Franchise Trade Mission enters the Urban Safari

 

 

Our third day of the trade mission was billed as the Urban Safari, site visits to retail outlets in surrounding areas of Johannesburg.  The group was joined by Mark Ruffley and Danisa Shetlele of the Pareto Group, which is one of South Africa’s premier shopping center investors and a leading retail property industry player.  We would be visiting  Southgate Mall in Soweto; Cresta Shopping Centre in Randburg and Sandton City Shopping Centre.  Mark and Danisa wanted to show the diversity of the malls in the areas which serve the diverse communities in Johannesburg.

Before we arrived at the first stop in Soweto, our hosts offered a surprise stop at a truly significant landmark in South Africa.

The Mandela House, at 8115 Orlando West in Soweto, a modest four room home was Nelson Mandela’s first home which he and his first wife Evelyn moved into in 1946. After he and his first wife were divorced, he was joined in the house by his second wife Winnie.  The home serves as a visitor attraction to tell the story of Former President Nelson Mandela and what he stands for: human rights, democracy, reconciliation, mutual respect and tolerance among the people of South Africa.

I was struck by one sign on the wall of the home that stated:

“In judging our progress as individuals, we tend to concentrate on external factors such as one’s social position, influence and popularity, wealth and standard of education…but internal factors may be even more crucial in assessing one’s development as a human being: humility, purity, generosity, absence of vanity, readiness to serve your fellow men – qualities within the reach of every human soul.” Nelson Mandela in a letter to Winnie Madikizela Mandela, 1977

Nelson’s home was a truly moving experience and captures the soul of a life committed to helping others and equality – a place not to miss when you are in South Africa.

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We then proceeded to Southgate Mall to see the first of three malls for the day.  Southgate was built in 1990 and has 170 stores and has served the Southern Johannesburg communities for more than 20 years.  It represents the lower of the demographic scale for South African customers with 61 percent falling within LSM four-ten categories.

Cresta was the next property the group toured.  It was built in 1976 and currently has 270 stores.  They are currently developing a new food court which will greatly expand the number of food choices the centre has to offer.  75 percent of the shoppers fall within the LSM four-ten+ categories.

Finally, Sandton City was the last stop on the tour, originally opened in 1973 and includes five levels and 328 stores.  This centre rivals the finest malls in the world for luxury goods and services with top fashion retailers and a full complement of food and beverage available.  This center should be on the list to check out for any American franchisors wanting to build market share at the top of the market in South Africa.

The day ended with a group of the delegates heading to a local Lion Park to experience what many who come to South Africa crave-lions, giraffes, leopards and baby lion cubs that the delegates had the opportunity pet (before they get too big!).

Next Stop Nairobi, Kenya!

Franchise Trade Mission heads into second day in South Africa

 

 

The U.S. Trade Mission to Sub-Saharan Africa began day two in Johannesburg, South Africa with the delegates ready for another action packed day.  After a promising day of one-on-one meetings with prospective candidates, the delegates began the day with a legal update from Eugene Honey, partner with Adams & Adams on the legal aspects of operating a franchise in South Africa.  Mr. Honey described Intellectual Property and trademarks  are similar to that of the U.S. The time frame tends to be about two years between application and the granting of the marks however the company marks are protected during that time. He described copyrights as slightly tricky in that the author of any work, for instance an ad agency writing copy or designing ads is the owner of the copy unless you get it in writing ahead of time that you would own the work at completion.  He commented that all franchise agreements must contain a ten day “cooling off” period where a franchisee can cancel the agreement and receive a full refund.  Agreements should also contain all authorized goods and services, the obligations of the franchisor and franchisee, description of the system, payments to the franchisor,  territorial rights, details of IP, training and duration of the contract.

He offered that master agreements tend to be ten years while single unit agreements tend to be five.  Also included should be details on the Marketing fund and how the funds are collected, handled and dispersed.  Mr. Honey reported that the Disclosure Document must be presented 14 days prior to signing any agreement.  It must also include the number of units, net profit and projections of sales, income and profits.  On the topic of Exchange Control, he reported that an application must be filed with the reserve bank which generally takes two months for a response and must be approved before you can receive any upfront fees.

The group then began their second day of one-on-one business meetings with their pre-screened candidates.

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The afternoon was filled with a session on Consumer Behavior and Urban Retail Profiles for South Africa. Dr. Dirk Prinslo, CEO of Urban Studies and Damian Hattingh, and consultant with McKinsey South Africa, provided some context on what lay ahead for the franchisors from a marketing and customer targeting standpoint.

Dirk reported that as of 2011, South Africa had a population of 51,700,000 with a breakdown of 80 percent – Black African; 9 percent – Colored; 8.5 percent – White; 2.5 percent – Indian/ Asian.

He described that the real opportunity is in the cities beginning with Johannesburg and then Durban and Cape Town.  He also described the migration of the populations to the cities.

Dirk explained that using the LSM – Living Standard Measurement, the growth was in the segment that captures the four to seven LSM which has more than four million people and growing yearly.  He also described the shopping center market as well developed in South Africa and that there are many options for franchisors and their master franchisees to locate in well performing centers for their intended markets.  He reported on the increase in car ownership for the general population which is increasing mobility and providing solid growth in the middle market for goods and services.  He also mentioned a number of international retailers entering the market including Zara and Top Shop which is proving that the people are interested in international brands. He also cautioned the delegates to understand the market and remember that their brands are currently unknown in the market and to match their product to the right centers for maximum market share.  He also stressed that identifying the right locations in the malls is key and to be prepared for the local competition that has been in the market and is very savvy.

Mr. Hattingh explained that the growth in Africa will come from consumer growth and not from resources as has been in the past.  He reported that real GDP growth in Africa is at 5.1 percent and is the second fastest in the world behind Asia.  He said the South Africa and Nigeria stand out as the two highest in consumption compared to the rest of Africa.

Damian also described Sub Saharan Africa as a young and optimistic population with an urban explosion of population – 40- percent growth in the cities.  These consumers are also looking for quality at the right price, highly digital savvy and with modern tastes.

He suggested that the keys to success in Sub Saharan Africa include:

Focus on the urban areas; anticipate explosive growth; deliver branded quality products; create a strong value proposition; understand changing media habits; understand alternative distribution channels; embrace the youth movement; and understand the art of hiring young talent.

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As the day wrapped up, the delegates re-united with the U.S. Commercial Service, IFA and Franchise Times for a press conference that brought more than ten different media personnel to the press conference to learn about the brands and to ask questions about their plans to launch their brands in South Africa.  Brent Omdahl led the press conference and introduced Scott Lehr from IFA and all of the franchisors.  The Wall Street Journal and The Global Post were among the media that attended and interviewed the franchisors after the event.

The evening ended with a fabulous steak dinner at a local favorite – Butcher’s Grill in Johannesburg.

 

AFC Enterprises’ Cheryl Bachelder at a Glance

Some of the best experience executives can gain comes as a result of them going through and coming out of difficult, but transitional situations.  Visionary leaders include those who are willing to share their experiences to help others advance. Bachelder, C. popeyes_5218 - may 2012

Cheryl A. Bachelder, CEO of AFC Enterprises, Inc., franchisor of Popeyes Louisiana Kitchen, provides her insights on achieving system cohesion in the November issue of IFA’s Franchising World magazine.  Bachelder, who will serve as a keynote speaker during the association’s Annual Convention in New Orleans, Feb. 22-25, 2014, will address her plans for the brand’s future and getting there.

Here are a few excerpts from the interview.

  • Revitalizing Popeyes Louisiana Kitchen

“If I had to attribute it to one thing, I would attribute it to our revitalization of our relationship with franchisees.”  Bachelder added that “It was my belief that the fundamental foundation of franchising is to have a strong, healthy and aligned relationship with the franchisee.”

  • Management Style

“I would describe my management style or my management philosophy as:   my job is to serve well those that are entrusted into my care.  And serving people well is understanding what helps them to be effective and successful and reach their goals.”

  • Leadership

“The most significant role of the leader is to seek out and understand the strengths and talents of team members and align them so that collectively, when you bring it all together, the capabilities are there for the organization to succeed.

“As a leader, whether you’re leading a restaurant, a group of restaurants or you’re a leader in a franchisor organization, I really want to encourage leaders to understand their role as being stewards of the next generation of leaders.  In our business, we essentially develop leaders for a living.”

Look for the complete interview in the upcoming November Franchising World magazine and find details on the IFA Annual Convention now. Continue reading

U.S. Trade Mission to Sub-Saharan Africa Kicks off in Johannesburg

 

 

The U.S. Trade Mission to Sub-Saharan Africa kicked off Sept. 26  in Johannesburg, South Africa.  With stops here, Nairobi, Kenya and Lagos and  Nigeria over the next week, the delegates were excited and anxious to get to work understanding the markets and meeting qualified prospects.

The trade mission, which is produced by the U.S. Commercial Service and is sponsored by the International Franchise Association and Franchise Times magazine, has become a true partnership with all the parties doing their part to create and deliver international development services to IFA franchisor members.

Participating franchisors on the mission include CKE Restaurants represented by Geoff Spear, vice president of International Relations; Curves represented by Clive Robinson; International Dairy Queen represented by Amir Kremer; Focus Brands Inc. which include Carvel, Cinnabon, Schlotzsky’s, Moe’s Southwest Grill and Auntie Anne’s Pretzels represented by Scott Chorna, director, International New Business Development; Global Franchise Group which include Great American Cookies, MaggieMoos, Marble Slab Creamery and Pretzelmaker represented by John Barber, chief development officer and John Peddar, executive director, International Business Development; Hertz Equipment Rental represented by David Riker, CFE, director, Global Franchise Development; Johnny Rockets represented by Duane Messerschmidt, director, International Sales and Support; Tutor Doctor represented by Frank Milner, CFE, CEO; and Wing Zone represented by Hair Parra, vice president, International Development.

The Global Franchising Team Leader for the U.S. Commercial Service, Jennifer Loffredo is responsible for overall coordination of the mission for the three stops.  As sponsors of the event, both the IFA, represented by Scott Lehr, senior vice president, U.S. and International Development and Franchise Times represented by Nancy Weingartner, executive editor, provided initial marketing for the mission and support throughout the mission.

As with all trade missions, the goals are to help the participating franchisors understand the markets visited from a legal, demographic, real estate and development perspective but most importantly to get them face to face with qualified master and area development prospects for one-on-one discussions.

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Deputy Senior Commercial Officer with the U.S. Commercial Service South Africa, Brent Omdahl welcomed the group to Johannesburg and introduced his team, Felicity Nagel, commercial specialist and Jean Claude Gelle who had been busy the last month setting up the qualified visits for the delegates. The country team briefing was led by Deputy Chief of the Mission, Virginia Palmer and Larry Harris, Commercial Counselor and Cory Pickelsimer, senior agriculture attaché.

South Africa, known by many as the gateway to Sub-Saharan Africa has strong financial markets and solid infrastructure which makes it an idea country for U.S. Franchisors to launch their African growth strategy.  Seven of the 10 fastest growing cities in the world are in Africa.  South Africa ranks 40th in the “ease of doing business” ranking, which is well above most of its neighbors.  More than 400 U.S. companies are in South Africa and the two countries have $17 billion in bilateral trade.  Top industries in South Africa include energy, healthcare, agriculture, technology, transportation and retail. Wal-Mart recently entered the market by purchasing a 51 percent interest in South Africa’s MassMart and the investment appears to be a paying off with strong growth. The unemployment rate is 25 percent although it is higher in some of the rural and poorer areas.

Some of the challenges for American companies in South Africa include finding skilled workers and the effects of organized labor on the cost of running a business.  While supply chain challenges can still occur, South Africa is much more advanced than its northern neighbors in this area. For food franchisors, beef & poultry can generally be sourced in South Africa. Because of high duties on imported U.S. beef and poultry, it is advised to purchase locally. Sauces and condiments can also be sourced locally but duties are a more reasonable 10 percent from the U.S.

The general migration of the population in South Africa is heading to the large cities of Johannesburg, Durban and Cape Town.  In fact it is estimated that more than 40 percent of the country’s GDP comes from the Johannesburg area which suggests that any entry into South Africa should begin in Johannesburg where the middle class is growing substantially.

Derek Smith, president of the Franchise Association of South Africa then provided the group with some statistics of growth of the market for franchising. He reported that franchising now has a legislated definition within the Consumer Protection Act and that FASA has drafted a code to submit to the National Consumer Commission and is offering to fill the role of Alternative Dispute Resolution for any complaints that may arise from the franchising sector. Mr. Smith also shared that franchising accounts for 9.7 percent of the GDP in South Africa and involves 17 different industries; 300,000 are employed directly in franchising with more than 30,000 SME’s in franchising. It was interesting to learn that of the 600 franchisors in South Africa, 90 percentare local.  The largest category within the sector is the food and restaurant category which represents 22 percent of the total. Derek reported that 50 percent of their franchisor members had been in business for more than 12 years and 75 percent at least six years. He described a few of the challenges ahead for franchising in South Africa, which include finding the right franchisee that is qualified both financially and with the skills to grow the business; increased costs such as labor, utilities and fuel. It still appears that FASA’s members are optimistic – 88 percent expect growth this next year.  He described a new jobs fund that the government is rolling out which could create 10,000 new jobs per year over the next nine years. With this fundmwhich will assist with training, mentorship and coaching, FASA hopes to create an additional 150-200 new franchised outlets which will create 2,000 new jobs in the next three years.

Of course the primary purpose of the Trade Mission is for the franchisors to meet with qualified master and areas development prospects previously set by the USCS staff.  The group quickly ran off to their scheduled appointments for the afternoon.

Later in the day the delegates reconvened for a panel discussion of franchise best practices.  Speakers included Peter Moyanga, McDonald’s Franchisee with eight locations; Eric Parker, CEO of consulting firm Franchising Plus and co-founder of Nandos and Salim Shermohammed, CEO of Impact Investments, a multi-unit Franchisee in the U.S. and now partner in new food brand in South Africa.  Mr. Parker described the local franchise market as robust and dominated by some very strong players such as Famous Brands whose brands include Debonairs Pizza and Steers Burgers and Mug & Bean; Nandos; Chicken Lickin and Wimpy.  He also cautioned the U.S. franchisors on finding the right partner and being willing to adapt to local flavors.  He mentioned a number of U.S. franchisors that have entered the market and left. The speakers discussed an important measurement – LSM or Living Standard Measurement and stressed that U.S. Franchisors need to know where their market is and target it.  They reported that the upper end of the LSM – six and above is already well serviced and that the real opportunity in South Africa is in the 4-6 range, keeping in mind that the average monthly salary is 2,500 rand (approximately $250 per month)

The evening was spent at the U.S. Commercial Counselor’s residence for a reception and dinner where the delegates met with other government and commercial contacts wrapping a very full first day in Johannesburg.

Tutor Doctor to Open as Franchising Campaign Drives Growth in Tunisia

Sousse Tunisia

This spring, the State Department, OPIC and the Middle East Investment Initiative teamed with IFA to support the growth of franchising in Tunisia.  This effort has born fruit with Tutor Doctor, the tutoring franchise that provides individualized home-based instruction to all ages, announcing the scheduled opening of its first North African location in October.

The signed agreement is a result of a Tutor Doctor’s visit to Tunisia in March 2013 for the Tunis MedFranchise Expo 2013, supported by the International Franchise Association and the Middle East Investment Initiative.

The Arab Spring began in Tunisia.  To support the growth of democracy, the US Department of State established a “partnership” with Tunisia to raise the level of economic development there.  When the State Department asked the Tunisians what they needed, they responded “Franchising”.  “As a market that is rapidly creating new opportunities for entrepreneurship, Tunisia is a great growth market for our brand,” said Rogelio Martinez, Vice President of International Franchise Development for Tutor Doctor. “This is the place of birth of the Arab Spring Revolution; this is a country where people want change. One of the best ways to create change is to give people opportunities to have better education to help them aspire more in life. This is what Tutor Doctor is all about.”

The Tunisian initiative is just one example of how IFA helps its members access international opportunities.  IFA offers a variety of resources including international educational programming at IFA’s Convention and the International Franchise Expo as well as trade missions stops in Egypt, Jordan, Qatar, the United Arab Emirates, South Africa, Kenya, Nigeria and China in 2013 alone.  In October, IFA will host its members on a study tour of Australia in collaboration with the Franchise Council of Australia.

Leading the expansion in North Africa are franchise owners, and brother and sister, Asma Belgaied Hassine and Tahar Belgaied Hassine. Prior to investing in a Tutor Doctor franchise, Asma worked as a team manager for Lyxor Asset Management, a subsidiary of Société Générale, the second largest French bank. She studied in Tunisia until the age of 18 and then moved to France where she received a PhD in Applied Mathematics and a master’s degree in Applied Mathematics, both from Ecole Centrale Paris. Her brother, Tahar, is a field force manager for a pharmaceutical company in Tunis.  He received his MD from the MD school of medicine of Tunis and he is expecting to receive his MBA in 2014 from the Université de Quebec à Montréal.  “We are eager to begin launching operations come October with the opening of Asma and Tahar’s Tutor Doctor location in Tunisia,” said Frank Milner, President of Tutor Doctor. “Tunisia is an untapped franchise market and now, with the help of the Middle East Investment Initiative, more qualified candidates will be able to pursue their dreams of becoming a business owner.”

Tutor Doctor will devote still more attention to growth in emerging African markets, exploring Kenya, Nigeria and South Africa as part of the upcoming Franchise Trade Mission co-sponsored by the IFA.   Tutor Doctor plans to open at least two more offices in Africa within the next three months.

“Tunisia, the Pearl of North Africa, has always been in the cross-roads of different civilizations and is the birth-land of science and literature,” said Asma Belgaied Hassine. “Nowadays, in this emerging country, knowledge continues to be the key to the future. We strongly believe that giving the best tutoring support for the best value is what we need in Tunisia and Tutor Doctor is giving us this opportunity. When we first met Rogelio from Tutor Doctor, we were charmed by the idea of opening our own Tutor Doctor franchise and we knew that it was exactly what we were looking for.”

Tutor Doctor’s presence will contribute to the economic growth and educational opportunity essential to the success of Tunisia’s political transition.

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