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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

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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

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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

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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.

Jeff Elgin has developed a consulting system that matches pre-screened, high-quality prospective franchisees with the franchise opportunities that best fit their personal profile.

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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).

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.

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

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.

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.

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

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. “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.”

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

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

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.

Related: Steps for Writing a Mission Statement that Means Something

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.

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Sector Focus

Comfort Food

Restaurant franchises are overcoming the challenges presented by the economic downturn, high operating costs and increasing competition.

Entrepreneur

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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.”

Staying competitive

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.”

Current trends

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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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.

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