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Famous Brands: Kevin Hedderwick

From shelf-packer to CEO of Famous Brands, Kevin Hedderwick took a successful but small family business on the growth ride of its life, turning it into a R4 billion industry and developing some of the country’s most loved food brands along the way.

Monique Verduyn

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Kevin Hedderwick

The Halamandres family (actually Halamandaris but the name was spelled incorrectly by an immigration official) came to South Africa from Greece in the 50s with just $50 between them, and the will to work hard and achieve something. It was one of the brothers, George, who decided that Johannesburg needed an American style steakhouse and so he opened the first Steers restaurant in the 60s. The rest, as they say, is history.

Steers was a huge success, and George was joined by his son John and his nephews, the Halamandaris brothers, Peter,  Theofanis, Perry and Babis in the 1970s. More restaurants were opened and the concept of franchising was introduced to the South African market. It expanded rapidly to become one of South Africa’s most well-known fast-food chains. In March 1994, the company listed under the name Steers Holdings (including Debonairs and FishAways) on the Johannesburg Stock Exchange. There were 162 Steers restaurants. On 1 January 1995 the company’s share price closed at 92c. But four years later, the family realised that the true value of the business had yet to be unlocked. In 1999 the share price was about 85c and the market cap R65 to R70 million. That meant that the family’s combined stake in the business was about R35 million to R40 million after all their hard work over a period of 37 years.

They were quite rightly very disappointed that they had worked hard at it for 37 years, and collectively were worth only R35 million to R40 million. You might be forgiven for thinking that’s hardly an achievement to sneeze at, but the family had grander plans. They complained that they had friends who owned Spar stores who had created far more wealth. It was as though the market was saying to them ‘you may as well delist and just remain a family business.’ Hard though it was to acknowledge, they needed to bring someone on board to change the company’s fortunes. Enter Kevin Hedderwick.

The man with a plan

Hedderwick is self-taught. Coming from a humble background in a small town, he has what he calls a “boere matriek”. There was no money for him to study further when he finished school so he went straight to work after completing his time in the army. One thing he knew was that he did not want to be poor. By the time the Steers founders met him, he had left the corporate world, but he had more than 20 years’ corporate experience behind him, and had also been the co-creator of the very successful Keg franchise which he’d helped launch and grow to 65 outlets. A highly effective leader and manager with a sharp mind for business, Hedderwick shared with the Halamandaris family humble beginnings, a need to learn as much as possible, and an almost insatiable drive to work hard and make it to the top. He was their man.

Craig McKenzie, creator of Debonairs, knew him well and brought him to the attention of the Halamandaris family who, McKenzie knew, were looking for a leader with the right set of business and people skills. That was how he found himself sitting in a boardroom with the family one day in 1999. He describes that first meeting as odd.

“I’d come out of a business where we wore jeans and takkies and I walked into a room with a bunch of guys in silk shirts and ties. I thought ‘Oh hell, back in corporate.’ But I soon got to know Theofanis really well. The chemistry between us was just great. Soon we were getting along really well and a relationship of trust developed. George and I both came from poor backgrounds and we spoke the same language. I didn’t walk in there waving qualifications around and claiming loudly that I would revolutionise the business. Instead, I listened to what they had to say and told them what I could do. After several more meetings, we agreed that we could work together and I joined what was then called Steers Holdings as MD.”

Working in a family business can present some tough challenges. But it was not like that for Hedderwick. “It’s been an amazing journey. I think that meeting the Halamandaris family and joining Steers was almost pre-ordained. I felt like I’d been practising for this all my life.”

He has huge admiration for the family. “They came here with nothing and built an amazing business. Then they were wise and smart enough to see that to take it to the next level, they would have to bring in an outsider. That’s quite a gamble.”

From vision to reality

Hedderwick, CEO of what is today known as Famous Brands, calls his story a fairytale. Having grown up in an environment where there was little money, he was determined that his family would not be deprived. He started his career at Distillers Corporation (known today as Distell) as a merchandiser, and through sheer hard work, determination and a focus on continuously improving himself, built himself into a man who was capable of taking what was essentially a family business and growing it into a South African franchising giant.

“My job at Distell was to make sure that our products were always within arm’s reach of the consumer. I was very blessed to get that job because the company invested heavily in its people.” It was at Distell that his raw enthusiasm and desire to learn caught the attention of Rauch van Reenen, the company’s Port Elizabeth sales manager. Van Reenen became his first mentor and an important influence in his life. In the young Hedderwick he found someone who was ready to learn what he had to teach. From him, Hedderwick learnt how to do presentations, how to manage other people and what business skills were critical. Like a sponge, he soaked it all up.

Ten years later, at the age of 30, Hedderwick’s hard work and commitment paid off and he was marketing director of the company, having played many different roles in the business. He had also become aware of how top-driven the company was. He’d learnt as much as he could and it was time for something new. In the mid-80s he made the move to South African Breweries, a time he recalls as one of the best in his life.
“I always say that SAB was where I did my MBA. Even though I don’t actually have the qualification, it’s a learning organisation like I have never come across in my life before. I spent 11 glorious years there working for some incredible leaders.”

At SAB he developed his knowledge further by moving from classic sales and marketing to doing lots of other tasks, like running depots. That’s how he built his skills in distribution, warehousing, and industrial relations, all of which he was to apply later in the franchising world.

A voracious reader, Hedderwick learnt much of what he knows from business books and biographies.

It was at SAB that he met marketing director Peter Savory, who was to become the next major influence on his career. Savory taught him to slow down, to take a deep breath before charging ahead into a situation and never to do anything impulsive. He says he was fortunate to find mentors as he believes the wisdom they have to impart is hugely beneficial for young people who want to grow. But luck played far less of a role in his achievements than his sheer drive and commitment to hard work. It was while at SAB that he moved to a much broader management position that included responsibility for human resources, warehousing, sales, industrial relations, finance and everything else in his district. His time there prepared him for the legendary turnaround that he was to effect at Famous Brands just a few years later.

At SAB, he got to know two of his customers who were starting the Keg franchise. They were great restaurateurs, but unlike Hedderwick, they were not great businessmen. Yet people were lining up to get into the Keg business so he decided to opt out of the corporate world and join them in 1994.

“By this stage, 20 years down the line, I was in my forties and ‘gatvol’ of corporate. I felt that I had learnt what there was to know about running a big operation and I thought it would be good to move to a smaller environment.”

It was a rash decision for someone who had thrived in the world of big business, but it opened the door to his future in franchising, or what he calls his ‘life’s work’.

He returned to his home town of East London and opened the Keg and Rose pub, a venture that taught him a lot about entrepreneurship. The former SAB hot shot served drinks and swept the floors, but he also turned the pub into a huge success. He was then persuaded to join the Keg team at head office where his management skills were sorely needed. He took over as MD and, in the second half of the 90s, grew the franchise into a very successful brand and was sad to see it sold to King Co when his partners decided to emigrate. He stayed on for three years, just long enough to see the company through its warranty period.

Believing in people

When Hedderwick joined Steers in 1999, McDonalds’s had set up shop in South Africa and there was a sense of panic in the air. But he focused on what he knew best: people, systems and processes. He applied everything he had learnt about the corporate world and running his own business to the franchising system.

“We sat in that same boardroom and decided that to unlock value for all the shareholders, we needed to take some risks and drive rapid business growth,” he recalls. “There certainly wasn’t investment in the right calibre of people.”

He stresses the importance of surrounding yourself with experts and not being intimidated by people who might be smarter than you. If you want to ramp up your game, he says, you have to make sure you have the right team. That’s really where he started.

“We brought in an HR consultant and installed a performance management system across the organisation. To this day, if you speak to the people in Famous Brands they’ll tell you that there is a high performance culture here and that’s the way it ought to be.”

On top of that, every four months Famous Brands does an executive officer review. It’s a well-known fact that Steve Jobs drives people around him so hard that if you fail to deliver you’re toast. That may well apply to Hedderwick too. Business unit heads present to him and his team. “We ask, ‘Are you on track, why aren’t you on track, what’s happening?’” he says. “So it’s not just a plan that you dust off once a year and pull out. It’s a living thing that’s been underpinned by scorecards. At the end of every fiscal year, everybody has an appraisal, so there are no surprises. Employees know how they’ve performed over the year. Everybody in this organisation, right down to the receptionist, has a scorecard that is part of the performance management system. We ensure that every scorecard is aligned with where we want to take the business in the long term.”

He says other people in the business will claim that he’s a workaholic and a micro manager. It’s not uncommon for a franchisee to call him late at night and complain that his bakery order has not arrived. He’s also straightforward and likes to tell people how it is. “With me, what you see is what you get. I love what I do. I’m a very lucky man. I get up every day of my life and I think I’m in such a great place. I’m surrounded by great people and wonderful franchise partners. I know them by name, I know their families, they know me, and they know my wife. So working long hours doesn’t faze me.”

He believes in management by walking around. Bureaucracy at Famous Brands is kept to a minimum, and he is often found visiting people at their desks. “I’m told that CEOs don’t usually walk around the building, but I always remind everyone that I’m just a burger salesman.”

Perfecting the systems

Hedderwick’s a stickler for formalities. Although he has achieved phenomenal successes, he has not rested on his laurels. Instead, he remains unassuming and refuses to ever be self-satisfied. His vision for Famous Brands to continue its growth trajectory requires unwavering focus. For him, constant reinvention is critical. Every year in October he and his team do a complete unpack of the business from a strategic planning point of view and robustly examine every area. Despite their significant size, they get right down to the detail and then put it all back together again. “That means that we have a strategy plan for the business going forward. We then share that with all the different business units and they make sure that they develop a plan that aligns with that macro strategy plan.”

It’s that drive to standardise the systems at the heart of the company that enabled him to turn a business that was already in franchising into the industry leader. He’s proved the obvious: the franchise business model is most successful when it’s ruled by systems.

“What was glaringly apparent when I joined is that there wasn’t a hell of a lot of attention being paid to process, which is typical in a family-run business. Decisions were written on the back of cigarette boxes.”

He can’t highlight enough the importance of processes. “That’s what was ingrained in us at SAB – if you can’t measure it, you can’t manage it. It’s as simple as that.

Underpinning all the systems and processes is a vision that was first articulated in 2000. “We set ourselves a four-year plan to take Steers Holdings and turn it into the leading quick service franchisor in Africa. Through luck, effort, hard work, and honest endeavour, come 2004 we ticked the box. Since then, every four years, we’ve articulated a new vision for the business and made sure that the planning process underpins that vision. If you wake any of our people up in the middle of the night and ask them what the vision is for Famous Brands right now, they’ll reply that it’s to double the size of the business by 2013.”

Growth through acquisition

Having put the right people and processes in place, Hedderwick took the business on an aggressive growth path. He refers to it as taking the lift rather than the stairs. “Right from the beginning we knew that in order to unlock value for ourselves and our shareholders, we needed to grow. We could play it safe, or we could take some risks. We decided to take the risks.” The Brazilian Coffee and House of Coffees franchises were bought in 2003. These small acquisitions were followed by a far more daring move – the buyout of that old family favourite, Wimpy. It was priced at R124 million, more than its own market cap. People in the industry and the company scoffed at Hedderwick. It was almost unthinkable that the deal would go through. “The family said to me, ‘Kevin you’re going to choke us on this thing.’ The big question for me was where the money was going to come from. We did not want to issue more shares as that would dilute the shareholding so we had to find a funder. We put a presentation together and pounded the streets. Five different financial institutions laughed us out the door, but then we met with Investec and they believed in what we wanted to do.” Hedderwick’s confidence in the Wimpy brand was soon vindicated. It proved to be a silver bullet. His persistence, self-belief and sheer ability to spot a good deal had paid off.

It became clear that a new name was needed for the group. “The Steers name was no longer representative of the business. What we were doing was buying brands and making them well-known. Hence, the new name, Famous Brands, was chosen in 2004. We chose it because it was in line with what we wanted to do – our philosophy has always been that we will acquire a business which is best in its class or that we can make best in its class.”

The 51% acquisition of boutique daytime café, Tasha’s in 2008 signalled a new direction for Famous Brands. “We had so many bases covered – pizza, burgers, fish, speciality coffee – all of which are mainstream businesses. It was time for us to look at something a little more upmarket for our portfolio. That’s when I met Natasha Sideris, who had two restaurants in Bedfordview and Athol. She has an energy that I would bottle if I could, so I said to her ‘let us buy into your business and we’ll help you realise your dream.’ People said there was no way we would be able to franchise Tasha’s, but we’ve done it and it’s been a great success. There are now eight shops and they are performing exceptionally well.”

Never one to be complacent, Hedderwick took another big bite at the franchising industry in 2009 with the purchase of Mugg & Bean for
R104 million, which significantly strengthened Famous Brands’ coffee offering. “I’d been talking to Mugg & Bean founder, Ben Filmalter for a long time and I loved the business,” he says. “Subsequently we’ve entered into joint ventures with an artisan bakery chain called Vovo Telo, and a township-based flame-grilled chicken business called
Giramundo.”

The group’s focus has now moved to leisure, a more encompassing concept than ‘quick service and casual dining’. Continuing to focus strongly on growth, Hedderwick says that being about leisure has opened up the market for Famous Brands more than ever before. “It just so happened that we were approached to buy the ailing Keg business, which came along with McGinty’s and O’Hagan’s, which we acquired for a relatively low cost. We did not acquire these businesses for the brands. Instead, we are launching a ground-breaking trading model, The Brewers Guild, for the pub and restaurant industry. It’s designed to reinvent what has become an ailing category and adds liquor to the portfolio.”

Taking care of brands

It’s worth noting that Hedderwick is also a great believer in bringing along good management teams when he acquires companies because they understand the culture and the business of their brand. Brand stewardship is a critical component of Famous Brands’ core strategy.

Under Hedderwick’s leadership, the group has always displayed a willingness to use the broadest array of tools and techniques to understand, develop and enhance the relationship between the consumer and the brand. Because the different brands have different requirements, it’s a strategy that underpins this business – one core corporate value buoyed by multiple individual brand values.

“Many people have asked me how we have managed to build a multi-branded portfolio when most other companies have failed because, they say, you can’t be all things to all people. But I learnt all about brand stewardship at SAB, and that’s the model we’ve applied here. No matter what brand we acquire or how big or small it may be, from the day we buy it that business has a champion who looks after it – they eat, drink and sleep that brand.”

He says that leads to healthy, if somewhat vocal, competition between brands at the group’s headquarters. “The other day the Steers guys launched a new range of burgers and wanted to get everyone to run a new screensaver for the product. The Wimpy people flatly refused. There’s good banter between everyone, and it creates a lot of brand loyalty within our team. That’s important because we always have to remember how different our brands are from each other. A Steers customer is very different from a Tasha’s customer, and the franchisees have to be people who can fit into those different environments.

“People ask me sometimes what keeps me awake at night. Right now I suppose the only thing that keeps me awake at night is the economy. If the economy works, we’re going to work. One of the things that I say we are fanatical about here is continuous improvement so we try and always keep up our game.”

Right now, Hedderwick heads up a franchising giant with 2 000 outlets, a market cap of R4 billion, and a share price of more than R40. Add to that his vision to double the size of the business by 2013 and you begin to understand the level of energy he has. At 58, his desire to continue to grow the business is relentless. As for the Halamandaris family, they still own 43% of the business. “They don’t spend much time here, but they know that I do and that I’m having a hell of a time.”

The Famous Brands Portfolio

  • Steers (520)
  • Wimpy, incl. UK (636)
  • Debonairs Pizza (334)
  • FishAways (115)
  • Mugg & Bean (115)
  • Tasha’s (8)
  • House of Coffees (16)
  • Brazilian/Brazilian Café (48)
  • Blacksteer (8)
  • Giramundo (6)
  • Keg (25)
  • McGinty’s (4)
  • Vovo Telo (3)
  • O’Hagan’s (19)
  • Milky Lane (90)
  • Juicy Lucy (16)

Acquisitions

2003

  • Acquisition of Pleasure Foods, comprising the Wimpy and Whistle Stop brands
  • Acquisition of the franchise agreements of House of Coffees and Brazilian brands

2004

  • The holding company changes its name from Steers Holdings Limited to Famous Brands Limited, to reflect more accurately the diversity of the group’s brand portfolio

2005

  • Acquisition of TruFruit, a manufacturer and distributor of fruit juices
  • Acquisition of Baltimore Foods, a manufacturer and distributor of ice-cream products

2006

  • Acquisition of Bimbo’s franchise agreements at selected Engen garage sites and successful conversion to Steers

2007

  • Acquisition of a 75% interest in Wimpy UK

2008

  • Acquisition of a 51% interest in the Tashas brand
  • Acquisition of Cape Franchising master licence and business

2009

  • Acquisition of the South African and African business of Mugg & Bean, the brand leader in the fast-casual coffee-themed category
  • Acquisition of a further 20% of Wimpy UK and settlement of foreign debt

2010

  • Acquisition of the trademarks and franchise agreements of Keg, McGinty’s, O’Hagan’s, Black Steer
  • Acquisition of a controlling stake in Giramundo, a flame-grilled peri-peri chicken offering and Vovo Telo, an artisan bakery and café business
  • Launch of black economic empowerment owner-driver initiative

2011

  • Acquisition of the trademarks and franchise agreements of Milky Lane, Juicy Lucy

Quote

“With me, what you see is what you get. I love what I do. I’m a very lucky man. I get up every day of my life and I think I’m in such a great place. I’m surrounded by great people and wonderful franchise partners.
I know them by name, I know their families, they know me, and they know my wife. So working long hours doesn’t faze me.”

Quote

“At the end of every fiscal year, everybody has an appraisal, so there are no surprises. Employees know how they’ve performed over the year. Everybody in this organisation, right down to the receptionist, has a scorecard that is part of the performance management system. We ensure that every scorecard is aligned with where we want to take the business in the long term.”

Monique Verduyn is a freelance writer. She has more than 12 years’ experience in writing for the corporate, SME, IT and entertainment sectors, and has interviewed many of South Africa’s most prominent business leaders and thinkers. Find her on Google+.

Entrepreneur Profiles

Karl Westvig Of Retail Capital Shares His Insights Into A Year-On-Year Double-Digit Growth Business

Here’s how Karl has negotiated the many challenges of building a high-impact growth organisation that currently has a turnover of R150 million, which expects to double within the next three years.

Nadine Todd

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player-karl-westvig-company-retail-capital

Vital Stats

  • Player: Karl Westvig
  • Company: Retail Capital
  • Launched: 2011
  • Turnover: R150 million (2017)
  • Visit: www.retailcapital.co.za

Anyone who has successfully navigated a business from a R5 million turnover to R30 million, then to R100 million, and heading towards the billion rand mark knows that growth might be the goal, but it’s also where businesses stumble and fall.

When you’re on a growth trajectory, there will always be some areas of your business outpacing others. The trick is to hang on, and bring your customers, employees, investors and directors on your journey with you, improving the business each step of the way.

Here’s what Karl Westvig, co-founder of Retail Capital, has learnt along his journey, and why he’s continuing to enjoy year-on-year double-digit growth.

Differentiators determine market penetration

Retail Capital’s core product is a merchant cash advance. When the company launched in 2011, there was limited competition in South Africa, but Karl knew that would change. “South Africa is a high card-usage market, which is what you need for merchant cash advance products to work. You need to be able to track the monthly income of an SME to determine the size of cash advance they qualify for, and collect the loan repayments through POS (or point of sale) card machines.

“My founding partner, Dave Lewis saw the product in the UK, and believed it would work here, thanks to our high card penetration. That meant other competitors would soon join the field. The product itself wasn’t our differentiator, but that didn’t mean it wasn’t a business worth pursuing.” In any industry, you need to evaluate competitors and whether the market is big enough for you. Karl and Dave believed it was, and that SME finance was under-served, but they also knew they needed a differentiator.

“We brought the concept to South Africa and built our own back-end. The way to differentiate is through channels and distribution, as terms and pricing structures are the same.

Related: Author Of The Little Book of Inspiration Gives Great Advice On Having Direction And Courage

“Our differentiator is our people. It’s about who we are and how we train. We have 40 sales consultants nationwide who conduct face-to-face visits with our customers. We don’t push product, we provide a solution. We work hard to understand each owner’s business, and whether they will get a return on investment from a cash advance. We evaluate what the money’s for, what the margin on it is, and whether it makes commercial sense. There’s no point taking money unless you can make more from it. For example, if it’s used to procure much-needed stock, or gain a large settlement discount from a supplier, that’s an opportunity. But, plugging a cash flow hole to pay salaries doesn’t make sense. You should always ask what the benefit of cash in hand is, and then determine if a cash advance makes sense.

“We’ve developed the tools we use to evaluate this in-house. We’ve gone from zero to 40 sales consultants and we’ve been testing our processes and learning from them throughout that journey. We manually underwrote our early deals, and tracked what the advance was used for, how long the terms were and whether there was a return.

“This process has been automated in recent years, and we now have a wealth of data available to us, but we also have consistency. This means our clients can walk their journey with us. They understand the cost of the money, why they are getting it and their ROI. By the time they deploy the cash, they understand exactly how they’re using it.”

Longevity is built on the right partnerships

point-of-sale-system

Retail Capital’s first product was a premium offering targeted at restaurant owners, franchisees and independent retail stores. “There are 200 000 POS systems in independent chains and single stores across the retail and restaurant sectors in South Africa, and 50 000 franchise stores,” explains Karl. “This was our target market.”

The offering suited the first segment of their market, but they struggled with franchise owners. “The independent space works for us. We’re almost like private bankers for SMEs. Our consultants understand the SME space — many of them have first-hand experience running a small business — and we work closely with our clients. We have business owners who have used us for seven years and have significantly grown their businesses over that time.”

Franchising was a much tougher nut to crack. “We faced a lot of resistance from franchisors who didn’t understand why their franchisees would need to borrow money — particularly a premium, and therefore more expensive product. We realised there was a disconnect between franchisors and their franchisees. Franchisors saw the product as too expensive. Franchisees had experience in trying to secure loans when they didn’t have assets to borrow against, and banks lend against balance sheets, not cash flow. We realised we needed to stop fighting the franchisors and partner with them instead.”

Retail Capital approached a number of franchisors and explained the pricing structure of merchant cash advances, particularly that higher risks for them meant higher interest charges for their (Retail Capital) clients. “We said we could bring the price down if the franchisors could help us derisk their franchisees with pre-vetting, and letting us know who the good operators who used their cash reserves well were. We brought franchisors into the fold and could pass on better pricing because we were taking on less risk.”

Karl has taken a similar approach to the micro segment of the market. “There are 50 000 micro retailers in South Africa, but this segment is growing rapidly,” he explains. “Within the next five years that 50 000 will be 250 000.”

It’s a segment that also benefits from cash advances, but not at the price point of Retail Capital’s premium product.

“We watched the development of mPOS (mobile points of sale) devices overseas and found local producers like iKhoka and Yoco. Our approach is simple; they have the devices, we have the capital and the system to disperse funds. It’s too expensive for us to service this sector face to face. It needs to be a fintech play, which was why we partnered with companies that had the devices.

“There are three sides to a deal. The originator (the device), the capital and the operator. The data that runs through the devices allows us to pre-approve micro vendors for a specific amount over relatively short payment terms. The risks are higher, but we mitigate them with cost-free delivery of the loans.

The systems and processes to get the funding to a micro operator and collect payments is our area of expertise, but we recognise that the originators will also want to hold the book.

“Yoco for example is building scale. To truly grow they need to become lenders themselves. This is going to happen whether we like it or not. Our current joint venture model allows them to partner with us, and eventually we will just be the operator. Within this particular market, we’d rather have that than nothing, which is why we’re flexible.

“There are other business benefits for us. Our technology is our platform, and this can be used in many other ways. We’re operating in a minefield of opportunity, collecting risk data on industries across the SME sector that we will be able to apply to other products. You don’t need to own every channel of a value chain. Working with the right partners can be much more valuable, and opens doors to new opportunities.”

Related: Going The Extra Mile With Neil Robinson Of Relate Bracelets

Leverage existing platforms for growth

“The most exciting part of Retail Capital for me is re-imagining the business. Dave built a great business before he exited to sail around the world. It was profitable and well-managed, but with a single product.

“When I walked in I took a different approach. I started by asking what our customers were looking for, and listening to what they were telling us, instead of pushing them into nine-month products.

Whenever you launch a new product, you need to start with a profitability framework. For us, this meant asking what our return on capital requirements needed to be across three to 18 months. Once we knew that, we could build it and offer adapted products to the market.

“Adapted products require adapted training. Too often companies add products, but don’t walk their teams through the new offerings, and so everyone sticks to what they know.

“We also looked at what other markets we could enter, which led us to franchises and the micro segment.

“What you really need to understand is your core. Financial services are all about distribution. Can you give it out, and can you get it back? Everything else is the framework that supports this core.”

According to Karl, the question ‘can you give it out?’ is about creating a product that you deliver where customers want it, whether that’s on the phone, online, or through face-to- face engagements. “You need to give your customers touchpoints at places convenient to them. Great businesses build capacity around their customers. Understanding their routines and what’s convenient to them allows you to invest where it makes sense.

“By listening to our customers, we could give them what they were looking for. We built new products and extended existing products based on this data.”

The second question, ‘can you get it back?’, involves underwriting and collections, and this is where Retail Capital’s IP resides. “You need to be able to set different limits and risk levels for different industries. There’s no such thing as one solution fits all in the SME space,” explains Karl. “Fashion stores and restaurants can afford to repay 10% to 12% of their credit card turnover, but FMCG stores wouldn’t have cash flow if their repayments were that high. Industries have differing risk profiles and require different terms. This develops over time. The longer you spend in the market, the more you can increase your efficiencies and reduce risk.”

Impactful growth doesn’t happen overnight

Two of the institutions that fund Retail Capital’s book are Ashburton and FutureGrowth, both large and established investment funds. “Today we are a rated business. Our returns are healthy. We’re a high-yield alternative investment,” explains Karl. “As our rating goes up, our interest rate falls, and we are able to pass that saving onto our customers. But that takes time.” You don’t go from being a start-up to funded by Ashburton overnight. You need a good track record, a professional and experienced team and stable loss rates. In short, you have to prove yourself in the market. Building something of value takes time and patience.

There have been challenges along the way, matching the balance sheet. “If you’re doubling the size of your business year on year, you need to be able to fund the growth of your book. The problem is that customers and money are seldom in balance. One is always stronger than the other. If you get funding, you need to find customers. If you suddenly have an influx of customers, you need funding.

“Then it’s down to distribution. You’re doing great, signed deals go up, your volume takes off, and now you need to run to your funders for more cash.”

Related: Executive Director Hasnayn Ebrahim’s 5 Rules For Strategic Growth In Your Business

Retail Capital doesn’t only have investment funds backing its book, but also equity investors. The management team owns 51% of the business, but various funders have been involved since the business’s inception.

“From a corporate perspective, growth triggers changes in a business, and those require investment. However, while we were experiencing rapid growth, our profits went backwards. People, systems and marketing are all significant costs, and they were all happening together. At the same time, I had to keep the confidence of my board and investors.

“As an entrepreneur, you sell your vision. Mine was that we would grow between 70% and 100%, and we weren’t hitting the numbers. It’s tough to keep the faith in a high-growth environment, and you really only get three strikes. How do you explain your vision, inner workings and full pipeline to a board that’s removed from your business, is risk-averse and doesn’t understand your sector? There was a six-month lag between where we were and where we said we’d be, but I knew we’d get there. However, confidence was waning because of the mismatch between the business and its investors.

“I realised I needed to find shareholders who understood where we were going. FutureGrowth was already funding our book. They understood our business, and we’d worked well together. They wanted a stake in the business, and they supported a management buy-out that would exit an investor who wasn’t comfortable in the business, and enable management to increase their stake.

“Ultimately, it all comes down to patience. Build the business that you envision, step-by-step. It takes time, but if you do it right, and lay strong foundations, the right people who share your vision will come on board.” 


CASH ADVANCES:

South Africa is a high card-usage market, which is what you need for merchant cash advance products to work. You need to be able to track the monthly income of an SME to determine the size of cash advance they qualify for, and collect the loan repayments through POS (or point of sale) card machines.

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Entrepreneur Profiles

How Bertus Albertse Overcame Adversity To Build A R80 Million Franchising Business

This is how an entrepreneur who is still under 30, and who launched Body20 from his living room when he was 24, has built a R80-million business that has just gone global.

Nadine Todd

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Vital stats

  • Player: Bertus Albertse
  • Company: Body20 Global
  • Launched: 2013
  • Franchised: 2014
  • Turnover: R80 million
  • Visit: www.body20.co.za

At 29, Bertus Albertse has built a R80-million franchising business that launched in the US a year ago. He’s been an over-achiever since school, and his approach to business has been no different. Over the past 12 months however, there has been a personal shift in Bertus’ life and mindset. Just over a year ago, he realised that his childhood wasn’t something to be embarrassed about or buried. In fact, the adversity he’s lived through is a big driving force behind a need for control and success.

“It was a part of myself I’d never shared. I didn’t discuss it in school, and once I started training people and then building a business, I didn’t talk about it either,” says Bertus. “

You’re focused on giving people the best customer experience possible, and that means putting your best foot forward, all the time. Admitting you aren’t always sure of what you’re doing, that you aren’t as confident as you look, or that you’ve struggled and needed to overcome real hardships — that’s just not part of the package.”

Bertus is driven — he got good marks at school, was captain of any team he played in, and would train on Friday nights when everyone else was out having a party. This same drive has led him to learn as much as possible about business, and the more he read, the more he realised that one of the things top entrepreneurs have in common is the fact that they’ve shared their stories. Who they are and what they’ve been through are big contributing factors to their success.

“We’re made to believe that, to a large degree, our adversity is not part of what we project to the world. What do you tell a client that walks in, or a franchisee, or someone that has to be motivated on your team — do you tell them the worst part of your journey, or do you share something that will motivate them? This was always my approach. But the more I started accepting my story, the more I realised that the power of my story made me who I am today.

“Books like Simon Sinek’s, Start With Why, and A Storyteller’s Secret have had a massive impact on me. We shouldn’t ignore the fundamental things that have brought us to where we are today. Mindset, willpower, discipline, the ability to pick ourselves up when we fail — these are all critical success factors, and they’re all mental. If you want to build a strong business, you need to start with your mind. You need to know who you are, how you react to challenges, and why you are the way you are. Then you can harness your strengths, and hopefully work on your weaknesses — or at least be aware of them.

Related: The Wolf Within Bertus Albertse: Body20’s CEO

bertus-albertse-body20“Every time you solve a problem, it makes you realise there’s a bigger problem that you didn’t know you didn’t know. The things that you don’t know hurt you the most. This has been my biggest learning curve with franchising. You might know what it takes you to be successful, but what’s to say what it takes someone else to be successful? You’re now supporting other people who aren’t like you. The more honest you can be with yourself, and the more you can interrogate why you’ve been successful, and what lessons you can share with others, the higher everyone’s chances of success.”

It was within this context that Bertus realised the dangers of being placed on a pedestal. “When your success starts to grow, people naturally want to know more about you. What I found was that I’d been so busy putting my best foot forward, an assumption had grown that I knew everything; that I’d had everything in life, and that this had all been easy. The opposite was true. I knew that if I was going to inspire franchisees to believe in their own journeys, I had to let them into mine. Nothing comes easy. In fact, adversity can often be your greatest gift, provided you know how to harness it.”

With that understanding, Bertus started delving into his personal psyche, motivations, habits and the driving force behind his actions. It’s been an interesting journey, filled with pain and rewards. He now has a much stronger understanding of his personal motivations and actions though, and he’s sharing these lessons with fellow entrepreneurs.

From humble beginnings

Other than a good education, Bertus’s childhood years are characterised by having as little as you can possibly start with. His childhood is shaped by memories of the all-too familiar feeling of a car running out of petrol, or of his mother waking him and his sister up in the middle of the night, so that she could take them home for a few hours before returning them to their 24-hour créche before starting her next shift as a traffic cop. These were all factors that the future entrepreneur buried when he went to school, directing his energy into his studies and sports instead.

“There were so many things we couldn’t control growing up. My mother did the best she could do, but the reality was that we had very little. I realised that control was important to me, and that I could create my own success if I was disciplined, and so I focused on the things I could influence: My marks and how much I trained. I’d grown up watching a level of perseverance in my mom that influenced the way I viewed work as well.”

In fact, Bertus has a keen understanding of the various influences in his life and how they have shaped him. When he was nine years old, his mother married his step-father, and later, in his teenage years, he reconnected with his father. The men are vastly different in the way they view work and success, and yet Bertus learnt a lot from both of them — not necessarily to emulate either of them, but rather in what he wanted from life.

“Both the men in my life had started out without degrees. They worked and studied at night. They achieved success through sheer hard work — and they’d both been indoctrinated to work for someone else, because that gave you stability.”

For a kid who had known very little stability in his life outside of what he could personally control, working for someone else wasn’t very appealing, and his father agreed. “My father realised that if you truly want to be successful, you need to work for yourself. He really encouraged me to be an entrepreneur. One of the first things he taught me was ‘buy low, sell high, collect early, pay late’. That’s how you make money. It’s obviously not that simple, but it’s a good way for you to start thinking about business. I realised that if you’re good at something, don’t do it for free. That’s rule number one. Rule number two is understanding how you generate income and making sure that your income is higher than your expenses. But I didn’t know about assets and balance sheets and how to generate wealth at that point. I was just starting to think about what a business would entail.”

While his father was pro-entrepreneurship, Bertus’ step-father was the opposite. “My step-father is a careful man. He’s got a good job, but he’s also frugal. He doesn’t take risks, and he has no debt. He’ll buy a smaller car, but he’ll pay cash. That’s how he operates. He instilled extreme positivity in us, and always put family first, but watching him made me realise that I’m not risk averse. If anything, I have a high impulse and risk appetite. The combination of these traits can lead you to taking good risks, or bad risks — it’s all about where your focus lies. I’ve always been aware of that and tried to channel my energy into the good risks — areas of my life that I could grow, build on, and hopefully also create an avenue of wealth for others.”

For Bertus, the secret is discovering what motivates you. “I believe in living life to the fullest. I live freely. One of the first decisions I made when I started earning my own money was buying a car I couldn’t afford. This was 150% against the advice of both of my dads — but it motivated me and made me run. I ran for my life. I could have it easier, with less stress — I create stress for myself — but it keeps me focused and driven. There are so many influences around us all the time. You need to find what matters to you. Mostly it’s trial and error. That’s okay. Just keep looking for it — you will find the answers you’re looking for.”

A strong sense of self

Key to Bertus’ journey has been understanding, and to a degree mastering, his own triggers. This isn’t always possible — but the more you understand why you do what you do, the more you can learn to harness that energy.

“I grew up in an OCD household. It was always fine, because I’m also OCD — I didn’t realise how much until I got to hostel and discovered it wasn’t normal to never want to sit on my perfectly made bed, or to shower for 45 minutes or brush my teeth for two hours. Sharing a room with other boys forced me to get rid of some of those habits, and I needed to channel that desire for control elsewhere, so I shifted it to sports and academics.

“This level of discipline is still massive for me, even today. I measure my day on zero to 100 every day. And each new day I’m back on zero — it doesn’t matter how productive I was the day before, or how big a deal we closed. I feel a sense of urgency to make extraordinary things happen today, each and every day.”

Related: Join The Fitness Revolution

This sounds positive, but it has a dark side as well. “If I don’t wake up at 5am to start dealing with emails I feel like I’ve started on the wrong foot, which quickly makes me spiral and feel like a failure,” Bertus explains. “I’ve had to find ways to balance my OCD nature. I can be very disciplined, but if I start spiralling, I’m the most unproductive person on the planet. I need to keep myself in check.”

To find that balance, Bertus has learnt to choose his battles. “I can be very obsessive about one thing, and care nothing about something else. I can’t be obsessed about everything, so I have to choose where my obsessions will lie. I try and make these as positive as possible, focusing on training and supporting my clients and now franchisees.”

Bertus might be OCD, but self-discipline is a muscle just like any other — the more you work it, the stronger it becomes. “For me, it’s all about directing my energies to the right place. For other entrepreneurs, it’s choosing where they can make the greatest impact, and then being consistent in their efforts. Routine is everything.”

Bertus does have a caveat though: “Discipline alone, with no clear direction, can actually be a bad thing. You can easily become too focused on things that don’t drive success.”

24 And taking risks (to reap the rewards)

bertus-albertseBertus has never been employed. He started out self-employed while still at university. He chose to discontinue his studies and dive into entrepreneurship instead, opening a supplements store in Cape Town. “As an underweight kid I’d taken supplements to get my weight up. That, combined with training, was where my expertise lay.”

But Bertus knew it wasn’t enough. “I was just making ends meet. What I had wasn’t a wealth building mechanism at all. I wanted to make a bigger impact in my own life, and in the lives of my clients. I believed a more holistic approach focused on training was a way to do that.”

Bertus wasn’t alone. He was 24 years old, and had a young wife and three children, one of whom was from his wife’s previous relationship. Given the risks involved in trying something new, many people would have stuck with the business opportunity that wasn’t a significant success, but that was paying the bills.

Bertus had different plans. “You need to run for your life,” he says. “That stress, the risks involved — they’re what drive me. I always tell our young trainers that if they really want to be successful, they need to move out of their parents’ homes. The most basic necessities should be at risk. There’s nothing like fear to motivate you.”

With this in mind, Bertus launched Body20 from his living room in 2013. He had

R85 000 in an Allan Gray investment fund that he’d started while he was still studying. He decided the time had come to draw that cash, but it still wasn’t enough. A friend had introduced him to Electro Muscle Stimulation (EMS) technology, and the whole set-up was R220 000. Luckily, this friend believed in the concept, and agreed to invest in Bertus’ business idea. “I paid the loan back within a year, but he was really investing in the purpose, and he and his wife received free training. It was exactly what I needed to get me started.”

Related: From Body20 Member To Franchisee Of The Year 2017

From the word go, Bertus understood a key element that would ultimately lead to Body20’s success: When it comes to EMS technology, the tech itself isn’t a differentiator. “There’s no exclusivity,” Bertus explains. “There are multiple tech providers available, and no one holds patents. There were also already competitors in the market, so I knew this wasn’t my competitive advantage.”

What Bertus also recognised was that the players in the market were focusing on their offerings as niche. He believed it could be a more mainstream addition to training programmes, working in conjunction with conventional gym sessions, and to help pro and amateur athletes prepare for big events. He went in with a different differentiator in mind: Service.

“At the time, I just wanted to move out of my living room and into a studio. I had no plans to franchise. I believed that my passion and willingness to serve would set me apart.”

And it did. “My clients saw how much I loved what I did, and they started asking me how I’d started out. They were intrigued by the lifestyle I lived — yes, success was growing, but I was also living my passion. That drew them.”

Slowly, Bertus’ clients started enquiring about franchising opportunities, and the idea started to take shape that not only was franchising an opportunity to scale the business, but it would help Bertus to share his passion with others, empower them and provide them a means to also build wealth.

The shift to franchising

Franchising has been an incredible experience for Bertus and Body20 has gone from strength to strength, growing from one studio in 2013, to franchising in 2014 and encompassing 38 studios in early 2018, including three studios in the US. But there have also been a multitude of lessons for the young entrepreneur to learn.

“Franchising as a growth strategy has never been about the capital — if that was the case, we could be a corporate that raises funds through investors. But this is a service business, and that means you need someone in the studio who is passionate about the business and their clients, and franchising enables that. We want to create opportunities for other people. This means supporting franchisees, and in some cases, even investing in the right operators who don’t have the capital to set up their own stores.”

The shift from studio owner and personal trainer to franchisor has not been without its own significant growth hurdles.

“The most interesting lesson I’ve learnt is that franchising is a completely different business model to operating your own business,” says Bertus. “That’s the problem; there’s no one bridging the gap for you. You can go to a franchise attorney to draw up your franchise agreement, but that doesn’t tell you how to operate your franchise. How do you suddenly put up an operational infrastructure to support other people to be as successful as you, when you don’t yet know what they need? It’s difficult to know what someone else needs in their business, even if it’s the same business that you were in.

“Everyone comes at business from a different perspective. We’re all indoctrinated in different ways. I had momentum in this industry. How do you carry that through to someone else who is a mechanic, an attorney, a teacher, or a CA? What do they each need? How do different studios operate in different areas? There are so many variables to consider, and we didn’t always get them right.”

Related: Healthy Body20 Franchise Leads To Happy Hearts

Bertus understood he knew nothing about franchising — but he had no idea of the lessons that lay in store for him until he took the plunge. “This is the biggest difference between corporate and entrepreneurship,” he says. “In a corporate environment, you get clarity first, before you take action. In entrepreneurship, you only get clarity through action. You only know where you’re going once you start moving — clarity comes from doing.

“When you start taking action, you’re already on the path to finding answers — you’re hitting the problems you’re going to encounter, which gives you the opportunity to find the solutions you need to keep moving forward. You won’t always get it right — the path to successful business is littered with failures, but you can’t overcome obstacles unless you’re encountering them.”

One of Bertus’ biggest learnings has been that effort alone isn’t enough to carry you through. “I used to believe that effort equals success in battle,” he says. “This was my guiding mantra — that if you worked hard enough, anything was possible. Franchising took me from being a sole operator to a business owner, and I now know that effort equals a lot of work and a lot of lessons learnt, but that you’ll still get nowhere if you don’t have a solid strategy in place.

“Success equals strategy plus effort. Busyness and success are not the same thing, nor are busyness and effectiveness. Effectiveness happens when you’re busy with the right strategy. This has been huge for me — finding the balance between strategy and effort.

“In 2014 I used to receive no less than 100 phone calls a day. I had to deal with clients, solve franchisee problems and be available for all the people looking for me hourly. I used to think ‘how do you upscale from this?’ I couldn’t take any more calls and I didn’t have a second of the day to think about anything other than getting back to people. I knew I needed to have those problems — if you don’t, you’re not on the right wicket, but how do you upscale from taking a hundred calls to five calls?

“I once had someone tell me that the day would come when I wouldn’t receive a single call. I just thought they didn’t understand my business. After all, my primary role is sales and marketing — how could I not get that many calls? I still believed that effort equalled income. The moment I started focusing on strategy though, this started shifting. With a focus on strategy came systems, processes, well-documented operations. These all empowered people, and the ‘busyness’ started to fall away. I started to find the time to work on key areas that would drive the business forward. My phone didn’t ring as much, because there were systems and processes in place that meant the entire operation was starting to flow. I’ve learnt that the more successful you are, the less busy you’ll be. This doesn’t mean you work less, just that you do less busy work. It’s replaced with focused, strategic work. When you’re busy, you’re just dealing with what’s in front of you. A strategic focus is looking at three, five and ten years down the line.”

Going Global

Body20’s next big growth move has been into the United States. “Like any growth strategy, we’ve had highs and lows, and we’ve needed to learn a lot of lessons,” says Bertus.

“The interest and uptake has been incredible, not just within the US, but from local entrepreneurs looking to expand into international markets as well.”

At the time of going to print, Body20 had already sold three franchises in Florida, with another four in the works. These have brought strong capital contributions into the business as a whole, but not everything has been smooth sailing.

“On the one hand, the first store broke even within four months, when our projected time frame was eight months,” says Bertus. “That’s incredible. But we’ve also learnt that no two markets are the same.

“South Africa is geared for business. We love it here. We sell a lease and the studio can be open within three weeks. There’s no permitting, no inspections, none of that exists here. The US on the other hand is an extremely regulated environment. For example, we signed a lease in February 2017, expecting to be open in June and excited about a great leasing deal that gave us four months’ beneficial occupation to set up the store. Except it took us nine months to get up and running.

“In South Africa, this would have taken us under a month. It was an expensive lesson. Not only were we burning through cash, but the franchisee needs to stay motivated while you wait. The project flow and milestones are inherently different.”

From a franchisor perspective, operating across two continents also has its challenges. “We’re essentially selling our time. This is a services business, and our clients are our franchisees. What we didn’t take properly into account when we started was the incredible travel times involved in doing business in the US. It took us 20 hours just to get to Miami, and a further six to California. You have to factor in all that time when you’re planning your schedules. It’s been a huge adjustment.”

That said, it’s also clearly been a rewarding one, and Body20 is still only just getting started.


TOP TIPS

  • Clarity comes from action. You need to start to figure out what you need to do next.
  • Success is the result of effort plus strategy. Effort alone won’t get it done.
  • Systems and processes are essential if you want to move from ‘busy’ work to strategic work.

 

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Company Posts

Going The Extra Mile With Neil Robinson Of Relate Bracelets

In business, your offering is only as good as your relationships. Neil Robinson from Relate Bracelets explains how FedEx Express has helped the business grow into Africa and beyond.

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  • Who? Neil Robinson
  • Company: Relate Bracelets
  • Position: Managing Director
  • Visit: relate.org.za

Neil Robinson, MD of Relate Bracelets understands the importance of business relationships. While Relate is a non-profit organisation, it is run like a business. It does not rely on donors, but instead produces and sells a product.

For each bracelet sold, one third of the income goes towards the materials and operating costs, one third supports the people who produce the bracelets, and one third goes to the charity for which that particular bracelet is branded.

In order for the business model to work and be sustainable, Relate’s partners are incredibly important. These include the retail chains that stock the product and who provide prime point-of-sale positioning, the charities who Relate works with, and most importantly, Relate’s logistics service provider, FedEx Express.

“Retail is all about visibility and availability,” explains Neil. “A brand is a living, breathing thing. People can see it, use it, and comment on it, but if they can’t access it, it’s all for naught. And so, at the point of purchase, it’s both visible and available, or it’s not.

“Logistics is key. You need to get your product to the retailer on time, 100% of the time. The expertise and focus that FedEx displays in supply chain and logistics encompasses far more than just retail, they understand our specific needs, making them a strategic partner, rather than merely a supplier.”

Related: Zenzele Fitness’s Clever Tactics To Grow In Next To No Time

Building a relationship

The FedEx/Relate Bracelets relationship stretches back to 2009, when Relate Bracelets launched its first campaign with ‘Unite Against Malaria’ leading up to the 2010 FIFA World Cup.

“We did the first campaign in partnership with Nando’s,” says Neil. “Robbie Brozin was passionate about the cause, and he pulled in strategic partners to launch the campaign. Within two years we’d shipped hundreds of thousands of bracelets. FedEx was an incredible partner, ensuring the integrity of our product and time-sensitive deliveries, and we’ve worked with them ever since.”

As with all good B2B relationships, the FedEx and Relate Bracelets teams understand that regular strategy sessions and updates are important.

“FedEx understands the inner workings of our business,” says Neil.

“A successful campaign has multiple elements, from planning and strategy, to marketing support, pricing and distribution planning. Of these, distribution planning is the most critical. For us, the bridge between our brand and the consumer is logistics. FedEx have delivered beyond expectations. They literally and figuratively go the extra mile for us.”

Protecting a brand

FedEx has customers across different industries and each of their needs are different. In the case of Relate, who operate in the retail sector, buying patterns are important. “Retailers run a tight ship,” explains Neil.

“They have planning cycles and seasons. Besides the fact that penalty clauses are built into contracts, you can’t miss a deadline by two days, or you’re in the next cycle, and that might be two weeks later. Not only are you missing out on valuable shelf time, but this can affect an entire campaign. Lost sales can also influence the retailers’ buying decision the following season. FedEx has made it their business to understand our business, so they know what’s at stake and what’s important to us.”

Supporting growth

FedEx has also played an integral role in the overall expansion of Relate Bracelets, particularly into new markets. “As a global organisation, FedEx has been absolutely critical in supporting us to grow our business into Africa, the US, Australia, the UK, Western Europe, and now New Zealand. They play an enormous role in the delivery of our products, with sophisticated tracking systems ensuring that the quality and integrity of our products are maintained.”

Through the relationship with FedEx, Relate experiences the benefits of working with a globally recognised and credible brand. “When you work with quality, you get quality.”

Related: Entrepreneur BB Moloi’s Inspiring Story of Rise To Success Through Grit And Hard Work

The business

If you’ve ever bought a beaded bracelet that supports a cause (for example: United Against Malaria, Operation Smile SA or PinkDrive), chances are it was a Relate Bracelet. If you bought it at Woolworths, Clicks, Sorbet or Foschini, it most definitely was.

To date, Relate Bracelets has raised more than R40 million, which supports various charities and ‘gogos’, women living on government grants and supporting their grandchildren, and who desperately need the additional income Relate Bracelets provides.

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