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Sector Focus

Safe as Houses?

With the economy showing a slow recovery and the interest rate remaining low, is property still a risky sector to invest in?

Chana Boucher

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A decade ago, if you were talking about real estate, most people would have agreed that investing in property was bulletproof. But, if you made that statement these days – following the harsh global recession, and people losing their homes and jobs – you could stir up a nasty reaction.

According to Raal Nordin, franchisor and chief executive officer of Only Rentals, the market is over the worst. “The brands that are still in business today have proven their strength and will be geared to accept the active market in a fruitful manner,” he says. Nordin adds that activity in the market will pick up pace towards the second half of the year.

Thabiso Ramasike, Standard Banks’s head of Franchising, says: “While the sector is operating in a sluggish market, top property brands should be able to ride the wave and be ready when there is an upswing in the market.” He adds that strong estate agencies should continue attracting discerning buyers and sellers. “Their brand equity is likely to count for more in this economic environment.”

Huizemark MD, Bryan Biehler, predicts that in the near future small operators will join bigger brands or buy franchises as the new operational requirements will hamper individual ownership. “Brand recognition plays an important role in procuring clients,” he says.

The State of the Industry

According to the South African Property Report compiled by the Institute of Estate Agents of South Africa, the property profession has continued to shrink and now has around 32 000 estate agents, working through 8 632 firms. The report states that the majority of firms are small or micro enterprises. Most of the large firms consist of individually-owned franchises, linked to franchisors that provide brand identity, marketing, training and other resources.

The property profession is regulated by the Estate Agency Affairs Board (EAAB) in terms of the Estate Agency Affairs Act 1976. By law, every estate agent and estate agency firm which operates in South Africa must be registered with the EAAB. Registration is subject to annual renewal. An estate agent who collects rentals must also register as a debt collector with the Council for Debt Collectors.

Franchising and Property

Ramasike believes the franchising model is suitable for the property sector. “Property requires a certain type of understanding of how to sell, of client needs, and of locations and trends. Franchisors can provide that type of expertise and support,” he explains.

Furthermore Ramasike says potential property buyers and sellers also need to feel assured that they are dealing with a reputable firm. He says the value of property transactions means that there can’t be room for uncertainties or risks with unknown role players. “The franchising model in the property sector also allows for set standards and codes of practice that are for the benefit of both sellers and buyers.”

According to Nordin, the property sector does more than just offer opportunities. “It is driven by entrepreneurs, and most well-known brands are dominated by multiple franchise owners.” He also says the cost to enter is reasonable, making ownership affordable.

Before You Buy

“Any potential franchisee in the property sector would be wise to first get a full understanding of the different brands, the locations that are available to be bought into, and the prognosis on the overall property market,” says Ramasike.

As with any franchise, doing the necessary research before you invest in the business is vital. Franchisees considering the property market should ensure that they go with a brand that is reliable and trusted by the public. “The market is tough, so easy pickings are not in abundance. We are however optimistic about the market and opportunities it presents,” says Ramasike.

Standard Bank, he says, understands that not all brands operate at the same level. He points out that there are three types of property brands:

  • New players and those that only operate at the local level
  • Regional brands that do not have national representation, but are recognised
  • Brands that are represented at a national level and sometimes internationaly.

“Potential franchisees will have to make a decision based on where they understand the brands to be operating. Consideration of the start-up costs required in setting up a franchise would also be a factor,” explains Ramasike. He says that one of the biggest challenges for the franchisees in the property space is a lack of consistent cash flow. “They would need access to bridging funding, as the sale of properties is not easily predictable, and even when the sale has been made, the turnaround times are often long and can cripple even the best of sales people.”

What You Need

This sentiment is echoed by Nordin. He says franchisees need to have the capital to enter the venture initially and to carry themselves for at least the first year. “Property is a competitive market, and although there is room for new entrants into the market, it takes time, energy and focus to get the brand established in a new area,” he adds.

In terms of the right skills and personality traits to successfully run a property franchise, Nordin says the biggest asset is to be an honest, people’s person who will focus on service before money. “Ethics come first in real estate. Somebody with great marketing ideas will be the bonus. But most known brands offer great marketing platforms already,” he says.

Nordin says that previous experience in the property sector is not necessary. “All training by the big brands is included in your franchise fee. We also provide ongoing training and newly legislated Acts are implemented in bigger brands as well as accurate compliant sales or lease documents.”

According to Biehler, a franchisee needs real estate experience to run a successful franchise. “Formal classroom style training or academic qualifications alone will not determine success because of the nature of the business. Proficiency in real estate depends on the principal’s ability to understand the fluctuating market conditions, clients’ needs, and the practical implications of legislation – and that comes from years of working in the field.”

The Amendment to the Estate Agency Affairs Act that came into effect on 15 July 2008 makes it impossible to register as a business owner unless a minimum standard of education and practical experience in the field has been obtained first. Biehler says new applicants must be aware of exactly what these requirements are and be careful not to fall prey to unscrupulous franchisors who will sell them a franchise at any cost just to find that the EAAB prohibits them from trading and employing agents.

“An estate agent is already in business for himself and is used to sporadic income and must possess basic business acumen to be successful as an agent. A natural progression for such a person is to become a business owner or franchisee. However, it is not easy for a person who has no real estate experience to enter this sector,” he concludes.

Get Connected

The advances made in technology have changed the face of businesses in all sectors over the last few years, and the housing market is no exception. According to NOWLETTING, people looking to rent or buy properties are more often than not turning to the Internet from the comfort of their own homes. Statistically, less than 5% of modern day sellers, purchasers, landlords or tenants are reportedly setting foot inside a traditional estate agency office.

New Features

As a result of the shift from the office to the Internet, the way properties are advertised for sale or rent has changed. Strong Internet presence with extra details such as floor plans and 360 degree photography is becoming increasingly important and has more impact than the traditional static photograph in an agent’s window or local newspaper.

The Internet has become a 24 hour, seven days a week shop window with the majority of enquiries coming directly off the website and via well established property portals.

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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