Ethel Nyembe The recent decision by the South African Reserve Bank to increase the interest rate to 6% has impacted on all sectors of the economy from consumers, big conglomerates to franchisees. As with all business enterprises, the economic conditions of the day impact directly and indirectly on the operations of franchises – their production, management, pricing – and so must be analysed carefully and managed strategically.  Ethel Nyembe, Head of Small Enterprise at Standard Bank says, “The recent interest rate hike combined with myriad other economic challenges certainly puts franchisees under pressure, and so, with the rate only expected to rise, they must plan carefully to mitigate the foreseen side-effects for future success.” “Fortunately, there are a number of strategies that can help franchise owners weather this economic storm.” Limit your spending: It is common to underestimate the costs involved in buying, opening and maintaining another franchise, but ...

Toni Fritz Anyone who owns and operates a franchise will tell you that cash flow determines whether your business succeeds or not. However, unexpected expenses can occur and many will be linked to the need to urgently buy or replace equipment. Therefore, the potential for a negative impact on cash flow always exists. When expensive equipment is needed urgently, the solution to obtaining the equipment also means preserving cash flow as far as possible, says Toni Fritz, Head of Vehicle and Asset Finance - Business at Standard Bank .   “When times are tough, paying out hard-earned cash for operational necessities is often not an option. Financing is then, the only realistic solution. However, how you raise the money and what the final cost will be to you, should be carefully considered before you commit yourself to a loan.” Things to consider when seeking finance: • The monthly repayments Research your options and do some calculations. You could find that, by paying a...

Ethel Nyembe Buying a franchise may seem like a short cut to business success. However, being a franchisee also comes with great responsibilities. As a result, it pays to ask the right questions so that you know exactly what your long-term obligations will be, especially when it comes to ‘freshening-up’ your franchise outlet. “Successful franchised outlets attract a lot of customers. It is inevitable that over time, the kitchen, and its appliances - and most importantly to patrons - the customer service areas will show ‘wear and tear’ and begins to look worn-out. It is when the franchisee is unexpectedly faced with the responsibility of freshening up the outlet, which can often be costly,” says Ethel Nyembe, Head of Small Enterprise at Standard Bank. “Many people who buy franchises, whether they are new or well-established outlets, do not realise that there are often contractual obligations placed on them regarding the refurbishment of their facilities. These can require that a...

New franchise strategies and growing earnings drive SA franchisors into Africa Philip Myburgh Times may be tough locally, but that has only encouraged South African franchisors to look beyond the country’s borders and take a long-term view on introducing integrated strategies for the growth of their brands across the continent. “The stage for expansion of franchise operations in Southern African Development Community (SADC) countries and beyond has shifted as franchisors have gained experience in African markets,” says Philip Myburgh , Head of Franchising Africa at Standard Bank . “Interestingly, we are seeing progressively more food retailers and quick-service restaurants eagerly trying to form business partnerships with the fuel service industry. While the concept has already taken off in South Africa, with limited maturity in neighbouring countries like Namibia, it is still at infancy stage in the rest of the continent, which presents an opportunity for more partnerships. ...

Attracting and selecting the right franchisee – key for success  Recruiting quality franchisees is becoming increasingly essential for every franchise business, as the wrong fit can seriously damage the reputation of the franchise.  Ethel Nyembe As the franchise sector continues to grow at a fast pace, so does the competition as franchisors strive to make their brands more appealing to potential franchisees. This often leaves franchisors with the challenge of attracting and selecting the right franchisees with the right skillset, work ethic, abilities and competencies to back their vision. “One of the success factors for franchise systems is market penetration which is often achieved through expansion, by opening new stores with quality standards that match the brand – through franchisees. The wrong fit, however, can seriously set a franchise’s growth back many years or cause irreparable damage to its reputation,” says Ethel Nyembe, Head of Small Enterprise at Stan...

Under-insuring your business has major repercussions Companies throw the dice by cancelling or not renewing their insurance. Businesses that choose to cut down on insurance cover to save costs are playing a risky game more akin to gambling than good business practice, according to Gerald Juma, Corporate and Business Insurance Regional Manager at Standard Bank. South Africa’s economy is struggling to eke out anything over 2% growth, while inflation has dropped below 4% – a four-year low. The slow conditions are placing pressure on businesses to cut back on costs – and insurance is often one of the first expenses to face the chop.  “In terms of priority, companies need to ensure the lights stay on and that there is electricity, for example, but this shouldn’t mean insurance is a lower priority,” says Mr Juma. Without adequate insurance coverage, a company could never financially recover if a fire were to raze it to the ground, for instance. “Instead of cutting insurance, co...

Five insurance nightmares that keep business owners awake at night Load shedding is at the top of the agenda  Bryan Verpoort South African business owners’ worst fears of the 2008 blackouts re-occurring are being realised with billions of rand in potential economic growth being wiped out every month as widespread power outages affect the country.  “Load shedding currently tops the list of insurance nightmares keeping business owners awake at night. But they are also nightmares which businesses can insure against,” says Bryan Verpoort, Head of Corporate and Business Insurance at Standard Bank, as he unpacks five insurance risks that every business owner should make sure they are adequately protected against:    Load shedding Persistent load shedding is the number one insurance nightmare for companies and individuals, because most policies simply do not cover the consequential damages that could arise from a power cut. Mr Verpoort says the problem is t...

What to consider when investing in a new franchise brand Many entrepreneurs entering the world of franchising often find it challenging to decide whether to go with an established brand or throw their hard-earned savings into a totally new venture.  “The dilemma of staying with the tried and trusted or going with something new that seems to offer great opportunities is something many potential franchisees face”, says Ethel Nyembe, Head of Small Enterprise at Standard Bank.  “However, if you are considering a start-up franchise operation, it is best to spend some time doing research and also asking a few probing questions,” advises Ms Nyembe.  The points to consider before signing a franchise agreement with a newly launched franchise are: It is an opportunity to invest in a new concept and fresh products The concept and products may excite you, but you need to look at both with a critical eye. For example, you need to know who you are targeting with your prod...

Spouse’s support key when taking the entrepreneurial leap When your partner decides to leave a secure job to start a business, there is often a lot of uncertainly on whether it is a good choice and how it will affect the relationship. One thing is for sure, though: to make it work, to reach entrepreneurial success, you will need to work together, trust each other and most importantly, set financial boundaries. Ethel Nyembe, Head of Small Enterprise at Standard Bank says, “When you are used to a steady income, the unpredictability in your finances can be really stressful and careful money management is vital in this situation. While your partner may be excited about the future, you are perfectly within your rights to get involved with the financial decision-making. For example, if he/she wants to cash in your savings or increase the mortgage on your home to fund the business, you can and should draw a line in the sand.” In most cases, starting a business from nothing can place q...

The correct financing for a franchise can heighten chances for success Ethel Nyembe There are numerous options available to fund a franchise. Careful evaluation and management of these options should see you on the path to commercial success and wealth. Establishing a business requires the investment of a great amount of time, effort and money. Most potential franchise owners do not have the capital needed to launch and run an enterprise effectively, and therefore rely on borrowing. “For many, the opportunity to launch a business is created by a pension or provident fund payment or, very commonly, from retrenchment cheques when leaving the corporate world,” says Ethel Nyembe, Head of Small Enterprises at Standard Bank. “There are, however, other, more conventional ways of finding finance.” Below, Ms Nyembe suggests and explains the more established methods of funding a commercial enterprise, and which approaches to avoid. Friends and family “Many potential franchise own...

Business interruption insurance is not a solution for load shedding risks 90% of business interruption insurance claims as a result of load shedding will not be paid out  Bryan Verpoort Blackouts are estimated to have shaved 0.3% off GDP, or $940 million, in 2014 after the country experienced weeks of rolling power cuts – the first since 2008. A continuation of this trend this year has placed increasing strain on an economy struggling to eke out even 2% growth, and as a result many businesses are mistakenly taking out business interruption policies as cover against power outages.  Bryan Verpoort, Head of Corporate and Business Insurance at Standard Bank, says business interruption insurance should not be seen as a solution for load shedding. “In terms of insurance - If a risk is not foreseeable, then you need to take precautions – but load shedding is foreseeable, which makes it challenging to insure.” “What this means is that a loss of profits needs to have been ca...

Franchising in 2015 How to ensure that your franchise remains successful Morne Cronje The global franchise environment is growing at a fast pace. Looking into 2015, South African franchises are confident about their growth prospects and better yet, looking at ways of improving the current business conditions.   A rejuvenated business environment is key to ensuring the survival and growth of many franchises. Currently franchise businesses, big and small face many challenges. “We are seeing slower economic growth, increased unemployment, new regulations, further load shedding and labour unrest, which increases the cost of doing business and makes it difficult to justify new investment opportunities,” explains Morne Cronje, Head of FNB Franchise.  Businesses have become more risk averse and are willing to take calculated risks to grow and develop their businesses. He adds that  companies need to be cautious in the current economic landscape given the challenges t...

Eight common reasons why franchises fail Ethel Nyembe Buying a franchise doesn’t automatically guarantee success; commitment to developing the skills needed to manage a business is key Aspiring entrepreneurs who want to avoid the high risk of failure associated with small businesses often look to franchising, assuming that a recognised trademark and support is a guarantee of success. Although it is true that franchises have a higher success rate, it is not true that they cannot fail. As it is the case with other businesses, there are several reasons why franchises fail, says Ethel Nyembe, Head of Small Enterprises at Standard Bank. “Enhancing your chances of becoming a prosperous franchisee can depend on addressing the common issues that can impact on a franchise by addressing them upfront.” “One of the primary reasons franchises fail is because potential franchisees often rely too much on the professional assistance and systems supplied by franchisors. If you are going to ...