We just need to turn on the news or browse online news sites to see that the South African economy is taking a beating and has been for a long time.
Many economic leaders agree that small businesses are part of the solution to improve our local economy. However, they have continued to debate the ways in which small business start-ups and franchising impacts our local economy. Which of these models adds the most value?
We spoke with Hannes Jansen, CEO of Montagu Dried Fruit and Nuts (Pty) Ltd, who shared his thoughts with us on the current South African economy. He believes that franchising is a powerful, more rewarding means to encourage entrepreneurship.
He believes that franchising empowers entrepreneurs and builds the South African economy:
1. Q: Where does Montagu see itself in the South African market place?
HJ: Montagu Dried Fruit and Nuts is a specialist supplier of the widest range of dried fruit and nuts to the South African market. Our desire is to bring these products as close to the consumer as possible for their ultimate convenience.
We combine the widest range of products with the best quality offering. Our end goal is to help all our customers support a healthier lifestyle. The fact that we have dedicated stores nationwide manned by trained sales assistants also gives us the opportunity to engage with our customers emotionally, providing them with support and valuable information to make their buying decisions.
This level of personal service is not available anywhere else and is a major differentiator from a buying experience in the larger retail environment.
2. Q: Why did Montagu decide to rather do franchising as opposed corporately owned stores?
HJ: We felt that the central management of a national network of stores with varying working hours and diverse cultures is not sustainable. Franchising allows our sales outlets to be owned and managed by entrepreneurs who have a vested interest in making their business successful.
3. Q: In what way does Montagu support the South African economy?
HJ: We add a great deal of value to the commodities that we buy, which have been produced in nature. The value is present in the selection, packaging, and distribution phases.
The Montagu franchise network has also allowed 80+ individual investors to earn a reasonable return on their investment. Further than that we have, on average, created three sales positions within each sales outlet.
And according to our estimations this has turned into 400+ new jobs.
4. Q: Why would you encourage people to take up a franchise instead of starting a business from the ground up?
HJ: As the Franchisor, our business follows a trusted and proven product-based model which is simple and effective:
- We provide a large range of Montagu products, sourced from one central point and is supplied on credit terms;
- We assume responsibility for national brand building, product awareness, promotions and events marketing;
- We continuously look to innovate our product range;
- We assist franchisees in selecting the right trading sites and leasing criteria.
5. Q: We know there is always a need for people to launch new businesses. Is there a need for new franchises too? Is there a difference in the value that each of these have to bring to our economy?
HJ: We feel that the risk of running a business is minimised if you deal with a trusted and proven model. That’s why franchises work so well. The more we have business concepts evolving through franchise concepts, the more we can bring people into the formal market.
The challenge is and will remain to find the right balance between the cost of the franchise (franchisor’s return) versus the profit potential of the individual franchisee. The right franchise at the right price will bring more value to the economy purely on the basis of a proven model.
So, Why Franchise?
As a franchisee, you have access to business support in many areas:
The Trade Name
As an independent entrepreneur you will have to spend weeks and months setting that all up from scratch. If you own a franchise, you are given rights to the use of an established brand, including the trade name, logo, trademarks, etc. Reputation is essential, which makes franchising a popular choice for people making an investment by joining a brand.
The Product or Service
Most franchisees buy into a brand when the product or service has been accepted by the public and the market. All individual franchisees work toward a collective, sound reputation for the brand. As a start-up, you could spend years trying to establish your brand as reputable and trustworthy. Under a franchise, you simply get to join a well-oiled machine and add value as you go.
Launching a start-up is usually geared around your personal skill set, hobbies or expertise. Under a franchise, you don’t necessarily need to have a background in the franchise’s product or service. You receive the necessary training.
As a small business owner you would be largely responsible for all marketing, which would come out of your pocket. By joining an established franchise, national advertising would be taken care of by the franchisor so that you can focus on local marketing and sales.
As a start-up you’d be responsible for finding the right premises for your business. That could be positive if you have the time and expertise, and negative if you don’t. However, a franchisor understands your business needs because they know the brand, and will help you select the prime location to trade.
As an entrepreneur, you have free reign over your business offering, but sourcing could be expensive (at least in the beginning). Under a franchise, the sourcing is taken care of by the franchisor who decides which products and services you’ll trade with. This means you should benefit from great bulk discounts negotiated by your franchisor on your behalf.
There are many other benefits to franchising, but the overarching consensus remains: as a franchisee, you cut out many of the time-consuming setup processes and paperwork that a start-up would have to plough through alone. This means that you can launch into the market place faster and start contributing to the economy.
If you are interested in applying for a Montagu franchise please contact MTC Franchising (Pty) Ltd here. They will bring you SUNSHINE IN A PACKET