Day Month Year ENTREPRENEURS WORKSHOP PRESENTATION BY THE INDUSTRIAL DEVELOPMENT CORPORATION Christine Schreuder : Head Franchising SBU 11 March 2008
INDUSTRIAL DEVELOPMENT CORPORATIONYour partner in development finance To be “the primary driving force of commercially sustainable industrial development and innovation to the benefit of South Africa and the rest of the African continent” Vision The IDC is a self-financing national development finance institution whose primary objectives are to contribute to the generation of balanced, sustainable economic growth in Africa and to the economic empowerment of the South African population, thereby promoting the economic prosperity of all citizens. The IDC achieves this by promoting entrepreneurship through the building of competitive industries and enterprises based on sound business principles. Mission Supporting industrial development capacity Objectives Promoting entrepreneurship Sustainable employment Growing sectoral diversity Regional equity Growing SME sector Industrialisation in the rest of Africa Broad-based black economic empowerment Outcomes Environmentally sustainable growth New entrepreneurs entering the economy Local beneficiation Growing export sector
FRANCHISING STRATEGIC BUSINESS UNIT OF THE IDC MISSION: To support emerging entrepreneurs with limited access to capital to acquire and manage a sustainable franchised business in South Africa and the rest of the African continent, & to assist new franchised concepts to expand & develop. PRODUCTS: The IDC’s Franchising SBU offers the following finance schemes to the industry: • Wholesale finance to franchisors who can administer the process of on-lending funds to individual franchisees • Directly to franchisees that require funding of at least R1 million.
Who may apply, funding criteria and terms? Individual franchisees applying directly to the IDC for finance: • Should have been selected as a franchisee by an established franchise brand and • Should have been allocated a site. Funding criteria and terms: • New outlets, refurbishments of existing outlets and acquisitions by BEE groups; • The business must reflect economic merit; • Minimum facility amount of R1 million; • Maximum 6 year term with repayments tailored to suit the cash flow of the business taking into account the start-up period; • Interest rates are prime related and determined based on credit risk and developmental impact; • Unencumbered cash contribution based on strength of the business model and acceptable to franchisor; • Operational involvement by franchisees.
KEY INFORMATION REQUIRED IN BUSINESS PLAN • Company and shareholder details, loan amount required, shareholders contribution (unencumbered cash); • Profile and description of franchise business including an analysis of current and projected market conditions; • Written confirmation from franchisor confirming approval as franchisee; • Financial forecast (Balance Sheet, Income Statement, Cash flow) including motivation for budgeted income and expenses; • Highlight critical risks and mitigating considerations for the franchise, market and the site; • Market demographics relevant to the franchise and motivation of the specific site; • Analysis of competitors; • Marketing strategy; • Description of franchisor support (upfront and ongoing training, aftercare and monitoring programme); • Copy of lease agreement or offer to lease; • Total capital layout required for the franchise; • Number of employees and CV’s of key staff; • For acquisitions / buy-ins: • Valuation and motivation of purchase price; • Details of shareholding to be purchased; • Detailed historical financial statements for at least2 years as well as management accounts (not older than 3 months).
KEY ISSUES AS A FRANCHISEE • Is franchising for me? (lifestyle) • In business for yourself but not by yourself • Source of income, good and bad • Marketing plan – Target market • Investment capital (own contribution / funding from financiers) • Royalty and marketing fees (what are you paying for?) • Franchise fee • Brand susceptible to action / inaction of all franchisees (touch one, touch all) • Approach of the franchisor (flexibility, approachability, adaptability) • Change of ownership in franchisor • Site selection / availability • Legislation (consumer protection bill, competition commission issues, minimum wages) • Allocation of new sites (encroaching on “your” territory) • Franchise agreement (interpretation and protection)
WHAT TO LOOK FOR IN A FRANCHISOR • Good strong brand and stage of growth • Focused committed franchisor • Not growing too fast, or too slowly • Protection of brand – even when it means acting against errant franchisees • Track record of performance • Quality of support • Price – do you get what you are paying for • Remember the 3 most important variables: • Site – no feet means no profit • Brand – what does it mean to your customers • Management – even a strong brand in a good site wont work without appropriate committed management in the operation
Day Month Year QUESTIONS? THANK YOU! The Industrial Development Corporation 19 Fredman Drive, Sandown PO Box 784055, Sandton, 2146 South Africa Telephone (011) 269 3000 Facsimile (011) 269 2116 E-mail email@example.com Website: www.idc.co.za