FRANCHISING PLUS Franchising Services

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(No Transcript)
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Tandem Franchising
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South Africa Market overview

• Young population
• 42.63 below the age of 20
• 18.83 between the ages of 20 and 29
• Unemployment at 25.6 (March 2006)
• 13 years of democracy
• Social problems
• Poverty About 50 of population classified as
  poor, income level of R800 per month (US 115)
• Crime driven by poverty
• Unemployment

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Economic outlook

• Positive economic indicators
• GDP growth of 5 for past three years
• Growth in government and household consumption
  expected at 5-6
• Projected employment growth of 3-3.5 (0.3
  million additions annually to formal economy)
• Average wage growth 6-7
• Reserve Bank targets 3-6 inflation, two
  interest rate increases this year (total of 1)

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Re-dressing imbalances of the past through BEE

• Government has implemented Black Economic
  Empowerment (BEE) regulations
• Individuals who were disadvantaged in previous
  dispensation stand to benefit
• Preference and recognition to businesses that
  comply
• A social and economic imperative to uplift the
  broad population broad based empowerment
• Targets are set and government recognises that
  transformation is a process
• Driven by government and private sector

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The state of entrepreneurship in South Africa

• Global Entrepreneurship Monitor (GEM) results
  2006
• Only 5.29 of SA population involved in start-up
  and new entrepreneurial ventures
• Country average (42 countries) 9.43
• Developing countries 14.8
• Weakest in new firm and established firm
  entrepreneurship, low economic contribution

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Contributors to low entrepreneurial levels

• GEM 2003
• Low education levels
• Perceived lack of skills
• Only 35 of men under 45 believe they are capable
  of starting a business
• Lack of entrepreneurial role models
• Lower levels of exposure to entrepreneurs
  comparative to other developing countries
• GEM 2006
• Increased participation of youth correlates
  with populations statistics
• 48 had negative perceptions
• of entrepreneurship

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Mentoring small businesses

• Lack of role models identified as a problem
  mentoring may be the answer
• The process of entrepreneurial learning
• Informal, on the job training
• Critical incidents learning by experience
• Must be practical, contextual and individualised
• Mentoring fits the requirements of this type of
  learning

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Why mentoring can work in a franchising context

• Adapt to changes in lifecycle of the business and
  franchisee lifecycle
• Avoid the learning trap objective view of
  mentor
• Inherent benefits of franchising
• Skills transfer through training programmes
• Ongoing support
• Additional support to previously disadvantaged
  individuals

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Financing SMMEs

• Lack of financing one of the biggest hindering
  factors in SMME development
• GEM 2006 Difficulty in accessing funding,
  although its available
• Lack of collateral a problem in financing
  previously disadvantaged individuals (PDI)
• Formalizing and recognising assets
• Assess franchise system as a whole (vs single
  individual only) in terms of investment risk
• Provision of guarantees

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What is Tandem Franchising?

• An empowerment and financing mechanism with a
  strong focus on mentoring
• Franchisee works in tandem with franchisor
  appointed mentor
• Franchisee starts with minority share and builds
  shareholding over time easier to access finance
• Mentor rewarded based on franchisee performance

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Implementation of Tandem Franchising

• Mentorship programme
• Franchisor or third party mentor
• Equity
• Franchisee purchases minority stake to be
  increased over time
• Financing
• Franchisor/bank/financial institution to finance
  the majority of the capital

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Options for implementation
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Developing the mentoring programme

• Profile of the mentor
• Experience, people skills
• Match with the franchisee
• Format of the programme
• Targets, goals, feedback to franchisor
• Daily operations
• Franchisee acts as assistant manager
• The transition
• Transition to full ownership and independence
  shareholders agreement
• Phased approach

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Advantages