Franchises

The following information will help you make the right decision. The idea to franchise was born from personal experience with the franchise I previously had and having spoken to other franchisees, it seems that poor service and support from franchisors is endemic. i-Water wants to not only make a success of our own water shops but also extend the privilege to others.

i-Water therefore commits to support the franchisee from set-up to continual assistance to build and maintain a profitable business. As far as possible due to distance restraints we will make regular visits to the franchisee site of business and especially at set-up will be there to provide guidance in choosing premises and installation of equipment and interior furnishings. Training will be provided prior to start-up and on an on-going basis as products develop.

Our brand is based on ethical trading which creates a climate of fair practice wherein the franchisee is able to maximise profits whilst building a loyal client base. We want to establish a brand that facilitates a platform for fellow franchisees to share their experiences where they can discuss best practices, pitfalls and trends. We will walk the walk not just talk the talk!

Issues Pertaining to the Franchise Cost Terms

§ What do you get for your initial fee? Reverse osmosis system (500L/hour) supplied and installed by qualified water filtration engineers, alkaline filter to produce high volume alkaline water), fridge, counter top, cash register, shelving, signage, flyers, and stock. The stock includes containers, empty bottles, caps and labels to run for some time depending on volumes the business will enjoy at start-up. You will be given an inventory list with cost prices and suggested retail prices. E-mail address @iwatershop.co.sa. On-site training on machinery and products.

§ The full fee is payable prior to set-up. Any financing is for your own arrangement and does not involve the franchisor.

§ Royalties during the first year are payable monthly being R2 800.00 replaced by 5% turnover from year 2. This provides breathing space to establish the business without incurring high royalty expenses. Monthly royalties are paid by EFT on the first day of each month.

§ Royalties are paid to cover support from the franchisor, research and development, sourcing of stock and price negotiation, website (currently under construction), franchisor visits to the franchisee and ongoing support.

§ Initial local advertising is provided and future advertising and promotions will develop with the brand. i-Water has had discussion with North West University to develop a game for the i-Water website which will provide excellent marketing opportunities through school competitions for local franchisees. This is medium to long term as the cost to develop a game is very high.

§ If you have to live off the proceeds from the business as the main source of income, it is advised that a working capital sufficient to live off be provided for the first 3 – 6 months.

§ Average profit margin is high with a comfortable income of R25,000-00 before tax and after expenses with minimum effort. Aggressive marketing and promotion of filter systems can increase this to the income you want. What you put in is what you get out.

Issues Pertaining to the Franchise Location Terms

§ The franchise does not apply to a specific geographical area. If 6 different franchises can operate in a single municipality, it makes sense that in an ideal situation, those 6 shops should all be the same franchise.

§ Whilst the franchisee has the final decision in the selection of a site, i-Water will guide and advise in selection, from experience, high foot rate equates to quicker profits and sustainability BUT high rentals result in failure.

§ Whilst the geographical area is not specific, full discussions will be entered into prior to any perceived or real threat to the existing franchise. The existing franchisee will be given first refusal and if required, assistance will be provided in securing additional finance if required.

§ Both retail and wholesale pricing will be determined by the franchisor and no price wars or under-cutting of i-Water prices between franchisees will be allowed.

§ Any research and development will be shared with the franchisee who will have access to any new products or services that may arise, this at no additional cost.

§ Zoning and/or other legal rights required to operate the business is the responsibility of the franchisee.

Issues Pertaining to the Buildings, Equipment and Supplies Terms

§ Trading area will require a minimum 60sqm shop if you have off-site storage space, if not minimum 80sqm. Ideally one needs cheap storage to enable larger stock quantities to be at hand if a bottle manufacturer is not operating in the immediate municipal borders. Larger orders attract better pricing which is essential in a competitive market.

§ Equipment will be supplied and installed by a contractor (qualified hydration engineer) appointed by the franchisor. The franchisor will provide full support in setting up the shop so that the franchisee can be begin trading from day one.

§ The hydration engineer determines set-up and layout of the equipment.

§ All equipment and supplies must be bought through the franchisor who will manage and ensure quality control. No minimum quotas apply.

§ The franchisor acknowledges that different communities have different requirements, therefore some leeway with regard to fitting of premises will be allowed. The franchisee has leeway, if granted in writing, to a degree of individuality in response to client needs and tastes.

§ Franchisee is responsible for all insurance and legal duties required to run a business. The franchisor will inform the franchisee of national rights and legal criteria to run a business.

Issues Pertaining to the Operating Practices Terms

§ It is not necessary for the franchisee to be personally involved in the day to day operation of the business but must at all times have controlling interest in adherence to policies and procedures stipulated by franchisor.

§ The franchisee will be provided with onsite training prior to commencement of business and will be issued with a manual on operating policies and procedures. Whilst this manual might be prescriptive it will assist with and ease daily operations and ensure minimum standards.

§ There will be continual management aid, training and assistance provided by the franchisor which costs are not covered by the royalty fee. Annual conference to be paid by franchisee; daily training covered by franchisor.

§ Other than the initial placement of advertorial in a local newspaper and supply of flyers and plastic carry bags, the franchisor will not provide advertising. From experience, word of mouth and customer care at point of sale, are the most successful.

§ Book keeping services are available and a very simple user-friendly stock system is available.

Issues Pertaining to Termination and Renewal Terms

§ Every endeavor will be explored to ensure that the relationship between franchisor and franchisee is beneficial to both parties and that both parties adhere to building the brand and building profitable business, therefore early termination by either party will be bound by contract. Contractual conditions must be met by both parties.

§ In the event of sale of business, the franchisor must be informed and discussions be entered into with all parties including the franchisor.

§ Should the franchisee decide to discontinue business, the franchisor has first option to purchase the equipment and/or find a new franchisee but is under no obligation to do so.

§ Renewal of contract will be on a first refusal basis.

Conclusion

The franchisor manages 5 water shops and is therefore aware of the challenges and best practices of operating a water shop. Please contact Maureen on 083-389-0148 should you wish to discuss opening a franchise. I will also be available to visit possible sites and advise on location and matters pertaining to your future business needs in regard to the franchise.