11 minute read
LEGAL
TRAINING THE POWER OF KNOWLEDGE SHARING
Training can occur both vertically and horizontally within a business, and franchisees should look to learn from each other, writes ANÉL LEWIS
CARE AND SHARE
The ability of franchises to share knowledge and offer ongoing training has helped many of South Africa’s successful businesses withstand turbulent economic times and even a pandemic. “Now, more than ever, those franchisors that have given solid support to their franchisees are living up to the principle underpinning successful franchises: that sharing, mentorship and support are at the heart of the model,” says Pertunia Sibanyoni, current chair of the Franchise Association of South Africa (FASA).
Communication between franchisees is key too, says Russell Berkman, franchise director at Jawitz Properties. “Franchisees collaborate for support, innovative ideas, and as a way to share their successes and challenges.” The company has developed effective channels, including Sandy Varty, brand manager for Wiesenhof Management Services in South Africa, says internal training and development keeps costs low and ensures brand consistency. Varty was previously director of operations at McDonald’s in Canada, managing and training franchisees. She advocates a “care and share” approach. “By all means, steal shamelessly (from other franchisees). That is why you are in a franchise.” online platforms, through which to Franchisees usually have varied experiences share information and best practices, and insight that can add considerable value. as well as provide ongoing training Swain agrees, saying: “Even though our and development. agencies are independently Knowledge sharing forms part of managed, there is the
Leapfrog Property Group’s organisational collective understanding structure, says CEO Bruce Swain. “We value that when the individual learning and also learning from each other. thrives, the group thrives
Information and knowledge sharing are and vice versa.” critical in any business, even more so within the franchise model where the structure tends to be more independent. Just as there Russell is strength in numbers, so too is there power Berkman in sharing insights and learnings that help to encourage success and growth.”
“FRANCHISEES COLLABORATE FOR SUPPORT, INNOVATIVE IDEAS AND AS A WAY TO SHARE THEIR SUCCESSES AND CHALLENGES.” – RUSSELL BERKMAN, FRANCHISE DIRECTOR, JAWITZ PROPERTIES
LEARNING FROM THE BEST
Established franchises are a great
source of knowledge for emerging businesses. As the industry body promoting franchising, the Franchise Association of South Africa (FASA) offers online networking opportunities and hosts regular training events. Pertunia Sibanyoni, current chair of FASA, says it also partners with government to establish initiatives to encourage entrepreneurship, training and job creation.
Franchisee councils, seminars and workshops allow franchisees to network with each other and exchange best practices, says Sibanyoni. Business Unity South Africa is one of several organisations that
Akhona Qengqe allow business owners to network and infl uence policy as a collective, says Akhona Qengqe, chief people offi cer at KFC Africa.
Also, franchisors encourage new franchisees to “buddy” with an established franchisee as mentors to help them learn the ropes, adds Sibanyoni.
MENTORSHIP AND CSI
Asked if business mentorship should be incorporated into CSI initiatives, Grant Smee, managing director of Only Realty, argues that while mentorship is intrinsic to the franchisor-franchisee relationship, he would fi nd it diffi cult to understand fully the value behind providing this through a CSI mechanism. “Having said that, it has been my personal experience that mentorship is severely lacking within franchise structures, which is perhaps where the industry should focus fi rst before looking outward to provide mentorship in other areas.”
Qengqe argues that mentorship and upskilling are already incorporated into most organisations and are part of company CSI. “As part of B-BBEE, there’s defi nitely a requirement from a supplier point of view in terms of companies to share knowledge and upskill new suppliers.” However, she adds that how companies on-board emerging businesses as part of their transformation initiatives should be institutionalised and underpinned by a strong business rationale.
“We should always absorb SMEs into our business operations to assist them in becoming larger enterprises that employ more people to contribute to our economy actively.” This approach should therefore be incorporated not only as company CSI, but also as a company’s licence to operate, concludes Qengqe.
FAST FACT
McDonald’s Hamburger University, based in Chicago, trains employees in company culture and best practice. More than 40 per cent of its top management are graduates of the programme, which is offered at satellite campuses around the world. The university-accredited courses include leadership, service effi ciency, franchise costs and business growth.
Source: McDonald’s
SELLING CLEAN WATER
South Africa has a growing number of water purification-related franchises, THANDO PATO speaks to some of the key players to find out how business is faring
This has shifted from being exclusive to corporates and businesses to include home and home offices.”
GETTING YOUR FEET WET
Du Preez says that the start-up costs for a water-purification franchise are lower than those of a franchise restaurant, for example, but the standard and quality of service are high. “We do not cut corners in our purification and opt for state-of-the-art equipment,” he explains.
THE STATE OF SOUTH AFRICAN WATER
In Southern Africa, access to clean drinking water is becoming a luxury. This is why over the past 25 years several water-purification franchises have succesfully expanded their footprint across the region.
Key players and Franchising Association of South Africa (FASA) members include H2O International, Perfect Water and Oasis Water. Tony Marchesini, managing director of H2O International, says that the growth in the industry has been spurred by several key factors.
“There is a greater demand for clean water by both big business and the consumer. People are also becoming more health conscious, so they are looking at the quality of their water more closely. But our business is lucrative on many different fronts, from the supply of water coolers to the refilling of water bottles and water treatment for big business. There are different income streams, and it’s up to the franchisee and their sales team to delve into the needs of the local community.”
AND THE CONSUMER.” – TONY MARCHESINI, MANAGING DIRECTOR, H2O INTERNATIONAL OFFERING ALTERNATIVES TO BOTTLED WATER
Marchesini says that while H2O International’s primary target market is individuals who are health and fitness conscious, its customer base has grown over the years. “Our products are also used widely in the hospitality industry, offices, light commercial businesses and factories. We’ve responded to the increasingly questionable quality of our municipal water supply and allowed customers to purchase water in their own refillable containers.” Oasis Water director Naas du Preez says that they’ve seen growth in several areas of their business. “We refill water into existing containers at 300-plus stores. This is a value-for-money solution for customers and costs a fraction of the price of buying bottled water. We have also seen growth in demand for water coolers and office dispensers.
Access to fresh water is a basic human right enshrined in Section 24 of the South African Constitution, yet many municipalities do not provide this essential service, according to a report compiled by AfriForum in 2020. The Department of Water and Sanitation (DWS) is responsible for ensuring that water provided by municipalities to the public meets a minimum standard for human consumption. This standard is outlined in the DWS Blue Drop Report, an audit of drinking water conditions across the country. DWS last released a Blue Drop Report in 2014.
In 2020, AfriForum tested the drinking water (blue drop) in 220 towns and the treated sewage (green drop) of 118 sewage treatment plants as part of its annual blue and green drop project. According to the report, the drinking water of five towns (Boshof, Brits, Delareyville, Sannieshof and Stella) and 90 sewage systems did not comply with national standards.
fast fact
While water covers 70 per cent of the planet, only 3 per cent of that is fresh water and only two-thirds of that is readily available for human consumption. As a result, it is estimated that at least 1.1 billion people do not have access to fresh water. A total of 2.7 billion people find water scarce for at least one month of the year.
Maria D’Amico
What to know when franchising your business
LAY IT ALL OUT
With the brand outline and trademarks protected, the real meat of any franchise is the Operations Manual – effectively the business’ bible. “It’s the A–Z – how long before opening the staff need to arrive, what needs to be prepared before opening, the value of the cash fl oat for the till, the branding, uniforms – literally every aspect of the franchise’s day-to-day operation,” says D’Amico. “It’s an essential part of the franchising process because every aspect of the business depends on it.”
Turning a business into a franchise involves a different type of acumen – and plenty of planning, writes TREVOR CRIGHTON
Not every business is franchisable, says Eric Parker, partner at Franchising Plus. “It’s important to do a full feasibility study to see if a business’ processes are replicable and scalable with the potential to grow it into a franchise, rather than a network of branches,” he explains.
POKE THE BEAR
Franchising Plus runs through an 11-point checklist with potential franchisors as part of their feasibility study, which also examines the fi nancial aspects of the would-be franchise. Those points examine things like whether the skills are transferable, whether the gross profi t is enough to warrant royalties and so on. “That’s a two-month process, with a thorough examination of and write-up on all aspects of the business to see if it would be sustainable as a franchise,” says Parker.
GET CPA-COMPLIANT
Franchising law expert Maria D’Amico explains that, once someone has decided to proceed with franchising their business, there are several steps, starting with drawing up documentation that complies with the Consumer Protection Act (CPA). “The fi rst step is the Disclosure Document – this contains all the information that backs up the franchise, including details similar brands. There’s a cost to this – about R3 000 – but it could save a franchisor plenty of time and money down the line when the brand is ready to be rolled out and a similar brand objects. “Whatever the franchise brand is, a franchisor will need to register it in at least two trademark classes – the type of business and then in the franchising class,” says D’Amico. The cost of registering in these classes is also around R3 000 per class.
about the franchisor, the fi nancial projections, establishment costs and the like – between 20 and 30 elements,” she says.
PROTECT YOUR BUSINESS WITH A CONTRACT
Once the Disclosure Document is drawn up, the Franchising Agreement, which also needs to be CPA-compliant, follows. This is the document that acts as a contract to legally underwrite the rights and obligations of both franchisee and franchisor, outlining intellectual property ownership, defi nitions, payment clauses, franchisee and franchisor obligations, disclosure, confi dentiality, restraint of trade and handling termination.
“I believe that if these documents don’t comply with the CPA, franchisors run the risk of them being invalid and seeing the franchisee able to resile from the agreement,” says D’Amico.
TRADEMARK YOUR BRAND
Next is the registration of the franchise trademark with the Registrar of Trademarks. Before you do this, it’s important to do an initial investigation to see whether there are any other businesses in the same sector with
BUYER – AND SELLER – BEWARE
Prospective franchisees need to be given the Disclosure Document and Franchise Agreement at the start of the partnership process. They have 10 working days to peruse, ask questions, do their due diligence and ask for opinions. If they sign, there is another 10-working-day cooling-off period, during which they can terminate the agreement without penalties, fi nancial or otherwise.
“I advise all franchisors to never impart any IP, confi dential information, the Operations Manual or anything that relates to the ‘secret sauce’ of the business during that cooling-off period,” says D’Amico. “If a franchisee has that information and cancels the agreement within that period, they can retain and use it without penalty.”
PAY TO PREPARE
“Assessing and preparing a business for franchising is an expensive exercise, but doing it properly can mitigate enormous costs down the road,” says Parker. The Disclosure Document can set you back around R30 000, the Franchise Agreement another R45 000–R50 000 and a comprehensive Operations Manual, about R180 000. “Franchising is an investment from both franchisor and franchisee, but that investment helps ensure that the principles are sound”.
