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FASA Franchise Award Winners Succeed Against The Odds

The Franchise Association of South Africa’s Franchise Awards for Excellence in Franchising, sponsored by Sanlam and held this past week-end as part of their annual Franchise Business Festival, honoured those franchise brands that have bucked the negative trends to show resilience and growth in these trying times.

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The Franchise Association of South Africa’s Franchise Awards for Excellence in Franchising, sponsored by Sanlam and held this past week-end as part of their annual Franchise Business Festival, honoured those franchise brands that have bucked the negative trends to show resilience and growth in these trying times.

Commenting on the finalists and winners in the categories, Franchisor of the Year, Franchisee of the Year, Newcomer Franchisor of the Year, Franchisor: Leading Developer of Emerging Entrepreneur, Job Creator of the Year, Brand Builder of the year and Field Service Consultant of the Year –  Tony Da Fonseca, FASA’s Chairman for 2017/8 and MD of the OBC Group, believes that the industry’s saving grace is the fact that, by its very nature, franchising is entrepreneurial, flexible and forward-thinking. 

“Despite the on-going recession that is impacting heavily on small businesses, the franchise sector continues to be resilient and offers its franchisees a better chance of surviving the ups and downs – largely due to the strong business format and support system inherent in franchising.”

Related: Should You Purchase An Existing Franchise?

Franchising has proved, time and again to be a much lower risk investment than starting a new business, with FASA’s survey, sponsored by Sanlam, showing that whereas 93% of new small businesses fail within two years of start-up, only between 5 and 7% of franchised businesses fail.

The business model of franchising is globally one of the soundest business methods and in South Africa has grown to 757 franchise systems with a network of 31 111 franchisees, employing close to 400 000 people and contributing 11.6% to South Africa’s GDP.

Following on from sponsoring the FASA Surveys, Sanlam decided to sponsor the FASA Awards to give recognition to business owners for their efforts to grow the economy and for providing much needed jobs. Says Kobus Engelbrecht, Marketing Head, Sanlam Business Market.

“We recognise that business ownership is a very lonely road to travel and recognition very rare and as the franchising industry is very important to the South African economy and therefore to us, we are very proud to sponsor the 2017 FASA Franchise Awards”.

FASA’s Franchisee satisfaction survey also shows a high level of franchisee satisfaction (82%), an extraordinary high level of longevity in business with nearly one in two (44%) in business for more than ten years, and 62% in business for more than five years. The overall sentiment amongst franchisees surveyed is that they  would highly recommend franchising to others because of the reputation and quality of the franchise brands, the strong support they receive and, as one franchisee put it ‘I would rather be in business within a franchise system than be facing all these challenges on my own.”

The FASA Awards, according to Vera Valasis, the Franchise Association’s Executive Director are the industry’s way of acknowledging the franchisors and franchisees that are still climbing the ladder of franchise success and who aspire to reach the heights of the icons in the industry and who serve as examples to those that are still growing their brands.

“This year’s franchise entrants reflect the pockets of excellence that we find in a range of business categories – even in tough economic times”, says Vera Valasis. 

“There are always businesses that do well in tough times or are able to find a ‘niche’ that sets them apart and those who, by default, thrive on the back of challenging conditions.”

Related: Owning A Franchise – Good Idea Or Bad Idea?

This year’s FASA Franchise Awards reflect how brands can, and do rise above the challenges to be successful, as the winners in this year’s award have shown.

  • Winner of the prestigious FRANCHISOR OF THE YEAR award, Car Service City is proof that the automotive services industry has benefited from motorists repairing rather than replacing cars. The growth of their brand is reflected in their good reputation and their accountability to their customers, franchisees and employees. Runners up were Kauai and Sorbet.
  • FRANCHISEE OF THE YEAR  winner, Madelein Van Staden of Placecol Skin Care Clinic in Pretoria, believes in the classic ‘lipstick effect theory’ that, in economically challenging times, consumers (and in this case women) may tighten their belts in some areas but will still spend on beauty treatments and products to boost their morale and stay positive. Runners up were Jaco Uys of Roman’s Pizza, Groblersdal and Kalai Moodley of Perfect 10, Ballito.
  • NEWCOMER FRANCHISOR OF THE YEAR winner Body20 is testament to the growth in the Health & Body culture sector in franchising, which, according to FASA’s recent franchise survey, makes up 5% of the franchise pie. Body20 helps time-strapped people get the equivalent of 5 conventional weight-training sessions in just 20 minutes with their innovative EMS fitness system. Runners up were Sherpa Kids and Rocomamas.
  • In line with FASA’s commitment to encouraging growth in BEE franchisors and franchisees, the FRANCHISOR: LEADEING DEVELOPER OF EMERGING ENTREPRENEURS award went to Hot Dog Cafe, a pioneer in developing government funding programmes that nurture entrepreneurial ownership, skills transfer and job creation. Runners up were Choprop and Sherpa Kids.
  • Winning the JOB CREATOR OF THE YEAR award is Sorbet, the beauty salon group that employs 2 400 people in their 177 outlets – many of whom are trained through the Sorbet Empowerment Foundation, an upliftment programme committed to building skills and job creation. Runners up were  Car Service City and Hot Dog Cafe.
  • Marketing, in today’s difficult trading environment and with fast-moving social-media trends, requires lateral thinking and health food brand Kauai, winner of the BRAND BUILDER OF THE YEAR award, hit the target with stores in 93 Virgin Active Health Clubs and partnering with Discovery Vitality and Discovery Insure through rewards programmes, apps and newsletters. Runners up were Perfect 10 and Placecol.
  • Central to the success of any franchise is the control and servicing of the many franchisees that make up the franchise.  FASA recognises the role that field service consultants play in mentoring and monitoring the operations of franchisees and has an award for the best FIELD SERVICE CONSULTANT. Nanou N’sa of Hot Dog Cafe wins this award and a trip to the USA’s International Franchise Association’s Convention and Exhibition in 2018. Runners up were Navin Sawnarain of John Dory’s and Eric McDermott of Rocomamas.

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Entrepreneur Today

3 Stealthy Tax Hikes Payroll Managers And Employees Need To Take Note Of

By Rob Cooper, tax expert at Sage, and chairman of the Payroll Authors Group of South Africa

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“Dammed if you do and dammed if you don’t.” 

The adage summarises the difficult decisions government and the Finance Minister faced when balancing the country’s books, rescuing state-owned enterprises, and reviving the growth of our economy. Given the economic pressure that most taxpayers are facing, government ideally needed to achieve all of that without direct increases to personal income tax in the most recent Budget Speech.

Personal income tax has comprised at least a third of South Africa’s total tax revenue in recent tax years, despite growing unemployment. The 2019 Budget, presented in February, forecasts that personal income tax will account for nearly 39% of tax collected during the upcoming (2019/20) tax year. Given that we are in an election year and that the tax base is fragile, it’s not surprising that the Finance Minister and the National Treasury avoided direct increases to the statutory tax tables used to calculate PAYE for employees in the budget.

Nonetheless, government has made inflation work in its favour to impose some tax increases by stealth. Here are three ways government is raising more revenue without direct tax increases:

1. Bracket creep

The statutory tax tables used by payrolls and employers have not been changed for 2019/20, nor have the brackets been adjusted for inflation. This effectively amounts to an indirect tax increase that will yield a revenue saving of approximately R12.8 billion for government’s coffers.

It is not unusual for government to use ‘bracket creep’ to effectively raise more revenue. But unlike previous tax years, even low- and middle-income earners are not getting much relief. Rebates and the tax threshold are being increased by small amounts to allow some relief, but many people this year will feel the pain as inflationary salary increases push them into a higher tax bracket.

2. Medical aid credit not adjusted for inflation 

As proposed in the 2018 Budget, the Finance Minister did not apply an inflationary increase to the Medical Tax Credit, which allowed him to raise an extra R1 billion in revenue for the year. Surprisingly, these funds will be allocated to general tax revenue rather than ring-fenced for healthcare. In previous tax years, revenue generated from below-inflation increases on medical scheme credits was used to fund National Health Insurance (NHI) pilot projects.

There is still no clarity on how the NHI is going to be funded except for a general statement that the funding model is a problem for the National Treasury to solve, and that the principles of cross-subsidisation will apply. One wonders if any real progress will be made soon, given the fiscal constraints government faces.

3. Business travel deduction left untouched

The Budget leaves the per-kilometre cost rates used to determine tax deductions for business travel untouched. By not increasing travel rates to account for inflation, government effectively increases income tax collection at the cost of the taxpayer. This will be a blow for people who need to claim from their employers for business travel in their personal vehicles. This change has slipped through largely unnoticed and the budget does not provide numbers for the expected increase in tax revenue.

Closing words

Amid political turmoil and uncertainty, the Finance Minister presented a balanced budget for 2019/20 that offers hope for the future along with some tough love. With government taking steps to accelerate economic growth and improve revenue collection, we should hopefully see a steady improvement in government finances, which will translate into less pressure on the taxpayer in future years.

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Entrepreneur Today

SMEs: Staying On The Right Side Of The Taxman

Remaining SARS compliant can be a constant challenge for small- to medium-enterprises (SMEs), especially when they are trying to focus on growing their businesses and streamlining their operations.

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EasyBiz Managing Director, Gary Epstein, says submitting taxes can be a seamless process that does not have to take up more time than is necessary. “If business owners understand what is required of them and they put a few processes into place to deal with their tax submissions properly, their lives will be so much easier.”

What are the top three considerations for SMEs when submitting tax returns?

“Firstly,” says Epstein, “SARS returns must be accurate and submitted in terms of the relevant Act. Secondly, returns should be submitted and paid on time to avoid unnecessary penalties and interest, and thirdly, business owners must follow up on queries issued by SARS. “Do not ignore these queries, act on them as soon as possible”.

What are the major SARS submission deadlines for SMEs?

Epstein points out that small business owners need to adhere to various tax deadlines, each with their own particular dates for submission. “It is important that business owners diarise the dates (and set advance reminders for themselves) and/or enlist the services of an accountant or financial adviser to help them keep abreast of requirements.”

Value-added tax (VAT)

VAT payments need to be submitted in the VAT period allocated to the business, according to various categories and ending on the last day of a calendar month. This may mean making payments once a month, once every two months, once every six months or annually, depending on the category.

Provisional taxes

Provisional tax should be submitted at the end of August (first provisional) and at the end of February (second provisional) – for February year-end companies.

Employee taxes

In addition to submitting an annual reconciliation (EMP501) for the period 1 March to end of February for Pay-As-You-Earn (PAYE), Skills Development Levy (SDL) and Unemployment Insurance Fund (UIF), employee tax, in the form of an EMP201 return, needs to be submitted by the seventh of every month.

When can SMEs get extensions and is it worth it?

Epstein says SMEs can apply for various extensions, but these are subject to the Income Tax Act and Tax Administration Act.

“It is best for SMEs to consult their tax professionals to get advice regarding extensions for their businesses.”

What is SARS not flexible about?

SARS is not flexible when it comes to late returns and late payments.

“I cannot stress enough how important it is for SME owners to ensure their tax returns are submitted on time. In this way, they will avoid the inconvenience and expense of additional fines and interest,” notes Epstein.

What skills do SMEs need in their organisations to be able to submit to SARS efficiently?

Business owners often don’t have the time or expertise to deal with tax submissions throughout the year. If the business cannot afford to employ a full-time accountant or financial services expert, it would do well to outsource its tax requirements to a registered tax practitioner.

“I would recommend that even if they are not submitting the tax returns themselves, business owners should have a broad understanding of the tax regulations and what is expected of them. There is a lot of helpful information on the various Acts and tax requirements on SARS’ website,” says Epstein.

How does the right software help SMEs remain SARS compliant?

SME’s (and their accountants’) jobs can be made easier by using reliable accounting software to calculate accurate VAT reports. These reports are only as accurate as the data entered into them, which means care needs to be taken when inputting data into the accounting programme. Epstein says a good accounting software package must be reliable, easy to use and functional.

“SMEs need to check that the software has thorough reporting capabilities and can interface with other software solutions. Of course, it is also important to find out whether the software is locally supported by the vendor or not.”

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4 Dangers Of Business Under-insurance

A common short-term insurance peril that many SMEs face when submitting a claim following an insured event is the risk of being underinsured.

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Malesela Maupa, Head of Products and Insurer Relationships at FNB Insurance Brokers says, many small business owners mistakenly believe that by merely having a short-term insurance policy in place they are adequately protected against unforeseen events.

“This is technically correct provided that the business is covered for the full replacement value of the items insured. However, in circumstances where the sum insured does not cover the full replacement value or material loss of the item insured, the business is underinsured,” explains Maupa, as he unpacks the dangers of business underinsurance:

1. Financial loss

The most common risk is financial loss on the part of the business. If the business is underinsured or the indemnity period understated, the short-term insurance policy will only pay out the sum insured for the stated indemnity period as stated in the schedule, with the business owner having to provide for the shortfall. This often leads to cash flow challenges, impacting profit margins or rendering it difficult for the business to recover following the financial loss.

2. Reputational damage

Should an underinsured business not have sufficient funds to replace a key business activity or critical component following a loss, this may impact its ability to fulfil its contractual obligations, leading to a loss of business or market share, and irreparable reputational damage in the worst-case scenario.

3. Legal action

A small business also faces the risk of customers or clients taking legal action against it, should it fail to deliver on goods and services following a loss or be unable to honour its financial commitments that they committed to prior to the loss.

4. Survival of the business

A catastrophic event such as fire, which could result in the loss of stock or company equipment and documentation, could threaten the survival of a small business that is not yet fully established, if the business assets are not adequately insured.

Working with an experienced short-term insurance broker or insurer is essential when taking up short-term insurance to ensure that business contents are covered for their full replacement value.

Furthermore, depending on the nature of the business or item insured, the policy should be reviewed on a regular basis to avoid underinsurance as the value of items often change overtime due to fluctuations in economic activity. Where it’s necessary, evaluation certificates need to be kept up to date.

“Lastly, SMEs should ensure that the sum insured does not exceed the replacement value, which would lead to over insurance. Should a business submit a claim following a loss, the insurer would only pay out the replacement value, regardless of the higher sum insured,” concludes Maupa.

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