Franchise – The Process

The Process

Buying a franchise is a serious undertaking, but compared to the inherent risks in starting a business concept from scratch it is far less risky; statistics show that the majority of small businesses will fail where there is no previous experience. Here again, the strength of a Wiesenhof Franchise, and its sister brand Dulce Café, when compared to a lot of other similar Franchises is that Wiesenhof Cofffees has been Franchising for over 15 years. It attempts to eliminate all potential outlet failures using their built in checks; in the site selection, the rental negotiation, the business viability evaluation and the design; and again in the franchisee recruitment, and in their training and support procedures, as described more expansively under key success factors. The Franchise although well established, is strong and growing with the recent major acquistion in Dulce Café, and has last year had a Corporate ID upgrade in decor , uniforms , menu design etc. The franchise is also fully accredited with several major SA banks, and in the process of extending this to all the major banks, and other recognised Franchise financing institutions

Wiesenhof Coffees success today is due to a rebuilding phase, a getting back to basics after the economic downturn, and in focusing on the core business of good coffee, and meeting the customers requirements.300Sq01

Wiesenhof achieves these results through an uncompromising belief in service and consistent standards in all facets of the business.

One of the cornerstones of Wiesenhofs success is the amount of focused effort placed on recruiting, screening, selecting and training of franchisees. However no matter how well one selects a Franchisee, and trains that individual and staff, if the business is not financially viable from basics such as poor location, low footcount, wrong clientele, high rentals and escalators etc then its not ever going to be a good and profitable investment.

Wiesenhof is very successful in avoiding opening Franchises in these non viable locations through its emphasis on business viability studies, enabling Wiesenhof to avoid fighting fires, and rather concentrate on its core activities, and hence this results in an increase in the Franchisees net profit margin.

Another one of Wiesenhof’s success strategies, is to ‘tailor make’ each store to its environment, the Wiesenhof Café with its extensive South African menu is aimed at the high-volume sites, and the smaller Wiesenhof refill unit aimed at more niche environments. Wiesenhof currently operates sites in a wide variety of markets such as Malls, Airports, Corporate Head Offices, Large retailers etc.

Certain Wiesenhof’s have a high retail or Deli component, some have liquor licences, but others not. Many of our stores have a take away menu and delivery option, we also have Platter menu’s for outside Function catering, and evening menu’s for increasing evening turnovers.300Sq02

The ideal franchisee is a strong individual with an entrepreneurial, outgoing nature and a burning desire to own and grow their own successful business. This owner / operator must be hands on, and have the ability to work long hours, manage others through good communication skills and respect. An eye for detail and a strong service orientation is a positive factor to increase turnover and profits, whilst previous direct experience in the industry is not a necessity.

The ideal Franchisee should have a MINIMUM of R800 000 in unencumbered ( no interest payable ) cash funds, and the ability to borrow at least another R900 000, collateral is usually required against this. Whilst there are financial means of borrowing a greater percentage of the total restaurant set up cost, this option is evaluated carefully by ourselves, as the repayment costs of borrowing are often too onerous for cash flow, and acquiring a partner with funds or a family backer, a better option.

Repayments on borrowings of over R1.2 million or higher are invariably too much to allow for a Wiesenhof business to succeed as a good ROI , and it is almost certain that Wiesenhof would not look at a Franchisee with such high gearing , unless there was high collateral backing with assets that one would prefer not to liquidate. This person must also be able to work within the systems and processes imposed by the franchisor.

In most cases , the franchisee must be prepared to manage and personally run the business for at least five days a week in the first year, and preferably for the duration of the lease. The following is a summary of the pertinent clauses of the Franchise Agreement. Please read the Franchise Agreement in its entirety and get the assistance of an attorney.

The Agreement ( usually) lasts for five years with an option to renew for a further five years.The agreement does not provide you with an exclusive trading area but does provide you with the right of first refusal for another Wiesenhof outlet within a three-kilometer radius of your business. This will only be initiated if circumstances demand and require the establishment of a new unit within the trading area.

  1. a fixed percentage royalty fee will be entered into upon joining the Wiesenhof group which will be based on the turnover of the store. This will be fixed for a 12 month period and increase 10% on an annual basis.
  2. You are responsible for providing monthly financial reports to the franchisor.
  3. The franchised business must be operated under the direct supervision of the franchisee, except at the Franchisers discretion.
  4. The franchised outlet will be upgraded at regular intervals when the need therefore is determined by the franchisor (typically a three-year facelift and a five-year revamp) and at the cost of the franchisee.
  5. The Operations Manual details the specifications, standards and operations procedure that the franchisee must follow.
  6. The franchisee must comply with the Wiesenhof standards and menu.
  7. The Operations Manual may be changed from time to time at the discretion of the franchisor.
  8. Trade secrets provided by Wiesenhof may not be divulged or utilised in other businesses.
  9. The franchisor provides the initial training and ongoing support to the franchisee.
  10. Use of Wiesenhof’s trademarks and logos is limited.

In the Business Viability & Verification Process you will be assisted with the following important factors:

  1. Sourcing and securing premises for the prospective franchisee
  2. Financial modelling
  3. Cash flow modelling
  4. Developing start-up requirements, schedules and plan
  5. Business Plan formatting, compilation and presentation
  6. Finance requirement schedules, facilitation, planning and documentation compilation
  7. Assistance with ‘Offer to Lease’, lease negotiation and ensuring reasonable leases
  8. Tenant installation requirements
  9. Independent Market research, Site analysis and verification of suitability
  10. ‘Start-up’ project management
  11. Business structuring and/or partnership formatting

One of the outcomes of the Business Viability & Verification Process is the franchisor’s assistance with the production of your detailed business plan. This business plan fulfills a number of roles, namely:

  1. The business plan answers your questions as to whether or not you are suited to this franchise.
  2. It answers your questions regarding the potential financial viability of your intended franchise.
  3. It answers the franchisor’s questions as to whether or not you will succeed as a Wiesenhof franchisee and therefore whether or not he should proceed by entering into a Franchise Agreement with you.
  4. The business plan is used as part of the presentation to the bank for the bank’s final approval on loan finance for the business.
  5. The business plan serves as the blueprint for your running of the franchised business, should you proceed.

300Sq05Because Wiesenhof is a retail business, location is important. For this reason, your business plan is produced for a specific site. Wiesenhof actively source sites for potential franchisees. Once a site has been identified that meets Wiesenhof’s basic site profile criteria and that falls within the area over which you have the right of first refusal (as described in your signed Pre-Franchise Agreement), Wiesenhof enters into negotiations with the landlord to obtain an Offer to Lease for the site, on your behalf. The objective of the Offer to Lease is to get the landlord to legally bind himself to leasing you the premises, yet enabling you to withdraw should you not be satisfied with the outcome of the Business Viability & Verification Process. Once the landlord has committed himself to the Offer to Lease. Wiesenhof undertakes a detailed site verification to confirm the suitability of the premises and Wiesenhof produces the designs, plans and costing for the site so that you will know exactly what the store will cost. The cost of these services is usually born by the prospective Franchisee.

Operational training for the owners, manager and kitchen supervisor

Basic evaluation of your suitability to be a successful franchisee (may include all significant partners/managers)

  1. Right of first refusal for an agreed area for an agreed period of time
  2. Optional Business skills training courses or modules
  3. Sourcing and securing premises for the proposed franchise
  4. Independent analysis and verification of the proposed premises
  5. Lease negotiation for the proposed premises
  6. Guidance and assistance in evaluating the viability of the proposed franchised outlet
  7. Detailed costing of your total investment for the proposed franchise
  8. Guidance and assistance in producing a business plan for the proposed franchise
  9. Facilitation and assistance in securing loan finance, if necessary

The Operations Training programme is conducted initially in a classroom environment on theory, then hands on training at one of the franchisor’s training stores, and finally in your own store. The training stores can be located in various locations countrywide, and at times training can be moved to better suit the Franchisee, at the Franchisors option. The Operations Training programme lasts a minimum of three full weeks, and finishes prior to your outlet opening, while the kitchen supervisor may train for up to an an extra week solely in the kitchen.

The objective of the Operations Training programme is to equip you, irrespective of experience, to successfully run and manage your franchise. The training follows the contents of the Franchise Operations Manual, some of which are detailed below:

Operating procedures

  1. Human resources and Industrial relations
  2. Basic Financial ratios and reports
  3. Presentation
  4. Kitchen recipes
  5. Baking recipes
  6. Point of sale systems

All staff members undergo the Staff Training Programme so as to ensure that they are adequately trained to work in the ‘front-of-house’ or ‘back-of-house’ of the business.

The Staff Training Programme is conducted initially in a classroom environment, at a training store and finally at your own premises, commencing two full weeks before your opening, and ending typically ten days after your opening. The cost of the Staff Training Programme , and an accrual for staff wages during training, is in addition to the initial Franchise Fee and is covered below under “Financial Information”

The Staff Training Programme contains a large amount of detailed information, but its contents can be broadly summarized as follows:

  1. Waiter service skills300Sq03
  2. Point of Sale System
  3. Confectionery and baking skills
  4. Back of house skills
  5. Front of house skills
  6. Possible Ice cream preparation
  7. Espresso and cappuccinos
  8. Bar service
  9. Disabled awareness, safety and first aid.

Wiesenhof handles the entire project management of your new business, from designs to plans, costing, shop fitting and merchandising (ie turnkey).As a new franchisee you are welcome to have input on the design and layout of your new business. However, the final decision on the design and layout rests with Wiesenhof. Shop fitting is performed by Wiesenhof ’s appointed shop fitters.In summary, the following support is provided to you after you sign the Franchise Agreement but before opening your business:

  1. Operational training for the owner and kitchen supervisor (and sometimes a manager)
  2. Recruitment and selection of staff
  3. Training of staff
  4. Design, project management, building and shop fitting

One of the most satisfying aspects of a Wiesenhof franchise is the teamwork Wiesenhof promotes and supports. Wiesenhof Coffee Holdings encourages participation and feedback and takes an active role in supporting your needs with its over 20 person strong back up team. We are on the same team and we consider our relationship a partnership, where we are striving to achieve the same goals.

Dulce Lite –  positioned between a Dulce Café and an espresso bar –  a smaller site, with a quicker menu, and a lower set up costing for niche applications.

Dulce Lite Café  

Smaller sites and smaller quicker menu, as above , but with a lower set up costing cost, between a Café and an espresso bar.

Espresso bar –  has a lower turnkey set up cost of R800 K to R1.3 million, depending on many variables of size, complexity of the retail section and stock levels, size of the menu and hence the equipment required in the kitchen.

TOTAL INVESTMENT

The total investment for a Wiesenhof franchise varies from store to store because of numerous factors including concept type, different store sizes and varying contributions from landlords etc.The total investment is made up of the following costs:

  1. Initial discussion and registration
  2. Prospective franchisee screening cost
  3. Business Viability & Verification Process
  4. Initial Franchise Fee
  5. Fixed Franchise establishment costs
  6. Variable Franchise establishment costs

The objective of this section is to give you an indication of what your total investment may be.

INITIAL DISCUSSION AND REGISTRATION

There is no cost to a potential franchisee during initial discussions, basic registration, and discussion and response to the Wiesenhof business disclosure document. If both parties are positive, and wish to proceed further, then costs will then start to be incurred, which are payable by the prospective franchisee.

SCREENING ASSESSMENT OF APPLICANT

300Sq04Screening of the applicant is carried out , and ranges from initial meeting and interviewing the applicant, and involve screening through several external companies, in order to check criteria such as references, financial background etc.

At certain times, we may also conduct personality profiles by means of simple aptitude tests, the cost of the screening assessment of one applicant is minimal, and varies depending on the number of applicants screened. These tests are to highlight any areas which may require additional training, prior to or after the Franchise is opened, the results of which are passed on to the candidate. Payment is upfront and non refundable, but in no circumstance guarantees that the application is acceptable.

BUSINESS VIABILITY & VERIFICATION PROCESS

The cost of any Business Viability & Verification Process will range from zero (internal ) , to an estimated maximum of R10 000.00 plus VAT if the prospective Franchisee wants an outside agency to be used , dependant on the store location and to what degree suitable Market research is available or required. Our normal service level is usually sufficient and this carries no fee, but as with all viability assessments carries no guarantees, the decision is entirely the Franchisees.

INITIAL FRANCHISE FEE

The Initial Franchise Fee is as follows ex Vat.

Wiesenhof Coffee Shop                R 95 000

Wiesenhof Refill Espresso Bar   R 95 000

Wiesenhof Mobile Unit                   R 45 000

Wiesenhof 1 in 4 unit                      R95 000

This fee is mandatory for all franchisees. In purchasing an existing store this fee is site dependant, and will be decided on by the Franchisor, dependant on the location and training requirements. This amount is to cover the cost of granting a franchisee the right to the use of trademarks, logos and intellectual property, as well as the following services:

Design and plans , costs dependant on requirements from approx. R20 000 to R45 000

Project Management Fee approx.
Amount (Excl Vat)
Within 100km
Amount (Excl Vat)
Outside 100km
Wiesenhof Coffee Shop
R165000
±R195000
Wiesenhof Refill Espresso Bar
R100000
±R150000
Wiesenhof Refill Espresso Bar Mini
R75000
±R100000
Wiesenhof 1 in 4 unit
R165000
±R195000
Wiesenhof Mobile Unit
Negotiable Negotiable

The set-up cost is calculated on the following basis and includes the following:

Typically for 2013 your potential total investment for getting the Wiesenhof Concepts to opening, as a turnkey cash outlay, including rental deposit , first month rental , stock etc ( every cost or cash outlay ) to 1 month after opening is approximately:

Café – R1.90 million excl vat.

Refill Bar – R1.1 million excl vat

Mini refill bar – R900 000 excl vat

Mobile unit – approx. R300 – 400 000 excl vat

4 in 1 unit – R1.9 – 2.4 million excl vat ( canteen by Lessor)

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