure that the décor is not ‘girly’ or too feminine. Sorbet salons are gender-neutral and our colours and store layouts are designed to be attractive and comfortable for both men and women. We’ve also seen that it takes quite a lot to get male customers into a store, but once they are there and they feel comfortable, the level of customer loyalty is high.”

Brand Loyalty

Kirkel notes that women, who are very experienced consumers of beauty products, tend to be more fickle than their male counterparts when it comes to brand loyalty and they are often more likely to shop around. However, when they find a salon or product that they like, they share what works for them with their friends.

An international survey shows that personal recommendations weigh more heavily than celebrity marketing, and only 44% of consumers buy a particular product because of its claimed attributes. Like many things, beauty products gain a level of familiarity and comfort for the consumer, and switching to a new product often takes some extra incentive.

Loyalty Programmes

Popular marketing campaigns in the beauty industry often include a free sample and discounts for referrals to lure new customers in, and loyalty programmes to keep them.
“In Sorbet’s case, one of the most successful marketing initiatives we have undertaken was the creation of our loyalty programme,” says Kirkel. “It has 70 000 members and is growing every month.”

Hair Care

“Hair care is one area we are very keen to expand into,” says Kirkel. “One of the major trends in the industry is the move to the ‘one-stop beauty shop’. Time-pressed consumers are increasingly keen on salons that offer all aspects of personal care, from hair styling and massages to all the traditional beauty treatments such as facials, hair removal and manicures.”

Express Services

Kirkel notes that the demand for quick services has led to ‘express’ innovations such as 20-minute facials and manicures. “We have definitely seen an increase in the demand for shorter, quicker treatments’ and we are responding by offering an increasing range of these.”

As we can see, the beauty industry encompasses a wide range of products and services, and franchising plays a major part in bringing them to the consumer. As the industry continues to grow and evolve, profitable opportunities are plentiful.

Sales trends

Beauty industry sees growth at its fingertips

Nail varnish has become the top-selling fashion accessory, replacing lipstick as an affordable indulgence in austere times and leading to a boom in sales as consumers flock to buy bright-coloured bottles.
Industry insiders predict nail colour will be the fastest-growing beauty business in the next few years, providing a small yet promising pocket of growth for beauty groups such as Coty and L’Oreal which have led the rush to snap up independent brands.

In France, over the whole of 2010, perfume sales in department stores rose 2%. Over the same period nail colour jumped 42%, according to global market research company NPD.
Nail polish is still a small sub-sector of the global beauty industry compared to other make-up items such as lipstick, and looks even smaller when compared to perfume, but it is on its way to becoming an important business, analysts say.

“We are seeing an explosion in many countries,” said Karen Grant, senior global analyst and vice-president of NPD’s beauty division.
She likened the trajectory of nail varnish sales to that of lip gloss, a niche business which saw sales grow tenfold over the past decade. “If the nail polish market continues to grow, it could also become a big category,” Grant said.

Nail bars, which have mushroomed in many big cities, target women seeking a small morale boost at a small price.

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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.

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).

Related: Want To Invest In A Billion Rand Industry? Then Look To the Funeral Business

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

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.

Related: The Complete Guide to Starting a Business in South Africa

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.

Related: Want to Run a Funeral Business? Then You Must Know This

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

funeral directingMany 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.

Related: 7 Disgusting Businesses That Could Be Tomorrow’s Mega Money-Spinners

“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.

Related: 3 Key Law Areas To Know When You Launch That Start-up

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.

Related: Entrepreneurship Is All About Overcoming Obstacles

“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

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.

Related: Steps for Writing a Mission Statement that Means Something

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.

Green burial

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.

Coffin making

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.

Related: 6 Of The Most Profitable Small Businesses In South Africa

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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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