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Welcome to Bizland News - Edition 16
February 2003

Where has January gone? It seems as if the year has just begun, and already we are into February. Time sure does fly when you're hard at work! I know I usually encourage all of you to focus hard and take control, but I want to take this month's column to remind you all to remember to relax once in a while! The inspiration for this? Well, I have (almost) forgotten what my husband looks like because I think he has forgotten how to relax! (unlike Oscar on the right, who certainly knows how to take a load off...). Jokes aside, while work does take up a large portion of our lives, particularly those running their own businesses, it is also important to make time to take time - for yourself. Be it a hobby or just time to relax with your family - your body and spirit needs time to rest itself, and at the end of the day you are not going to be a help to
anyone if you collapse in a heap from exhaustion.

People are like elastic bands - everybody has a limit as to how far they can be stretched before they either snap, or end up back where they started. And of course the thinner we are stretched, the weaker we become! Good grief I'm becoming deep in my old age! Right, now before I become too philosophical on you, let me go make that appointment at the spa... (by the way since writing this my hubby and I started an art class together - watch out Picasso...)

Feature Article: The Lure versus the Reality of Franchising
by Gavin Mc Alpine, Founder, Enfranchise

Over the years franchising has been aggressively promoted as a less risky way to go into business instead of starting your own independent business. This is supported by statistical figures of low failure rates in franchising and high failure rates in independent businesses. This article will briefly discuss the lure this creates for potential franchisees. It will then outline our view of the reality and risks of franchising. Lastly, some recommendations are made for anybody interested in franchising.

Before we kick off, it should be mentioned that the writer of this article is an ex-franchisee and academically qualified. He is also the founder of EnFranchise (the word enfranchise means to empower), a company focused on making franchisees stronger, better and more profitable. Our view is that franchising implemented properly could be a significant wealth generator. Franchising poorly implemented exposes franchisees to potential abuse and losses.

Most people interested in entrepreneurship must have frequently heard a statement that goes something like this:

95% of franchisees succeed while 80% of independent businesses fail

What is the problem with this statement? The problem is that people are lulled into a false sense of security because franchising, and not a particular franchise, is promoted as less risky. The above statistic may be true for large blue chip franchises (we call them Blueies). But can it be applicable for newly established (under five years) franchises (we call them Greenies)?

Lets have a look at the statistics used to promote franchising. In a book written by Robert Purvin, chairman of the Board of Trustees of the American Association of Franchisees and Dealers, it was found (in the US) that the claim "95% of all franchise businesses are still in business after five years" was attributed to a US Department of Commerce study called "Franchising in the US economy 1981-1983". Recent studies in the US have, however, demonstrated that franchise failure rates are similar to, or worse than, failure rates of all business start-ups. One of the problems found with older research findings was that only closed franchise stores were counted as failures. What this means is that if a store is transferred to a new franchisee, even if the old franchisee has lost everything, the franchise store is not considered a failure. So, because the original statistics exist, they are used to promote franchising systems.

These statistics are then supported by the success of the Blueies such as McDonald's, Wimpy, KFC etc. These franchises cost a fortune and generate a large portion of the turnover of all franchise systems. They are sometimes in the hands of a few, for example KFC has over 350 stores but only about 80 franchisees. McDonald's in South Africa only has 37 franchisees from 103 stores, the rest are company owned.

The Greenies then use this perception of franchising to entice potential franchisees to invest in their franchise system by underplaying the business risk and over stating the potential of their business. Greenies make up the majority of the franchise systems (they are affordable to many) but generate a small portion of the total revenue of franchise businesses. You will also find that the majority of Blueies are registered with the Franchise Association of Southern Africa (FASA) while many Greenies are not registered members of FASA. On this point, out of about 450 franchise systems in South Africa, less than 150 are registered members of FASA. But let us not think there is no risk with Blueies.

According to recent articles in the media, McDonald's closed 15 of their 103 outlets in South Africa. This is 15% of their total stores. If the 15 closures where franchise stores then this is a 41% failure rate (calculated from figures mentioned earlier). McDonald's has been quiet about whether the stores closed were franchised stores. If McDonald's can experience failures so can many franchise systems, especially Greenies who are more vulnerable to risk and failure than Blueies.

The point we are making is that potential franchisees should identify what is marketing hype and what is reality. Once you have done this you should satisfy yourself that the chosen franchise is a business whereby you can use your skills and expertise to generate wealth. Don't just go into any franchise because it is the newest and hottest thing around.

Be realistic about - the potential of the franchise, the risk of the franchise and the returns that could potentially be achieved. Be conservative when estimating your potential sales figures and less conservative when calculating your expenses.

Visit www.enfranchise.co.za. Gavin Mc Alpine can be contacted at (011) 477 8503 or gavin@enfranchise.co.za.

In Brief: Why Consider Franchising?
by Sally Hetherington, Bizland Webmaster

Since the 1980's, franchising has become more and more popular. It offers a good all round package for someone looking for their own business, without you having to start from scratch. Consider the advantages of purchasing a franchise… Click here to read on. (n.b. remember to do your homework first!)

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EnFranchise.co.za focuses on "Stronger, better and more profitable Franchisees!" If you are a potential or existing franchisee and are interested in reducing your risk or improving your long-term returns of your franchise business, consider becoming a member. Click here for more information.

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Tax Seminar - New Date - Our Tax Seminar has been moved to the 19th of February from 5 - 7 pm in Cape Town, at R350 per delegate. Receive important information about the latest amendments to tax laws, understand Capital Gains Tax, learn how to set up your payroll for tax efficiency and discuss your concerns with the experts. Not to be missed! For more information click here!

Budget Overview - Our March Seminar will be focussing on the new budget. Watch your inbox for more info!

Free Software Download - Tired of using hundreds of search engines to get a simple answer? Try WebFerret to combine one search over a number of popular search engines, eliminating unsuitable material through the use of filters. Click to download.

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An amazing product that allows everyone in your company to send and receive faxes and SMS's from their own PC's:

      • Compatible with your standard email package
      • No more upfront costs
      • Uses least cost routing making it more affordable than conventional faxes
      • No human intervention - your confidential information remains just that - confidential
      • Save on telephone, paper and maintenance costs

Can you afford not to use BizFax? For more information email products@bizland.co.za.

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Rich Dad's Prophecy
Your retirement nest egg is not what it's cracked up to be. The author of the phenomenally popular Rich Dad series lays another golden egg. If you think you personal saving and retirement fund will cover you in the years to come... get ready for a major wake-up call! An insightful, accessible, and timely book about the imminent crash of retirement funds and the best way to safeguard your wealth, and prosper from events to come.
Click here for more Tep Ten books

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This month's Success Story: Janice Botha of Verjuice - A Juicy Enterprise

Janice Botha is a woman of many talents, with the entrepreneurial spirit breathing through her every pore. Even at the beginning her life was the stuff of dreams. Armed only with a Secretarial Diploma, she joined the fast paced exciting world of film, a career which has held her captive for the past 24 years, the last 20 of which she has been running her own commercials film production companies, firstly in Johannesburg and for the past 14 years, Coastal Connection Producers, the first film production service
in Cape Town to service international clients coming to SA to produce commercials.

It was Janice's love of food, however, that led her to her current venture. Being an enthusiastic amateur cook, she designed, built and opened her own restaurant in Scarborough, Cobbs at the Cape, in which she remains the majority shareholder. Three years ago Janice extended this passion to wine, and with the encouragement of her wine-writer friend, Melvyn Minnaar, she began the Cape Wine Academy courses and is currently completing her final Diploma Course. It was during this time that Janice received a cookbook as a gift, written by Maggie Beer and Stephanie Alexander, two renowned Australian restaurateurs. It was in her research for her cook books that Maggie Beer rediscovered "the original acid", used in Medieval times, as a way of adding zest to cooking, before the introduction of lemons and vinegar. Maggie then utilised her resources and through many years of experimentation, she eventually reproduced the original concept, and so Verjuice was reborn.

Janice's interest was piqued, and she dreamt of introducing Verjuice to the South African palette. She explained that Verjuice is the unfermented juice pressed from unripe noble wine grape varieties, used primarily as a culinary condiment as an alternative to lemon juice, vinegar or wine in cooking. However, it is delicious as a refreshing drink with crushed ice or soda water. Janice explains: "Verjuice contains the same fruit acid-base as wine, and so will not distort the essence of wines served with a meal to which Verjuice has been added, unlike lemon or vinegar."

Janice went on to research the production process of Verjuice, with the help of Australian wine makers who were already producing their own brands of Verjuice. Armed with the data, she approached a well-known Paarl wine-farmer and asked whether he would produce it: "Fortuitously, his fiancé is one of my best friends, so she briefly became my partner in the venture (she has since resigned from the company due to heavy work and personal commitments) which helped to twist his arm. He and his winemaker produced a superb Verjuice from predominantly Pinotage grapes harvested on his farm." Verjuice was officially launched at a dinner held by the International Food and Wine Association in March 2002, and the 2003 vintage is being produced at a wine co-op in Stellenbosch.

Along with her experience in the commercials industry, Janice also asked her wine-writer Melvyn Minnaar to write the initial media releases, which was positively received by food and wine magazines. She also did a lot of marketing herself, visiting many deli's, tasting rooms, farm stalls and restaurants to introduce her product On marketing she says: "There's no magic formula - just hard work and lots of talking. I've become a real motor-mouth about Verjuice."

As part of these marketing efforts, Janice presented Woolworths with a couple of Australian samples, who then agreed to sell Verjuice in 5 of their flagship stores. However, based on the exciting media response, the product was launched in 65 stores around the country! Top restaurants are now also using Verjuice and even itemising it on their menus: "I got a great kick out of seeing it on the 2002 Veritas Awards banquet menu," says Janice.

The greatest achievement, however, says Janice, is the difference Verjuice has made to food-lovers around the country: "The emails and letters that I receive from excited housewives and househusbands are immensely gratifying and just confirm what I knew when I first discovered it as an ingredient - that Verjuice makes a remarkable difference to the taste of food."

Things weren't always easy for Janice, however, as harvesting was is an expensive process and requires extra labour to catch and box the unripe grapes, which are usually allowed to fall to the ground and rot. The natural sugar in the fruit also calls for the fermentation process to begin, so it takes a great deal of skill to prevent this from happening. Janice has also had plans to use screw-caps for the closure of the bottle, but unfortunately, being a manual capping process which limited the amount of bottles closed in a day, Janice was forced to continue using the cork and capsule as the closure for her 2003 harvest.

Janice offers the following advice to aspiring entrepreneurs: Firstly learn good computer skills so that you know how to do everything yourself. Truly believe in what you are wanting to do, be passionate about it and be prepared to work 16 - 18 hour days and weekends. And remember: Success is a system, not a secret!

Janice's love of food and wine extends to her home life in Scarborough, where she loves entertaining and spending time with friends and family. She also enjoys reading, watching movies and gardening, as well as attending a wine tasting group once a week, and keeps abreast of news events by listening to the radio.

Janice has high hopes for the future of Verjuice, believing that it has unlimited potential, having completely sold out the 2002 vintage and trebled production of the 2003 vintage to accommodate the export market. London, Hong Kong Europe and the Arab Emirates have shown great interest and Janice intends pursuing these markets aggressively. "I predict that within the next couple of years, no self-respecting kitchen - in the home or restaurant - will be without a bottle of Verjuice."

Click here to visit Verjuice's website.

Let us know if there is a success story that you want us to investigate, or if you have a story to share with us. Send your contributions or suggestions to success@bizland.co.za - we look forward to hearing from you.

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"Do what you can, with what you have, where you are" - Theodore Roosevelt

Please send us your comments or questions to sallyh@bizland.co.za or post them on our Discussion Board.

Until next time...

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