Exciting New Opportunity Emerges Quietly
Arguably the most exciting addition to South Africa’s franchise scene is the Dis-Chem franchise which was launched in the second half of 2009. This company’s move into franchising happened for all the right reasons. Dis-Chem is essentially a family business with extremely strong cash flow. It could comfortably fund its further expansion from own resources but its founder and CEO, Ivan Saltzman, recognised that operating through manager-controlled branches hampers growth.
Saltzman identified franchising as the preferred vehicle for further expansion and retained Franchising Plus to create the necessary infrastructure for a trouble-free roll-out of the concept. Following a year of painstaking preparations, six franchisees were brought on board. Some are already trading while others are being groomed for trading success.
Franchise model with a difference
Dis-Chem’s franchise model is interesting in itself. Saltzman realised that because of the very high capital cost of setting up a store, individuals with the necessary capital who are willing to operate the store hands-on would be hard to find. Yet hands-own management by the franchisee is Dis-Chem’s main rationale for franchising.
To resolve this dilemma, Eric Parker of Franchising Plus developed a joint venture model which has been adopted by Dis-Chem’s management. It functions as follows:
Once a promising site has been identified, a new company is established and granted franchise rights for the specific area. Dis-Chem Holdings (Pty) Ltd holds a minimum of 51% of the shares, with the incoming franchisee taking up the rest. By using this model, Saltzman has managed to attract excellent operators into the network, individuals who would not have been able to support the full investment required.
To find out more about the use of the joint venture (JV) model in franchising and other growth mechanisms, contact Eric Parker at Franchising Plus firstname.lastname@example.org.