In the January edition of this newsletter, we predicted that alert franchisors will have a busy – and productive – year ahead. A quick glance through this newsletter will confirm that we were spot-on with our forecast – things are indeed moving along nicely.
Our lead story deals with BBBEE – again – but this is not a rehash. Rather, it's an update that contains some reassuring news. Still on the legal front, we provide you with valuable insights into the way the Competition Board looks at franchising. We also tell you why you should encourage your franchisees, even those who are essentially tax-compliant, to take note of the current tax amnesty.
We also introduce the proposed Consumer Protection Act . It is currently in the drafting stage and we have asked the legal eagle on our expert panel, Eugene Honey of Bowman Gilfillan, to write an in-depth article on this important topic. An understanding of this proposed legislation is important for every franchisor because if it would become law as it stands, it could have catastrophic consequences for franchisors. Eugene 's article will be placed in the Franchise know-how section of www.whichfranchise.co.za by the end of March 2007.
The question “are franchise fees tax-deductible or not?” raised its ugly head again and we address this issue next. On the consumer front, the trans-fat story continues to make waves.
Noteworthy trends within the franchise sector are pop-up stores and assembly kitchens ; if you don't know these terms, stay with us, by the time you have finished reading our relevant articles, you will be an expert. Lastly, we bring you some sector news and conclude by bragging a little – we think we deserve it and hope you'll agree.
Any information given in this newsletter is intended to draw our readers' attention to issues of concern to the franchise fraternity but does not constitute legal advice. Readers should be aware that individual circumstances that are not known to us and/or are beyond our control can have a substantial impact on the outcome of each scenario. We therefore advise readers not to act on anything contained herein without consulting an attorney with proven experience in this field.
Earlier this month, Absa Franchising invited a group of leading franchise personalities to learn first-hand how the final version of the long-awaited Broad-based Black Economic Empowerment (BBBEE) codes would impact on franchising in general, and their own operations in particular.
The workshop was presented by Vuyo Jack, CEO of Empowerdex, one of South Africa 's leading rating agencies. Vuyo was intimately involved with the formulation of the codes. His presentation made it clear that although the codes are not specifically dealing with franchising, the sector should be able to live with them. He also explained that the codes provide for self-evaluation. It follows that in theory, it is not necessary to hire a rating agency, but this can have its drawbacks.
Another interesting aspect that emerged is that failure to implement the codes does not attract direct penalties. This notwithstanding, it could have serious practical ramifications for enterprises that are less than diligent in implementing BBBEE measures. After listening to Vuyo, we firmly believe that to continue sitting on the fence is no longer a realistic option for anyone wishing to continue to do business in South Africa . To read more about BBBEE and its impact on franchise operations, click here
One of the guest speakers at the Franchise Association of Southern Africa's (FASA's) annual conference was Professor Tanya Woker, who has a special interest in the impact of the Competition Act on franchising. Quite unlike the stereotypical law professor, Tanya has the ability to explain complex legal concepts in layman's terms. In her presentation, she interspersed necessary theory with meaningful practical examples. At the end of her session, everyone present had a reasonable understanding of the issue. To read a summary of the points she made, click here
Don't skip this article! You will soon realise that it is of importance to every network's franchisees. We have to confess that when the tax amnesty was first announced, we reported on it only half-heartedly. Our thinking was that this amnesty is of interest to the taxi sector and other very small businesses. After talking to a seasoned franchisor, however, we realised that it impacts on any business. The franchisor raised two very important points: Read more…
Experts are generally upbeat about the proposed Consumer Protection Legislation (CPL) and have dubbed it a “Bill of Rights for consumers”. It is extremely far-reaching and covers almost every commercial transaction. As such, it puts the consumer into a stronger position than was the case in the past. For example, if a company says that a product performs in a certain way then they'd better make sure that this actually happens. Read more…
The February 2007 issue of Real Business , a title published by Business Day, revisited the issue of “royalty payments” made by franchisees to their franchisors on an ongoing basis. The “Ask an expert” section of whichfranchise was flooded with questions about this. It is clear that the article created much anxiety among franchisees but in our opinion, much of it is unfounded. Read more…
To keep our readers ahead of the pack, we are always on the look-out for emerging trends. Here's an interesting selection.
Needless to say, this latest retail trend originated in the US - where else? A company opens a store at a high-traffic location, with great fanfare and lots of special offers, only to close it after a short time, sometimes as little as four trading days. These stores create excitement around a product launch, or enable manufacturers to test consumer reaction. They also inject a sense of urgency, something modern-day consumers apparently crave.
What on earth are assembly kitchens? Assembly kitchens are a concept that allows consumers to prepare their own home-made meals without the hassle of shopping, chopping and cleaning up. Customers rent work stations where they use freshly prepared ingredients to create set menu items. They take those meals home – uncooked – and put them in the freezer for consumption at a later date. Read more…
In the January edition of this newsletter, we reported extensively on trans-fats and their impact on the health of consumers. Trans-fats are hydrogenated fats that are mainly used by fast food outlets, commercial food processors and bakeries. Health authorities in a growing number of states in the US have either banned the use of trans-fats, or are in the process of doing so. South Africa appears to be somewhat lagging behind but several of the major fast food chains and food processors are actively seeking substitutes for these artery-cloggers. Read more…
When told about this franchise opportunity, one member of our panel of franchise experts said: “This must be the most bizarre concept I have ever heard of.” It's a service concept that provides one simple yet essential service: picking up dog poop. What makes it noteworthy is that in our view, it demonstrates the versatility of franchising as well as the option to expand into related fields.
Pet Butler is the leading pet waste cleanup service in the US . They now move into “poop gear”, clothing to be worn by dog lovers, for example T-shirts with “Poop Master” emblazoned on them. The company's CEO (Chief Excrement Officer) is confident that the new line, which is offered over the Internet, will be a resounding success.
Italtile reported a net profit of R126 million for the six months ending December 2006, derived from sales of R1,32 billion, up 11% on the sales achieved during the same period one year earlier. In the light of deflation experienced in the tile market, the company is extremely happy with these results and has declared a dividend of R2,30 per share, up from R1,40 a year earlier.
Italtile's Australian stores, currently eight, made only a modest contribution to group results. CEO Gianpaolo Ravazzoti explained that the Australians don't like the warehouse model that is so successful in South Africa . The company is now testing a showroom store model.
The Australian Competition and Consumer Commission (ACCC) is the guardian of the Australian Franchising Code of Conduct. When problems associated with the code arise, the ACCC will usually recommend mediation as the preferred option. Should it emerge, however, that the franchisor is less than diligent in complying with the code, the ACCC may decide to lend support to franchisees who feel that the franchisor rides roughshod over their interests.
This code is in force for several years now but of late, a growing number of complaints emanating from disgruntled franchisees were received by the ACCC. This has led to an overhaul of the code and given it additional powers. More specifically, disclosure requirements have been strengthened and greater transparency in dealings between franchisors and their franchisees has become mandatory.
Franchisors with an interest in the Australian market should visit the ACCC's website – www.accc.gov.au. Moreover, the question must be asked whether this code could not serve as a model for a similar code to be instituted in South Africa .
Franchising Plus conducts a monthly Business Skills course for new franchisees. The course covers an Introduction to Franchising; Basic Business Finance; Marketing; Human Resources; Business Planning and Customer Service. In other words, everything your new franchisees will need to get them started as well as peace of mind that you have done everything to equip them to manage their new ventures successfully.
For details and more information contact: Annie Baptiste on 084 404 1144 or email annie@franchisingplus.co.za
To close on a high, we must tell you that during January 2007, the administrators of our website, www.whichfranchise.co.za , recorded 42 557 page visits . No wonder our advertisers are so happy – the traffic we generate guarantees exposure for their concepts that surpasses anything else on the market today. Add to this the fact that most visitors to our site are actively looking for opportunities, and it is easy to see why your brand should be represented. To find out more, visit the site or call Dustin Chick on 082 856 2390 or email dustin@whichfranchise.co.za
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