My series on who is killing the SA Restaurant industry. Still a few more chapters to go. Best viewed if you download it

1. Michael Said
On the upside there is the marketing
shpeeeeeel you will surely be dealt.
We bring a lot more customers to
your door… You certainly do attract
more customers who were never
going to visit you at your regular
prices. The only problem is, will
they return when the price is back to
“normal”?
We will advertise your business
for you… Granted this is a BIG
plus. They have huge data bases
and resources that few restaurants/
Deal or
businesses could reach on their
own. So if you are doing this as a
brand building exercise and if the
costs are right, go for it.
We will help you move stock…
Great, just make sure it is stock you
no deal?
were not moving already and try to
ensure that moving all that stock
isn’t actually costing you money.
We will help you build
relationships… Well not with a
one-time deal, but what if you could
structure a deal that rewarded
Everything you REALLY need to know about those deals but customers if they came back a few
were too afraid to ask… times in order to get the benefit of
the deal?
by Michael Said We generate revenue… If you have
T
a low cost or fixed cost business,
his has been an exciting year and it has been quite a while since I put fingers this would be ideal. Let’s say
to keys (used to say pen to paper in the old days), waiting for something, you owned a bowling alley with
besides the terrible state of the restaurant industry, to rouse my interest. I fixed costs and overheads and a
do not wish to belabour the dismal state of the industry, except to say that it product that was not being depleted
has operators clutching at straws and throwing a fair amount of “Hail Mary” (besides a little extra maintenance),
passes into the air. this would be fantastic. Maybe a
hotel room or conference venue
Enter Groupon et al and all the promises of new customers, repeat business and full
that was standing empty, but if you
restaurants. Groupon and other local and international deal makers have proven to be
are reading this, you may own a
wildly popular. What’s not to like? I can get a R500 massage for R199, I can get my hair
restaurant with high input costs
done at a fraction of the price, learn to use all sorts of equipment and dine out at 60% off.
and possibly even turnover clauses
Who wouldn’t like it?
with both your landlord and your
Well, apparently, some merchants aren’t too enamoured with it and before you sign on the franchisor… now things get a little
dotted line there are some things you need to consider. tricky to say the least.
66 www.safw.co.za SEPTEMBER 2011

2. MIKE SAID WHAT?
Of course there is one other point they
How a discount affects your profitability may not mention and that is “breakage”.
Nope, this is not what your waiters drop,
it is the term used in loyalty programs for
So even the upside appears to have a downside and I haven’t even deals not redeemed. Let’s say they sell
mentioned the real problems you may anticipate. 500 deals on your behalf, but only 400
people arrive to redeem within the allotted
Before we take a closer look at these, the first thing you need to time, you only receive payment for the
understand is exactly how a discount affects your profitability. For redeemed vouchers, less their commission
the purposes of this exercise we do a simple calculation using of course. So, in fact, unclaimed vouchers
the example of a restaurant. Assuming the restaurant generates are more valuable to them than claimed
sales of R10, 000 at a 40% cost of sale (here’s where I hope you ones.
know your cost of sale) and your overhead expenses amount to
45%, effectively this means that for every R10,000 in turnover you
are paying out R8,500 and retaining R1,500 for yourself. If I am My good friend Nick from Global Wrapps
erring at all, I am erring on the generous side. Quite a number of Franchising took the trouble to write to me
and point out the following positive aspects
restaurants are retaining a lot less.
of these programs. Thank you Nick.
Now if the restaurant generated R10,000 in sales at a 55% • Excellent method to create awareness
discount, round about what they will explain to you “works” as a of a new brand, new location or new
deal, you receive only R4,500. From this you must deduct your product range.
dealmakers charges, which I have on good authority is between
20% and 50%, as well as a processing fee. • The ability to target a specific market
segment. Those with internet access
While overhead costs may reduce fractionally, let’s be generous and credit cards.
and say by 10% to R4,050, production cost will remain at R4,000. • It is up to the store owners and staff to
The deal still cost you R8,050 and if you are lucky you will get back create return customers, by providing
R3,500. This little marketing exercise ONLY cost you R4,550 per excellent service and quality products.
R4,500 of turnover (i.e. R10,000 turnover less your discount offer
of 55%). • Voucher users are usually big talkers/
Facebookers/tweeters who tell
Now the deal is over and you are waiting for all those customers everybody about their great deal thus
to come back and enjoy your faire at the “normal price”. (Don’t spreading brand awareness.
hold your breath). Let’s say they all do come streaming back, • All advertising costs money and the
(yeah right). To recoup the money you expended on running the mathematics thereto apply to all
deal, at your current retention of 15%, you will have to generate an advertising campaigns. Compare the
additional R30,333 in sales. I am no accountant or rocket scientist, cost of such a voucher campaign to
but basic mathematics seems to be at work here. running a radio campaign, TV ad or
billboard. We know print ads are costly
Aren’t you glad I got all the good news out of the way first? and the results of these campaigns are
hard to measure. Undoubtedly nothing
beats word of mouth advertising, but
Now let’s take a look at some “challenges” (us marketers hate to say “problems”) you may Groupon style campaigns certainly
encounter. have their place and that place is
certainly ahead of print campaigns and
Deals are simply not good for your brand image! Now that you have offered that deal
for most small traders ahead of radio
at a discount price how are you going to convince everyone that the meal/product/service
and TV.
is still great value at the old price? Have you been fleecing them all along? Will you be
fleecing them now?
Deals don’t generate repeat business! Chances are you will never see those “new” Of course there are many instances where
customers again without another voucher in hand. Research in the US shows that, on deals will work and I am not suggesting
average, only 19% of voucher users become repeat customers, that means it takes a long for a second that you dismiss them out
time to recoup that “marketing spend”. of hand, but please go in with your eyes
wide open, not like Posie Bakery & Café in
Deals attract bargain hunters! The majority of voucher users are “deal seekers” and
Portland Oregon (Visit http://posiescafe.
bargain shoppers, translating to a low spend per head and little chance of generating
com/wp/?p=316 for the details). 
repeat business. Also, the greater the number of vouchers redeemed the higher the cost
of your marketing exercise, so be sure to limit the number of vouchers sold.
Deals are not profitable! While I don’t wish to belabour this point, please ensure you
have a clear grasp of exactly what is at stake. Michael Said often refers to himself as “Just a Waiter
Who Got Lucky!” After 22 years in the hospitality
industry Mike brings his own brand of humour and
understanding to the weird and wonderful world of
marketing and franchising. His company, brandStrategy,
If you are a restaurant owner, please participate in the specialises in the development and implementation
of social media strategy working with companies
South African Restaurant Owners Survey at: and individuals from all industry segments, advising
them on branding strategy, market development
http://bit.ly/RestaurantSurvey and customer service. You can visit his website at
www.brandstrategy.co.za and follow him on twitter at
mike_said_what
SEPTEMBER 2011 www.safw.co.za 67

3. MIKE SAID WHAT?
Who is killing
the South African
restaurant industry?
CHAPTER ONE:
Identifying the suspects
by Michael Said
C
you and not once they have arrived home. impact of this is a significant increase in
rime thrillers are all the
Thirdly, customers are only expected to the rental to turnover ratio that should
rage right now and while
pay for their purchase after they have ideally be sitting at 11% or less. Then
I am no James Patterson
enjoyed it. Combine these factors with a there is the increased input costs as food
or Lincoln Child, the slow
few others like cash, alcohol and ego and prices climb and a budget conscious
and painful death of the
you quickly realise why an owner’s visit to clientele continues to put pressure on
South African Restaurant Industry makes
any table is fraught with danger. restaurants not to increase their prices.
for some pretty interesting reading.
I would be remiss in not mentioning the
“Death?” you ask, am I not being a little Despite these challenges, margins were owners, franchisors and other industry
too dramatic, a little too severe? I think acceptable to high if you managed your role-players who are contributing to the
not! Restaurants are closing down weekly business properly and the restaurant decline, either through total apathy and
and those that manage to keep their doors industry remained an attractive and neglect, or in some cases, sheer stupidity.
open are doing so against great odds. Of seemingly lucrative pursuit. Alas, all that
course there are the exceptions to this has changed over the past three years. So the picture is not a pretty one and the
statement and over the next few months Restaurant profitability, or retention as casualties are mounting. Who is to blame
I hope to uncover some of the suspects it is often referred to, is at an all-time and what can be done about it?
and hopefully, aid some of the survivors. low. Whereas in the past a restaurant
owner could expect to retain 18-24% of It is with great sadness and regret that
Like all good crime writers, let me begin we note the passing of yet another of
his turnover, this figure is now down to
by introducing our lead character, the Johannesburg’s restaurants. Last month,
between 7-14%, something on par with
victim! The restaurant industry has the Linger Longer Restaurant in Sandton
what the waiters are earning in tips and
always been a difficult industry, with a joined the growing list of casualties and
often less than the landlord is receiving
number of factors that unsuspecting although the cause of death is yet to be
in rent.
entrants are often not aware of. For one determined, you can be certain that at
thing it is a factory. You have to turn raw There are a number of key factors that least one, if not all, of our suspects were
material into finished goods in little or no have contributed to the drop in retention. to blame.
time at all. Secondly it is retail with a twist. First and foremost is the considerably
Your clients sample the product in front of slower than anticipated growth. The Surely there must be warning signs to
spur you into instituting a program of
6 www.safw.co.za OCTOBER 2011

4. MIKE SAID WHAT?
6
action to save the business? What are the
indicators of failing health and increased Our six suspects, in no particular order, are as follows…
risk that you can look out for in your own
business? Here are a number of red flags to • Was it The Landlord with his Lease in the Shopping Centre?
look out for in your own establishment and
please, if you recognise any, take action • Was it The Customer with No Spending Power in South Africa?
now. Remember, you can always sell a
restaurant a little too early, but you can’t sell • Was it The Supplier with No Concept Of How The Industry Functions
it one second too late! behind his Desk?
• The absence of a well-organized and • Was it The Staff with Total Indifference in The Restaurant?
implemented accounting system
• Was it The Franchisor with His Eye On The Joining Fee at the First
• Key operating expenses that are too Meeting?
high, relative to gross sales
• Menu items that are not accurately • Was it The Owner with No Clue Or Conception in La La Land?
documented, costed and updated
• Food and beverage inventory levels
not counted, costed and recorded at
the end of each chosen period
• Food and beverage inventory
levels that are too high, relative to
corresponding sales
• Daily and weekly financial operating
data not collected, reviewed or acted
upon
• Inaccurate posting of financial
information to your accounting
system
• Current liabilities sufficiently greater
than current assets as to impair your
future ability to pay accounts
• An owner relying on his online bank
balance to determine the cash
available for account payments
• An overall lack of understanding as
to how to read and interpret period
ending financial statements
down a hole that, statistically at least, will way, from The Banks to The Legislators
almost surely prove dry? Why venture into and Previous Owners who sold their
an industry with enormous fixed expenses restaurants under false pretexts… the list
(rent, electricity, gas, water, linen, goes on and on.
Monitoring the health of maintenance, insurance, license fees, trash
And what of our poor victim, how is he
your business relies on removal, etc), a notoriously transient and
unstable workforce and highly perishable fairing at the moment? He is on life support,
your ability to control the inventory? The chances of ever seeing a meagrely trying to eke out an existence
until the December season or until the
return on your investment are about one
financial aspects of your in five. What insidious spongiform bacteria election or until the next world cup or until
the government changes or doesn’t, until
restaurant so riddles the brain of men and women that
they stand there on the tracks, watching the interest rates come down, until sentiment
lights of the oncoming locomotive, knowing goes up, until… until… until… 
full well it will eventually run them over?
After all these years in the business, I still
You will see from the above that monitoring
don’t know!”
the health of your business relies less on
tracking turnover or foot counts, but rather So wrote Anthony Bourdain in the now
on your ability to control the financial legendary Kitchen Confidential and it
aspects of your restaurant. If your mouth certainly makes a fine introduction to The
was getting a little dry or your pulse started Suspects. While this investigation reveals
to race as you read through the list - seek more suspects than food critics at a free
help now! Of course the best time to start lunch, I have tried to narrow it down to six.
putting these things in place was last year, Over the next few chapters I shall state the
but the second best time is now. case against each one and allow you, the Michael Said often refers to himself as “Just a Waiter
Who Got Lucky!” After 22 years in the hospitality
jury, to make up your minds. Who can forget
“To want to own a restaurant can be industry Mike brings his own brand of humour and
the board-game Cluedo with its rooms, understanding to the weird and wonderful world of
a strange and terrible affliction. What marketing and franchising. His company, brandStrategy,
weapons and suspects and the plain brown
causes such a destructive urge in so many specialises in the development and implementation
envelope that sat in the middle of the board of social media strategy working with companies
otherwise sensible people? Why would and individuals from all industry segments, advising
waiting to reveal the mystery.
anyone who has worked hard, saved them on branding strategy, market development
and customer service. You can visit his website at
money, and often been successful in other Besides our six suspects, I am certain there www.brandstrategy.co.za and follow him on twitter at
fields, want to pump their hard earned cash are others that have contributed along the mike_said_what
OCTOBER 2011 www.safw.co.za 7

5. MIKE SAID WHAT?
Who is killing
the South African
restaurant industry?
ChaptER tWO:
Investigating the suspects - Monsieur Landlord
Our poor unsuspecting victim moved quietly
about his business, opening the doors, mopping
the floors, working IN his business instead of
ON his business, completely oblivious to the
danger lurking inside his filing cabinet. For
there, in a dusty folder alongside the liquor
license application he had been meaning to
submit, was his lease agreement!
by Michael Said
10 www.safw.co.za NOVEMBER 2011

6. MIKE SAID WHAT?
W
hen he originally signed the document,
life was soooooo good. Restaurant
profitability (retention) was running at a What is required is a clear
very acceptable 18-24%, there appeared
to be an endless stream of customers understanding of the pitfalls, a better
and certainly no shortage of buyers,
should he decide to exit. How had it all gone so terribly wrong?
working relationship between tenants
Well, the writing had been on the wall and the warning signs there
and landlords, and proactive property
for all to see. Over-trading, new centres opening daily, falling foot owners who better understand the
counts, rising input costs and an increasingly selective clientele,
all coupled with a world recession, but why should this worry him? challenges of their tenants/partners.
After all, people have to eat, don’t they?
Yes, they do, but they don’t have to eat out, they don’t have to
eat out as often and they certainly don’t have to eat out at YOU!
Suddenly foot count plummeted by 30% and the customers still
eating out were spending 30% less. On top of which, the retention
on the now diminishing turnover had alsodropped by well in excess
of 30%.
Now, in order to run a successful business, our victim understands
that there are three key fundamentals he must adhere to. An
acceptable food cost (35-40% depending), an acceptable salary to
turnover ratio (18-21%) and a rental to turnover ratio of UNDER 11%.
He seems pretty confident that his food cost is correct, despite only
taking stock once a month and only occasionally glancing through
the pile of invoices on the spike over the hot pass. He has been
able to reduce staff to keep his wage bill ‘almost’ under control and
it seems that the only matter requiring his urgent attention is the
ever escalating ratio between his turnover and his rental.
So he wonders, if times are so tough for me, the same must be
true of my competitors, my suppliers and of course, my landlord.
“It is time to renegotiate my lease or at least negotiate some kind
of break until the flood subsides, after all…” he thinks “we had such
a great understanding when we first met; he seemed like such a Landlords have a tendency to play independents off against
nice chap!” franchise groups. Often, being ignorant of the pitfalls and driven
by “the dream” of owning their own restaurant, independents are
prepared to pay more.
Landlords actually budget for an attrition rate (failures in new
Mall owners are not malls) and when a shop does fail, they are merciless in enforcing
compliance in meeting rental commitments. This even goes as
addressing the real issue, that far as installing a new tenant in the old tenant’s place and then
charging the old tenant for any shortfall in the difference of the
anchors are paying next to lease amount for the balance of the lease period. Next time you are
nothing for their space and are faced with a lease agreement, watch out for that personal surety
clause…
effectively being subsidized by
One of the single biggest killers is the dreaded “Tenant Mix”. In
the man on the street. the process of looking out for ways to differentiate their mall from
the competition, landlords may ignore tried and tested concepts
in favour of something new and fresh, often with disastrous
consequences for all involved. Other times they play it safe,
installing more of the same successful tenants that can be found in
Well, there is an old riddle in the Restaurant Industry. Question:
every mall everywhere and then they wonder why they can’t drive
How do you turn a pleasant, helpful, compassionate, approachable
feet through the mall. By installing similar tenants to those already
and understanding landlord into a friggin monster? Answer: Just
established in the mall, often without consulting existing tenants,
sign the lease agreement!
mall owners are effectively cannibalising the trade of existing
Now I need to state that this assessment of landlords may not tenants. As a result, instead of two or three struggling stores we
apply across the board, but the overriding perception is that find one or two successful stores.
landlords are unapproachable and single-mindedly fixated on
One only has to visit any one of the literally hundreds of malls
immediate profit at the expense of all else. (I would welcome any
around the country, to realize the only ones making money are
and all comments from landlords on the subject). Certainly, more
those selling the fancy paper landlords use to block the windows
and more landlords are becoming increasingly amenable to rental
of empty stores. Don’t believe me? Pay a visit to Brightwater
negotiations, if the restaurant in question can prove that they have
Commons, Balfour Park, Bel Air, Norwood Mall, Stoneridge… and
given the matter serious consideration and are able to put forward
the list goes on and on.
a compelling case.
Mall owners are not addressing the real issue, which is that anchors
However, to gain a true understanding of this problem we need to
are paying next to nothing for their space and are effectively
look back to the circumstances surrounding the initial signing of
being subsidized by the man on the street. Restaurants are often
the lease agreement.
expected to pay the same rental, or higher, for large premises that
NOVEMBER 2011 www.safw.co.za 11

7. MIKE SAID WHAT?
other tenants are paying for smaller premises on the pretext that
they are not big enough to pay anchor rates.
Most tenanting is done by brokers who earn a commission for
each placement. Granted, when a business fails, the period until
full commission is paid is extended, but then every new placement,
or re-placements, also earns them a commission. To ensure that
brokers are more careful about who they install as tenants, a
commission clawback system and “switching” policy, as instituted
for insurance and assurance brokers, should be implemented.
The “Ops Costs” paid to brokers to manage and maintain the malls
and turn a profit, are simply too high. In Sandton City, for example,
the Ops Costs run to approximately R120/m². With at foot print of
approximately 130,000m², you do the math. With inflation, these
costs have increased year on year, with no downward adjustment
and at a rate approximately one to two percent higher than the
actual basic rental costs.
Rates increases are another killer! It would be interesting to
here is an e-mail forwarded to me from one of my clients… conduct a survey amongst malls and mall owners to find out
who amongst them has approached their local city councils to
Despite the empty stores in every mall, this is the latest OTL (offer
fight these ridiculous increases on behalf of their tenants, or do
to let) received from Pareto for a store in Tyger Valley SC. Besides
they simply add these costs onto the rental? Then we factor in
the ridiculous rental asked, they have added a NEW “availability”
the increase in electricity costs and we have more blood on the
charge for items that one would expect to be provided for in the
streets. Sadly, with landlords adding even more costs, such as
normal course of business.
insurance costs, it does not stop there.
Millions upon millions of rands have been poured into the set-up
Basic Rental R450.00 per sqm escalating at 10%
costs, hundreds of people have lost everything and thousands of
Ops R64.42 per sqm escalating at 12% jobs have evaporated. Somebody has to stop the madness! I am
not implying that nobody should buy or open a restaurant, or that
Marketing R 26.14 per sqm escalating at 10% nobody is making money. I am suggesting that before you do, do
your homework as you should for any other business. Owning a
Ass Rates R 28.60 per sqm escalating at the council’s restaurant is not a dream job! Wipe the sleep from your eyes and
discretion conduct a careful and thorough investigation to ensure you don’t
wake up screaming from a nightmare or the sheriff banging on
Refuse R 2.31 per sqm escalating at the council’s
your door.
discretion
What is required is a clear understanding of the pitfalls, a better
availability Charges !!!!! working relationship between tenants and landlords, and proactive
You will still be billed for usage for each of these property owners who better understand the challenges of their
tenants/partners.
Air Con R8.80 per sqm (escalating)
Property owners are under pressure too. Loans were secured
Water R1.00 per sqm (escalating) on projected turnovers and rental increases and empty stores
are hurting everyone. There is a strong case to be made that no
Sewerage R2.77 per sqm (escalating)
one was forced into signing the lease and “Ignorantia juris non
tOtaL R597.04 per sqm excusat”, ignorance of the law, does not excuse, BUT it does kill!
Before you sign the lease and launch your concept or purchase
an existing business, seek professional advice. There are some
great restaurant consultants out there, franchise advisory services
Based on the 10% rule, this means your little take-away (start with FASA), informed and helpful brokers and banks that
store must turnover R600,000 per month, before VAT, or are slowly beginning to understand the challenges of what is a
based on an average transaction value of R45 you will need wonderful industry. You may well be sitting on “the next big thing”,
to serve 15,200 customers a month i.e. 506 customers a but make sure you support your passion and drive for the project
day. Likely? I don’t think so. with the knowledge you will surely need. 
Annual escalations are driving rentals too high, whilst annual
menu price increases are unable to keep pace, a situation similar
to the “subprime” crisis that has virtually crippled the world
economies. With everybody convinced that restaurant turnovers
would continue to rise in excess of the rental clause turnover and
that their value would continue to increase, banks dished out
money, landlords dished out leases and restaurant owners signed
ANYTHING to get the premises. In reality store growth now is in Michael Said often refers to himself as “Just a Waiter Who Got Lucky!” After 22 years in
the hospitality industry Mike brings his own brand of humour and understanding to the
the low single digits and inflation is ‘officially’ running at around weird and wonderful world of marketing and franchising. His company, brandStrategy,
five percent, but rentals are rising at in excess of eleven percent. specialises in the development and implementation of social media strategy working
with companies and individuals from all industry segments, advising them on branding
In short, this is a recipe for disaster! Maybe this will be known one strategy, market development and customer service. You can visit his website at
day as the Sub Prime Rib Crisis. www.brandstrategy.co.za and follow him on twitter at mike_said_what
12 www.safw.co.za NOVEMBER 2011

8. MIKE SAID WHAT?
Who is killing the
South African
restaurant industry?
CHAPTER THREE:
Investigating the suspects - Señor Supplier
In order to establish a clear motive and
opportunity for our next suspect, Señor After accounting for your food cost it leaves a gross profit of 63
percent. That is quickly gobbled up by…
Supplier, it is necessary that we understand
the circumstances in which both the victim 11.00% OCCUPANCY COSTS
and the suspect, operate. This covers the basic rental and building operations cost,
as well as any payments to the landlord in respect of the
by Michael Said leased premises. Rentals vary greatly from place to place
I
and in some operations may exceed the 10% level, but may
t was after all only a few short years ago that be compensated for in volumes generated. (If you have read
the local restaurant industry was operating chapter two, The Landlord, you will know how difficult it is to
on a retention rate of 18 to 24 percent, way in achieve this.)
excess of returns in the US, making businesses
in this industry highly sought after. In fact, every 19.56 % SALARIES AND WAGES BILL
man and his dog who could get their hands on a few rands were This takes into account salaries and wages for all staff
gobbling up sites and franchises. Most restaurants were able to including managers, whether permanent or casual. All
show year on year growth in excess of annual rental and product salaries, wages and even waiters commission should be
cost increases and all appeared to be well in the South African applied at market related rates. Even the franchisee/owner
restaurant industry. should be paid a market related salary. If he is fulfilling the
So, exactly how do restaurants make their money? Selling role of manager, he should be paid accordingly. Anything
food and drink of course, but what are the percentages and how over and above this is effectively drawings.
have they changed? For the purposes of this exercise I am going
to show current retention of a franchise operation averaging a 6.00% MANAGEMENT SERVICES OR FRANCHISE
monthly turnover of R500,000. FEE
At least 37 percent of that turnover is expended on food cost, This is the monthly levy payable to the franchisor, as agreed
with some restaurants only achieving 40 to 42 percent. That is in the franchise agreement, and is typically calculated as a
money left on the table. Food cost is one of the last controllable percentage of net turnover.
expenses and if you are not controlling that, well…
From stock control systems to spreadsheets and manual books, 2.00% MARKETING
there are many methods through which effective stock control can The marketing expense should cover both the marketing levy
be achieved, but whatever system you use, use it properly. My paid to the franchisor, as agreed in the franchise agreement,
personal favourite is www.idealstockcontrol.com, as I did have and any ad-hoc monies spent on local advertising and
a hand in its early development. promotions.
10 www.safw.co.za DECEMBER 2011

9. MIKE SAID WHAT?
0.50% ADMINISTRATION COSTS After all that it leaves a little under 11% to take away from the
This includes the cost of producing management reports, business… BUT, you haven’t paid interest, borrowings or tax.
VAT returns, PAYE returns and audited year-end financials. Now, I realize that not all my readers are members of a franchise
FYI, PAYE does not stand for Planes, Automobiles, Yachts, group, and that means the 6% management and 2% marketing
Etc. so stop buying toys before you have paid off the fees may find their way to the bottom line, but as the Bard said
business. “herein lies the rub!” If you are not paying franchise fees, a fair
portion of that should be going to marketing, product engineering,
1.20% BANK CHARGES
research, human resources and other services that you otherwise
This includes bank and credit card charges, but specifically
‘should’ be getting from your franchisor. (We will cover all that in
excludes interest on loans and loan repayments.
a later chapter.)
1.00% CLEANING MATERIALS That was rather a lengthy introduction, but in the context of
Here we include all cleaning equipment, detergents, understanding how suppliers are contributing to the death of the
disposable uniforms, tidy mats and cleaning contracts. franchise industry it is necessary to understand these figures. In
fact, I will be referring to these same figures in future chapters as
1.30% REPAIRS AND MAINTENANCE well.
This covers maintenance contracts, equipment repairs and
While there are many ethical suppliers, some who are ex-
replacement parts.
restaurant owners themselves with a sound understanding of the
1.20% REPLACEMENTS industry and who are willing to go the extra mile for their clients,
Rather than capital goods such as fridges, stoves and regrettably there are many who do not fall into this category. How
furniture, this covers the cost of replacing crockery, cutlery many of your suppliers have visited your restaurant and taken a
and glassware breakages as well as cooking and baking
utensils.
1.00% GENERAL
This should cover all costs directly related to operations How many of your suppliers have
including telephone, legal, printing and menus.
visited your restaurant and taken a walk
0.65% INSURANCE
All insurance relating to the leased premises. through your fridges or dry goods stores
4.00% UTILITIES to understand your space limitations?
Consider your electricity, water and gas bills.
DECEMBER 2011 www.safw.co.za 11

10. MIKE SAID WHAT?
walk through your fridges or dry goods stores to understand
your space limitations? How many of them understand that
delivering during a Friday lunch is not practical? And most
importantly, how many of them realize the true impact of a
price increase on your bottom line?
Amongst the many difficulties restaurants currently face, How many of your suppliers are aware of when exactly you
one of the greatest is balancing the increasing input costs change menu prices? Do they realize that a price increase one
with price points placed by the customers. Most customers week after you printed new menus means that you will be operating
come with a number in mind, an amount they would expect on reduced margins for up to six months? It is recommended that
to pay for a type of product. As a customer you may feel that fixed prices for a guaranteed period be negotiated with suppliers.
R30 is the most you should pay for a toasted cheese, R120 However, doing so requires commitment from your side, you
for a 300g fillet, R49 for a margarita pizza and so on… The cannot suddenly jump ship on a supplier because someone else
moment the restaurant exceeds that number… POW they has offered you a few cents discount. Quid pro quo, as they say.
are perceived, and worse, described as expensive. Now, of Groups and franchise operations should have no difficulty
negotiating such terms, but they are often sideswiped by
franchisees who then buy off-spec products. This brings me to yet
another matter. My father, a mine of useless information by his own
It is recommended that fixed description, would often tell us “you can always buy oats cheaper
prices for a guaranteed period be if you buy it AFTER it has passed through the horse”. That is to
say you will get exactly what you pay for. Squeeze a soap supplier
negotiated with suppliers. for a few rand discount an you may find your concentrate diluted.
Squeeze your butcher and he may stop aging his meat as long, so
as not to lose the interest, and so it goes on.
course expensive is relative, but customers don’t consider The relationship between restaurants, in fact all businesses
this when scrutinizing price. I am sure, and their suppliers is a difficult balancing act, but if
Many suppliers do not appreciate the fact that as they both parties can adopt a policy of fair profit, both could benefit
push up the price of raw goods, the restaurant owner cannot greatly. Now get on the phone, call your suppliers personally and
simply follow suit and pass the cost onto their customers. schedule a ‘getting to know me’ meeting. Speak to them about the
“Yes, but” says the supplier “why should I absorb the price challenges, explain restaurant margins to them, give them a tour
increase passed onto me by my supplier?” A fair point, but of your business and make them a partner… you will both be richer
let’s consider the following two scenarios… for it! 
1. You purchase an international product that is imported
from the USA. Suddenly the rand takes a dive and
you receive the dreaded “sorry to inform you of our
price increase” letter. Well, the rand is at an all-time
high, yet not a single restaurant I have canvassed has
received a price reduction. Perhaps the time has come
for all restaurant owners to revisit their files, find all the
Michael Said often refers to himself as “Just a Waiter Who Got Lucky!” After 22 years in
suppliers who increased their prices according to Forex the hospitality industry Mike brings his own brand of humour and understanding to the
rates and insist on a price reduction. weird and wonderful world of marketing and franchising. His company, brandStrategy,
specialises in the development and implementation of social media strategy working
with companies and individuals from all industry segments, advising them on branding
2. The same is true for the price of fuel. As petrol prices strategy, market development and customer service. You can visit his website at
increase, you can bet that suppliers will be pushing up www.brandstrategy.co.za and follow him on twitter at mike_said_what
prices to cover ‘transport’ costs. Yet when the price
of fuel goes down, prices remain the same… Please
explain!
12 www.safw.co.za DECEMBER 2011

11. MIKE SAID WHAT?
Who is killing
the South African
restaurant industry?
CHAPTER FOUR:
Investigating the suspects - El cliente
“If it wasn’t for the customers, the suppliers and
the staff… this would be a great job” lamented
our victim as he trawled through the complaints at
hellopeter.CON, “for heaven’s sake, why couldn’t
they just complain to me, instead of writing to
the world about that one tiny little unreasonable
by Michael Said incident?”
“That’s ‘cause the customer is always right!” said a
voice from his distant past.
“No!” He shouted to no one in particular “He is not
always right, but he is the customer and it is the
customer’s right to be wrong.”
Y
ou may feel that all this is just then demand compensation in the form of a make a sauce, a dish or a dessert and, of
semantics and merely a slightly free meal or a round of drinks for the table? course, everyone knows what good service
different way of explaining the should be, even when they are unable to
same thing, but in essence Are restaurants themselves to blame for deliver it in their own businesses.
there is a huge difference. this monster they have created? Has our
Adopting the “the customer is always right” own willingness to accept all responsibility There is no denying the fact that every
philosophy is tantamount to saying “I am and to offer all manner of compensation cent that enters a restaurant, does so in
always wrong” or “my staff is always wrong” come back to bite us in the rear? Strangely, the pocket of one of our customers and
or “the restaurant is always wrong”, and I feel it runs a lot deeper than that, and without them there would simply be no
that can’t possibly be true. is indeed a reflection of the state of the business. However, the same principle
psychosis of the country. As a community applies to businesses in most industries,
I recently bought a shirt at a men’s clothing we feel emasculated. Our government yet they don’t feel the need to take the pain
store, it was marked medium, but when I appears to do just as they please, public and abuse that the restaurant industry is
got home I discovered it was in fact a small. servants appear hell bent on making our required to put up with. Falling foot counts,
Back to the store I went. I stood in line at lives miserable, we get pushed around by dwindling spending power and decreasing
the ‘customer service’ counter (now there is our fellow road users and have to deal with margins mean that each customer is more
a misnomer if ever there was one), waited disrespectful kids, with nowhere to vent our valuable than ever before. There is an old
patiently for my turn, had to supply the frustrations… that is until we walk into a adage that says “Nothing is sacred other
store with proof of purchase, two forms of restaurant. than that the customer returns and nothing
ID, proof of residence and a blood sample costs more than an empty chair!”
before they gave me permission to change This is the safe space, the psychologist
an item they had marked incorrectly. No couch, the one place we can exert our The Americans have a term called “The
free shirt, no complimentary round of authority, our chance to assert our Lifetime Value of a Customer” and a quick
socks for everyone in the line, in fact not “manhood” and prove our superiority. A Google search will refer you to a number
even an apology! So why is it when I enter strange phenomenon about the restaurant of different calculators you can use to
a restaurant and there is the tiniest error, industry is that it is the one industry where determine this. In a nutshell, it attempts to
I feel entitled to complain at the top of my there are more experts not in the industry predict what a customer may spend with
voice, rant and rave if necessary, act as than in it. Everyone knows more about you over a specific period of time, and this
though the error was a personal slight and meat cuts than we do, has a better way to is added to the business you will receive
30 www.safw.co.za JANUARY 2012

12. from referrals from those same customers. offending dish from in
While the numbers can appear staggering, front of the customer.
I am not certain that anyone has attempted In doing so you remove
the ‘other’ calculation. The one that reflects any reference to the
the damage done by ranting customers, offending dish along with
the very same customer you have tried to the customer’s ability to
placate and bribe with free meals and free poke his finger into the
drinks, who STILL leaves your restaurant food or waive a lettuce
and carries on telling anyone and everyone leaf in your face. Now
that will lend an ear, that not only is your the waiter or manager
restaurant cr@p, but that they managed to holds the dish behind their back as a signal CUSTOMER PROFILE 1:
extract some compensation from you as to anyone walking past that there is a
well. problem. Passing staff members can then ZIJN EN HAAR KONINKLIJKE
remove the dish to the kitchen and warn
Is there an answer to this conundrum? Well, them that although they don’t know the
HOOGHEID
maybe not a definitive one, but perhaps I exact nature of the complaint, that there is a (His Her Friggin Royal Highness)
can offer some advice to alleviate your problem and they should be prepared. Now
sleepless nights, assured that you have at back to the table. The person taking the Easy to identify, they announce their
least given it your best shot. Let me start complaint now begins “The Hoff’s” Three presence long before they walk in. Not
by introducing you to my very own 10 – Step Process. wearing a single item of clothing that
80 – 10 rule. Henceforth to be referred to doesn’t have a designer label on the
as Mike’s Law, kinda like Newton’s Law of Step 1 - Look the customer squarely in the outside, his highness always walks in front
Gravity or Malcolm Galdwell’s The Law of eye and say “I am terribly sorry Sir/Ma’am” of her highness. As they are greeted by the
the Few, only much more important. Mike’s continue with Step 2 - “I am sorry for the smiling hostess, he simply walks past her
law states that customers can be divided trouble/inconvenience/embarrassment looking for his ‘royal’ party. After not finding
into three distinct groups; the bottom 10% this has caused you” (notice how we have them, he will return, interrupt the hostess
who we would rather never seen again, personalized this) and finally Step 3 - “What who is now speaking to mere mortals and
the top 10% who we are quite prepared to can I possibly do to correct this for you?” just say “We have a booking!” assuming the
move heaven and earth for, and ‘the rest’, hostess will know exactly who they are.
the other 80% who come and go almost By placing the decision of recovery on the
without notice. client you will be amazed by the calmness No matter what table you take them to it is
that sweeps over them as they realize that not good enough and she will be whining
Typically we expend all our of energy the resolution is now in their hands and that on about that time in [insert exotic city here]
trying to turn the bottom 10% from hating ranting and raving will not accomplish any when [insert celebrity name here] had the
us and the top 10% to keep on loving us. more than a simple request. “Could you same trouble. Once seated, he will turn his
The answer to real success actually lies please ask the chef to cook it a little more chair slightly to avoid eye contact with the
in getting rid of the bottom 10% without a for me?” or “Would it be possible for you to lowly waiter. He will order one of the more
moment’s thought, maintaining a strong but replace it with another dish?” Crisis averted expensive bottles of wine on the list (and
healthy relationship with the top 10% and AND mission accomplished. Now go and probably miss pronounce it), but not the
concentrating most of our effort on a certain attend to the preparation of the meal, make most expensive, after all “no one can pay
segment of the 80%. You need to find sure the cutlery has been changed and these prices!”
the 10% to 20% of the middle group who keep the customer informed of the process.
are almost great regulars, almost brand You are now able to enjoy the rest of your When the rest of the party arrive all the
ambassadors and do all you can to tip them evening, no screaming, no shouting, no girls will do the double kiss without actually
into the top group. Now you are on the way blame, in short, no problem. making contact and the men will all shake
to a highly successful business. By the way, hands or maybe give each other a manly
Mike’s Law works with your staff too, but I Of course most customers are completely biff on the shoulder. The women will chatter
shall address that in a later chapter. unaware of a restaurant’s ability to sum through the specials about their kids,
them up in a few seconds. Malcolm school and the trouble they are having with
The second tip I have is in ‘complaint Gladwell calls this “Thin Slicing”. It is our their domestic staff and the men will simply
handling’ and as much as I would love to ability after years and years in the trenches ignore the waiter until he is done before
tell you I came up with this on my own, to categorize our customers without ever one of them will say… “Don’t you have
the concept was introduced to me by a life letting them know we are onto them. For any specials today?” and then make some
coach I will simply refer to as “The Hoff”. He those of you feeling a little battered and comment about how service in the country
introduced me to a way of apologizing that I bruised by a hard year, here is a little light has gone to the dogs.
believe would alleviate most of the tension relief for you…
and problems you face in the restaurant. Not one of the ladies will order directly
He explains that there is a very specific off the menu, after all it is simply a list of
three step process to follow. (And I shall ingredients from which to choose. They will
add a forth from my own experience). discuss, Mbeki, Zuma, Zimbabwe, falling
property prices and drop plenty of names
, h e re
Firstly, let us understand what happens r note throughout dinner. They talk a lot, say
lighte p nothing and interrupt each other constantly.
when a staff member is called over to a table lightly hten u
to handle a complaint. In this instant there On a s to brig They then continue to order expensive
e thing h your
are three major influencers at play. Cash, is som his wit cigars and cognacs, which they all hate,
hare t e
alcohol and ego. A lethal combination at
your day, s you r notic and complain bitterly when the bill arrives.
the best of times, which this is not. p os t it on (to You can expect a 10% tip on the dot! You
staff, laugh
have a o ne o
f can thank them all you like as they leave
Step one in handling the complaint, b o ar d a nd ime but don’t expect a reply; they are too busy
e ne x t t
and this is my contribution, remove the elf ) th lks in . saying nothing to each other.
yours s t s wa
th e s e gu e
JANUARY 2012 www.safw.co.za 31

13. MIKE SAID WHAT?
CUSTOMER PROFILE 2: CUSTOMER PROFILE 3: CUSTOMER PROFILE 4:
LE SOLITAIRE SEÑOR Y SEÑORA L’AFFAIRE
(THE LONER) (MR MRS - THE MARRIED COUPLE) (THE MARRIED TO SOMEONE ELSE COUPLE)
Usually found sitting at the bar, on the Oh, shoot! Chances are one of them Only found in quiet out of the way
same seat, wearing the same rugby jersey, doesn’t want to be here. He would rather restaurants in a corner table near the
drinking the same beer and eating the same be in the clubhouse with his mates after back. You can immediately tell they are
snack he has for the past seven years. The golf today and she would rather be out with not married as they giggle and tickle each
modern version can be seen at the same her personal trainer. Once seated, get them other. The meal is as close as she is going
table, in the same corner, reading the same their menus quickly, they have nothing to to get to foreplay so she might as well drag
newspaper, sipping the same coffee, in the say to each other and the sooner you give it out. He is in his late forties to early fifties
same coffee shop, morning after morning. them something to discuss, even if it is the and she is in her twenties to early thirties
exorbitant prices, the better. and may be wearing the corporate uniform.
He never complains unless someone else
is sitting in his chair. He knows all the staff He will be dressed in his golf clothes, sans They will listen intently to the specials, hold
by name, their ages, their likes, dislikes and the shoes and probably look like a pimp. hands and whisper. They will definitely
innermost thoughts. He has been hitting She in her tight jeans and sparkly top, high share the wine, share the salad, share the
on the same waitress for the past three snake skin boots and excessive jewellery starter and eat off each other’s plates. Give
years and is convinced she secretly has a might look like someone who works by the them lots of space to enjoy themselves, he
crush on him and if it wasn’t for that stupid hour. If you ever tell her that she might just is dreaming of later and she of the day he
assistant manager with the biceps and the take it as a compliment. leaves his wife and 3.4 kids… you are right,
attitude, the two of them could be happy it is never going to happen, but why should
together. The 26 year age difference and Don’t expect them to share a bottle of wine that stop her from dreaming?.
his four ex-wives would not be an obstacle or a salad, they haven’t shared anything for
to their happiness. ages and they are not about to start now If he had his way they would leave
just because you’ve had some suggestive immediately, but because right now she
He is happy when she serves him and selling training lately. He may have a bored is the boss, they will be the last to leave,
delivers his favourite beer without asking, faraway look while you are recounting the having depleted your stock of Irish Whiskey
but woes betide the day you send a new specials, but don’t let that worry you, it’s the and cream. By now all the other waiters
waiter to look after him. He is friendly to same look he has had for the last 23 years. have cashed up and are enjoying a smoke
a fault, bordering on harassment as the while waiting for you so that everyone can
evening wears on and the drinks go down. When they order you can expect a small be on their way. When they finally leave,
He becomes increasingly animated and argument to break out about his cholesterol he is so excited to be heading for his hotel
loud as the evening winds down and the and although he may give in and order the room that he completely over tips you and
subject switches to Super 14 or the race side salad he will inevitably eat all her chips. you get the last laugh at the other waiters.
quotas in cricket. He may be running a tab She will have the side salad, no dressing,
at the bar which means the chances of a the steak with no basting, a lemon diet coke Don’t expect to see them back in the same
tip are pretty slim. Offer to call him a cab and finish it off with a Crème Caramel. Tip restaurant and if you ever recognise him
as he stumbles out protesting that he is between 9 and 12 percent and a pleasant with someone else do not remind him of his
sober, and watch as he attempts to open goodbye. last visit.
the wrong car with the wrong keys. He will
be back tomorrow and the next day and the
next day and the…
32 www.safw.co.za JANUARY 2012

14. MIKE SAID WHAT?
CUSTOMER PROFILE 5: CUSTOMER PROFILE 6:
THE SECOND COUSINS THE “OTHERS”
Everyone’s dream customers! Second There are of course plenty of other types
cousins like you, enjoy their visit, are polite and one day I may even find the inspiration
to everyone and always go home. They to write about them, they include the ‘30th
have been coming to the restaurant for birthday party, too much money crowd’, the
ages, know everyone’s first names, and ‘new entrepreneur, let’s blow the company
bring lots of friends with them. When the budget type’, the ‘we didn’t realize this was
waiters see their names on the booking going to be so expensive party’, the ‘ethnic
sheet they scramble to get them into their group that never tips’ (this varies from city
section. to city and location to location so don’t get
all defensive) and of course there is YOU,
Second cousins are regularly found in most a true individual who just couldn’t find a
family restaurants, or their neighbourhood group to fit into. 
pizza joint. They love drinking the amusing
house wine or may prefer to BYO (bring
your own). They do watch the prices but
would never be so rude as to discuss it at
the table. They will eat plenty, enjoy the
meal and leave the table a complete wreck.
Their kids are always polite, know the
menu backwards and love paying the bill
themselves with Dad’s credit card. When
things get a little crazy in the kitchen and
the food is coming out slowly, they are the
one table that really does understand. Do
yourself a favour and move mountains to
get the kids' food out first, even the second
S L AW
MIKE’
cousins can get a little irritable when little
to Johnny starts moaning.
ided in
be div
m er s c an s .
Custo g ro u p They are a steady 10 to 15 percent tip with
istinct
t hree d little or no hassle and plenty of laughs. Do
r
e neve not forget to laugh at his latest joke, even
0% w
e bo ttom 1 ;
if you just heard it at the table next door.
1. Th again The joke will be a little off colour which will
to see
want l move
cause Mrs. Second Cousin to blush and
we wil say “Not in front of the k-i-d-esses, Mike!”
e to p 10% o r ; an
d
2. Th ar th f They will leave laughing and smiling and
n a nd e probably carrying the youngest daughter
heave ome
w ho c who fell asleep on the floor at their feet
r 80%
e othe ithout on a blanket he fetched from the Chrysler
3. Th os t w
o, alm Voyager.
a nd g
.
notice JANUARY 2012 www.safw.co.za 33

15. MIKE SAID WHAT?
I
s the franchisee to be
treated as a partner?
Absolutely. Without him/
her there would be no
income for the franchisor
and they are dependent on each other for
growth and survival.
Should he be treated as an employee?
Well, they are expected to toe the line, to
work within the constraints of the franchise
agreement and are subject to certain
penalties if they step out of line.
Should they be treated as a customer?
Well, they do pay the franchisor a monthly
fee, in return for which they expect certain
deliverables and they did after all, for a
hefty fee in some cases, buy the rights to
trade under the franchisor’s brand name.
If at this stage you are feeling a little
confused or unsure, we say: “Welcome to
the wonderful world of franchising”.
Wikipedia defines franchising as follows:
‘Franchising is the practice of using
another firm’s successful business model.’
Most franchisors would describe it as: ‘the
practice of using another firm’s successful
business model just so that you can try
and do it completely differently and then
blame us when it doesn’t work!’
Who is killing the South
African restaurant industry?
CHAPTER FIVE: To sum up the relationship in one short
Investigating the suspects - Capitán Franchisor sentence: “A happy franchisee is one
who is making money.” And there are not
many happy franchisees out there at the
by Michael Said
moment!
The relationship hasn’t suddenly gone
bad. Franchisors haven’t suddenly
“Franchising in not a democracy”, boomed the deep voice become money grabbing lowlifes who
from across the room. “This is my brand and I will protect it prey on the innocent. Some might say
they have been that way for years, and
at all costs!”
franchisees haven’t suddenly become
The statement above could conceivably have been heard independent, lazy, brand-destroying,
reprobates with absolutely no foresight
at any one of hundreds of franchise meetings held around or ability to understand the value of the
the country each year. Only names and places have been brand. They too have been described that
changed to protect the innocent. The precarious relationship way since time began. Of course I am
being facetious and inappropriate, but now
that exists between franchisors and franchisees has been a that we have that out of the way we can
topic of debate for many years and will likely continue so for attempt to discover where things are falling
years to come. short and what can be done about it.
8 www.safw.co.za FEBRUARY / MARCH 2012

16. MIKE SAID WHAT?
Let’s face it, as a franchisee, hiring a Next is “the joining fee”. This is the upfront
In order for any business, Finance, Engineering, HR and Marketing money paid for the right to use the brand
regardless of type, size or years department or external consultants would name and for the training and preparation
in operation to be successful, you cost you considerably more than the five that a potential franchisee will undergo.
need the following departments in to seven percent you are paying in royalty Unfortunately the preparation and training
some form or another, and if you or management fees, so perhaps you is often not forthcoming and new entrants
are a one man business you are should ‘shut up’ and get on with executing are left to sink or swim on their own, and
probably trying to do it all. your side of the deal. If, on the other hand, regrettably it is often the former. Of course
you are not getting the input and the the company has a right to charge an
A Finance and Accounting support you were either promised or were entry fee for joining their organisation and
division. Finance plans for expecting, it is time to speak up and speak the training they will provide, but if there
future growth and long term up loudly. is no support structure, the manuals and
stability and Accounting takes documentation are either nonexistent or
care of the day-to-day expenses So what role is the franchisor playing in the outdated and the value of the brand has
and bookkeeping duties. Death of the Restaurant Industry in South been overstated, then surely somebody
Africa? Well, the role is multifaceted and must be held responsible. But please
An Engineering and we will start at the very beginning. remember the Latin phrase “Caveat
Production division. emptor” – Let the Buyer Beware!
Engineering plans ahead,
developing new products and Now, if charging an upfront fee when you
models and Production will The Consumer are offering little to no support seems
produce these today. unreasonable, then charging it a second
Protection Act, having time is surely bordering on criminal. All
An HR and a Personnel
division. HR is responsible
shifted the burden too often the first poorly vetted, hardly
trained, badly prepared and over matched
for the future development of more firmly onto the franchisee fails miserably and is left to pick
your workforce, ensuring that
there is adequate manpower
shoulders of franchisors, up the pieces of a failed venture. He is left
facing financial ruin and wondering why
and skills for the company to may resolve some of he failed when ‘anyone else’ would have
build on while Personnel looks succeeded. Now the franchisor goes out
after the day-to-day welfare and the problems, but the in search of another ‘victim’, sorry I mean
attendance of the workforce. onus rests with the franchisee, and the cycle stars anew.
No vetting, no training, no support and...
A Marketing and a Sales potential franchisee to no chance. The problem stems from the
division - and they are not
the same thing! The marketing do his homework before fact that the franchisor does not have a
sustainable business model for himself,
department develops the signing. and not for his franchisees. Instead he
strategy and the medium with relies entirely on repeat joining fees to
which to take your company sustain his business. Your failure is his
or product to market and your success.
Sales team will go out there There is little or no doubt that a number of
today and sell it to them. the concepts offered as franchises should I need to state for the record that this is not
not even be operating on their own, let indicative of all franchisors and there are
The common thread is that alone as a franchise. Stricter laws need plenty of excellent companies out there
Finance, Engineering, HR to be in force before you can take money delivering much more than they promise.
and Marketing all relate to from an unsuspecting public. While the They offer excellent support, top notch
the future of the company Franchise Association of South Africa training and ongoing guidance. It is up to
with the franchisor assuming (FASA) is doing a fantastic job of setting the buyer to ensure they are dealing with
responsibility for these roles, controls and monitoring in place, it is such a company. If you are thinking of
while Accounting, Production, not illegal to start a franchise company entering the market, do your homework;
Personnel and Sales relate to without being a FASA member. The speak to existing and ex-franchisees and
the now and is the responsibility Consumer Protection Act, having shifted contact FASA.
of the franchisee. The problems the burden more firmly onto the shoulders
in franchising arise when either of franchisors, may resolve some of the So you have signed for a store and put
one or both parties are not problems, but the onus rests with the down a hefty deposit. What happens
delivering on their side of the potential franchisee to do his homework next? Well, you wait for a location, and this
bargain. before signing. too is often in the hands of a franchisor
FEBRUARY / MARCH 2012 www.safw.co.za 9