As a franchisee, like most other business
owners, it is of great importance for you
to build up cash reserves and savings
for future projects and unexpected
expenditure. With franchises specifically,
you have to plan for and consider certain
factors when putting those hard-earned
funds away.
Small revamps and repairs
Small in-store revamps and monthly
maintenance payable from monthly
cash generated from your business are
encouraged, and can include replacing
old furniture, buying new equipment, as
well as servicing and repairing existing
equipment.
As a franchisee you need to have a
cashflow that can accommodate these
Nedbank provides flexible, relevant and cost-effective financial packages that take into account your company's
present position and future goals. Lending forms an integral part of business success and Nedbank provides packages
customised to the needs of each franchise concept. These finance packages include funding for new store setups,
financing for resale transactions, financing of multisite franchises, as well as revamps.Laurette PienaarWhy you need to build cash
reserves for your franchise
upgrades. Do keep in mind that your
turnover is expected to be lower during
this time due to the inconvenience
caused to customers.Major revamps
Franchise outlet agreements require
revamps and upgrades of trading spaces
every five to seven years. Therefore, in
addition to monthly maintenance and
repairs, you have to set aside savings to
accommodate major periodic revamps.
These revamps usually entail a full
makeover of the store and can include
everything from new wallpaper or paint
to a complete restructure and expansion
of the store with new equipment. It could
also include new signage to comply with
brand standards and requirements.The cost of a major revamp can vary from
R300 000 to R4,5 million, depending on
the concept and size of the store. Always
remember to take cashflow implications
into consideration for the time that your
store will be closed.Expansion
Most franchisors encourage multi-store
ownership in the current South African
economic environment. Strategically, this
gives existing franchisees the opportunity
to own, expand and diversify a portfolio
of stores as opposed to owning only
one store. You will, however, have to be
prepared financially with the minimum
required unencumbered funds to open
more stores.First right of refusal will usually be given
to the closest franchisee in a specific
geographical area. If you do not have the
required funds available, this opportunitywill unfortunately be passed on to the
next qualifying franchisee with the
available funds.Also remember that the investment
amount of franchise concepts might
increase over time, and are often
influenced by inflation, fluctuation in
commodity prices, the cost of securing a
site, changes in the franchisor structure
or ownership and location-specific
requirements.Seasonality and predictable
fluctuations
Most franchises experience some form of
seasonality or fluctuation in their trading
throughout the year, which may influence
your cashflow negatively or positively.
Some seasonal periods are easy to
predict, such as school holidays, winter
and summer months, festive seasons,
religious holidays and special events
taking place in your area, and you can
plan in advance.However, unexpected factors, such as
fickle weather conditions and natural
disasters, can affect your business. This
is why it is important to do research
and to take unexpected fluctuations
into consideration when retaining cash
reserves.Speak to a Nedbank relationship banker
for advice on innovative savings plans
and to discuss your future requirements
for working capital facilities or required
capital expenditure.For more information on how Nedbank can assist please
contact Laurette Pienaar, National Franchise Manager,
Nedbank Business Banking. Tel: +27 (0)11 294 2829,
email: [email protected].FranchisingNews Advertorial