FRANCHISING

HOW TO BECOME A FRANCHISEE

The earning potential of a franchise opportunity is subject to many factors, such as the location, the amount of time you devote to the business, your management ability and the quality of the franchise support system.

We realize that, as much as we love this business, it might not be suitable for everyone.  The hours might be long. The work can be both physically and mentally demanding. It is the type of business that requires a level head, strong hands and a lot of heart.

If you share our passion for great bread and our commitment to running a first-class business, you may want to consider becoming a member of the Fresh bakeries. We would be happy to help you explore the possibilities.

COMPANY GROWTH

The Fresh Bakery concept has started in August 2013. We plan to open a pilot bakery in Alexandra, Johannesburg soon. Another bakery will open in Solwezi, Zambia early next year. Negotiations are under way to roll out hundreds of bakeries over the next 5 years. We project that our flour consumption figures, within the next two years, will be in excess of 1 500 tons of flour per month. This will make Fresh Bakeries a major role player in the baking industry.

PREMISES LOCATION top

Wherever people eat bread, Fresh Bakeries has reason for existence. In smaller rural centres the operational size of a Fresh bakery may divert from the general norm; however the nature of the main product suggests that a Fresh bakery be established in all small towns.

The Fresh business plan revolves around retail trade, therefore requiring high volume pedestrian traffic in the vicinity of the selected premises. Fresh Bakeries will work with a dedicated development division, managing information flow of possible premises through a network of top leasing agents, property administrators and development consortiums.

It must be pointed out that in order to establish a bakery in a certain area; Fresh Bakeries is dependent on the availability of suitable vacant premises in this area. Accordingly, Fresh Bakeries has no control over the time needed to find a suitable shop in that area. Therefore, if in the judgement of the prospective franchisee, it takes too long to find suitable premises, it is the responsibility of the prospective franchisee to inform Fresh Bakeries that he/she wishes to withdraw his/her application. Fresh will not be held responsible for any expenses or losses that the applicant may have incurred during the time that he/she waited for suitable premises to be found.

Fresh Bakeries will only link a prospective franchisee’s name to a specific city / town / area / site / premises after the prospective franchisee has paid part of his cash contribution (deposit). This amount will be determined by Fresh Bakeries from time to time.

TYPES OF OPERATIONS

During the development of the Fresh Bakery concept, the format has been limited to suit smaller bakeries to be set up in smaller rural towns and villages. Fresh will also accommodate larger concepts up to a capacity of 480 loaves per hour, depending on the market evaluation and feasibility study.

MANAGEMENT OF THE FRANCHISOR top

Floors van Zyl, a Professional Accountant, completed his articles with a medium size firm in 1992. He then started his own accounting practice, which he operated for 6 years till the end of 1998. He joined an insurance company in 1999 and returned to an audit firm in 2000. During this time he started to consult for Butterfield and joined them early in 2001 full-time. He was the financial director for 7 years and thereafter the managing director of the Butterfield Group for 5 years until July 2013. He started Fresh Bakeries in August 2013.

FRANCHISOR INVOLVEMENT

The most important duties of the franchisor can be described as:

  1. Upholding of the trade mark.
  2. Design of outlets to concept specification. We have compiled detailed specifications, in line with modern technology and trends, to meet all applicable requirements.
  3. Defining of and implementing the Fresh Bakery business system into the franchisee's operation.
  4. Conduct continual back-up support in all areas of operations and administration.
  5. Conduct negotiations with all relevant suppliers, with regard to bulk ordering.

ROYALTIES top

The franchisor charges a fixed monthly royalty of R2,500 per month.
No marketing royalty is charged.

THE FRANCHISE AGREEMENT

The franchise agreement serves as a tool to the franchisor to set, introduce and maintain standards in an effort to maximise the success of the concept and therefore every franchisee. The initial agreement is entered into for a period of five years. The franchisor does not have shares in the operation, but is entitled to 20% of the profit made, should the sale of any part of the business, its assets or shares, be affected. The sale of a franchise by an existing franchisee to a new franchisee is only valid after prior written approval of the new franchisee by the franchisor has been obtained. The new franchisee must undergo the full assessment process and must be approved and trained by the franchisor before the sale can be concluded.

ASSESSMENT top

All persons who apply to become Fresh franchisees will be assessed by Fresh in order to determine whether they are suited to become Fresh franchisees. Fresh Bakery trains one person per bakery and this person needs to pass the assessment in order to be admitted to the training course.

TRAINING

The franchisor maintains a fully equipped training facility for the theoretical training of all newly appointed franchisees, as well as for on-going refreshment courses. Training takes place before the opening of new bakeries, for a period of 2 weeks, (including a week’s practical training with opening) and includes all disciplines required to effectively manage a Fresh bakery. Such training is intended for the key personnel of a franchise (one person per bakery), while all other staff of the franchisee will be trained at the new bakery, prior to, and during the opening of the bakery.

The franchisee’s joining fee (see Annexure B) provides for the training of one person, the franchisee. Any other staff sent by the franchisee for training will have to be paid for by the franchisee. The training cost for additional staff to be trained is half the normal training fee. Payment must be made prior to training.

If a franchisee fails the training course, Fresh will not proceed with the franchise and the franchisee will have to pay for the training. The franchisee will also have to pay for the training if he should, after completion of the training, withdraw his application.  If the second person fails, half the training fee will be added to the set-up cost to provide for retraining of this person or for training a new trainee.

PROFITABILITY ESTIMATES top

The Profitability page (Annexure A) provides a basic projection of income and expenditure but will differ materially from bakery to bakery depending on its unique overhead structure. It must be emphasized that these figures are merely estimates and that no guarantees can be given by Fresh with regard to any projected profits.

GROSS PROFIT

The gross profit percentage is greatly influenced by the following factors:

A gross profit of 45% is a conservative estimate. Anything less indicates gross deviations from standards. In order to monitor operational and retail variances, which occur as a result of non-compliance with prescribed recipes and theft of raw materials and finished goods, a comprehensive computer program has been developed. The installation and use of a computer, to a specification so that it can accommodate the software, is therefore not negotiable.

OVERHEADS top
  
The following factors directly influence overhead costs: 

SET-UP COST

For details of set-up cost and the contribution required by the franchisee on the various bakery options, refer to Annexure B of the prospectus.  All figures stated on this annexure are subject to change without notice.

 CASH CONTRIBUTION top

The applicant’s cash contribution (deposit), as determined by Fresh Bakeries from time to time, must be paid in full, upfront. If the applicant should not pass the assessment or training course, or if suitable premises cannot be found for the applicant, his/her contribution will be paid back. Fresh Bakeries cannot start to develop the bakery before the franchisee’s full cash contribution and pay-out from the financier has not been received. Any losses caused by a delay in payment of this amount, will be for the account of the franchisee.

FINANCING

Although the franchisor does not get involved in the financing of bakeries, it will provide any information required by the financier. The whole finance application process is the responsibility of the Franchisee. Fresh will help the franchisee with assistance in the preparation and submission of his finance application, but cannot be held responsible for non-approval or late pay-out received from the financier.

Currently there are two options available in which the franchisor will assist the franchisee to acquire financing:-

Option 1

Option 2

GETTING STARTED top

How do I go about becoming involved in this exciting venture?

Step one is to complete the application form. Submit the application to the address stated. On receipt of the application, the franchisor will respond, via email or telephone. Once provisional approval of your application is obtained, a fee of          R1,500 will be payable to undergo the Fresh assessment test. This fee is non-refundable whether or not you pass the test. A meeting will only be arranged to introduce ourselves and to formally interview the applicant should your assessment results have a favourable outcome. The finer detail of the concept will also then be discussed. Discussions will include the location of your bakery, as well your assessment and training and application for a loan. There after the applicant has to pay at least R 30,000 which will form part of your total cash contribution before Fresh will endeavour to find a suitable site for the bakery. The remainder of the applicant’s deposit/cash contribution must be paid when a site is finalised.

Suitable premises can take months to source. The less you as a prospective franchisee are concerned over where in the country your Fresh bakery is going to be, the better your chances are of being accommodated sooner.

It is required of the franchisee to assist Fresh in identifying possible sites in the area(s) where he/she would like to establish a franchise. The franchisee will also be required to do local market research with regard to the area where his franchise will be located. Fresh will provide the guidelines in this regard.

SET-UP PROCEDURES

The duties of the franchisor include specification, design, costing, project management and quality control of the complete project on behalf of the franchisee. All construction disciplines are co-ordinated to such an extent that minimum time is spent on site. This enables opening the outlet as soon as possible after initial occupation. Training takes place during the set-up of the bakery, which lasts for two weeks prior to the opening of the bakery.

REGISTRERING A COMPANY top

Fresh will assist the applicant with the registration of a Company. If, after registration, the sale of the franchise should not go through, the applicant will bear the costs of registration and keep the registered Company.

MANAGEMENT OF THE BAKERY

The bakery must be managed on a full-time basis by the franchisee/shareholder. The person who thus manages the bakery on a full-time basis may not have any other employment after the establishment of the bakery.

It is important that the prospective franchisee take note of the fact that a Fresh Bakery franchise needs to be managed in a hands-on manner. In Fresh’s experience the main reason for some of the bakeries not succeeding is because of the franchisee’s absence from his bakery. If a prospective franchisee is not committed to full-time management of his bakery, he is advised not to proceed with this franchise.

 CONCLUDING top

Please take all the time you need to think and rethink this opportunity. The baking trade is competitive and physically demanding. However, consumer patterns are predictable and are not easily influenced by other socio- economic factors.

ANNEXURE AProfitability Estimates
ANNEXURE B:  Estimated Set-up Costs

Please complete an application form in order to progress with the possibility of becoming a successful Fresh Bakery franchisee.