enterprise development · to franchisee level 1 – recommended for start up companies • the...
TRANSCRIPT
Enterprise Development –
Bridging Economic Transformation
Franchising as an alternative
Roshqott
Content
B
C
D
A
PwC
Content
Franchising – what is it about?A
Roshqott
Franchise Concept
Franchising the Energy sector is an unique conceptwhere Roshqott grants ; The rights to use its complete business package containing allthe elements necessary to enterprise a previously disempoweredperson into the Energy business ;
To enable him or her to run it on an ongoing basis, efficientlyand profitably according to guidelines supplied;
Franchised Business models are diverse ,ranging from selectedproducts and services agreements to the complete range thatinclude Substation ,Overhead line construction and HV/MVnetwork maintenance
The franchisee is the key pillar in franchising ; HV/MV network construction experience and knowledge oflocal market are key assets for the business model ;
The premise is that franchisees can achieve better results than inown businesses, where franchising is used to grow the totalserved market and achieve cost reduction
1Roshqott
Entrepreneurship promotes franchisee’s best performance
ey lements for Success
• Exclusivity: franchisee represents only Roshqott’s Products and services
• Branding: Roshqott’s brand policy has to befollowed strictly
• Product portfolio: in most cases completeProduct /service portfolio is offered
• Engineering : full engineering including designs support
• Advisory services:Set up and on-going training of staff
• Entrepreneurship: franchisee are independententrepreneurs with full P&L and staff responsibility
•Costs advantage for the franchisee:access to Roshqott’s procurement chain
2Roshqott
A clear agreement about entrusted constructionactivities enables close monitoring of franchisees
Main obligations of the Franchisor Main obligations of the franchisee
•Supporting Franchisee drafting a Business Plan
•Engineering and design support•Support Franchisee on Preparation of tenders•Main Equipment - procurement and supplies•Supporting business tools’ implementation•Advising on IT systems to be acquired by franchisee•Advising on Personnel,Plant, equipment required•Providing detailed procedures and training•Supporting franchisee on-site SHEQ issues•Supervising and controlling franchisee’s activity•Providing detailed catalogue of activities
• Managing and Performing business activities
• Providing business contingency plans• Regional marketing• Participation in training provided by Franchisor• Recording and accounting for monthly, all
business transactions• Following all regulations provided by the
Franchisee as per instructions and procedures documents
• Keeping in secret any information concerningagreement details ,IP or client’s data
• Preparing monthly management accountsdocumentation and submitting it to theFranchisee
• Ensuring monthly payments to Franchisee of allfees/commissions and equipment supplies
Typical activities for the Franchisor and the franchisee
3Roshqott
Engineering,Technical ,Commercial issues are covered by franchisor – Construction management and on-site execution issues are covered bythe franchisee
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Franchising: Different roles on the value chain
Support functions: Human resources, finance, IT, general services etc.
Suppliers Operations Sales CustomersDistribution/Logistics
FunctionsFranchisor Franchisee
Roshqott
Product selection flexibility allows smaller but effectiveinvestments
Offered Products :
• Turnkey substation projects : Franchise agreements Will have as its focus turnkey HV substations
• Turnkey rural Overhead line projects :
• MV overhead line
• Networks and equipment maintenance : this will beincluded as part of the standard package
• Protection and automation systems
5Roshqott
PwC
Franchising modelsB
Roshqott
Engineering Franchise ConceptualModel
DTI
Government InstitutionsPrivate Sector
SOC’S -BEESubcontract Quotas
T&F institutions- BEE Funding
GovernmentInstitutions
Market
Model description
• Government through Department ofTrade & Industry and otherGovernment organs dictates andinfluences SOC’s ,Municipalities andothers , levels of BEE and SLD quotasthat Government Institutions mustintroduce to achieve economictransformation .
• Often,these dictates are enforced through tender and finance grants awards on pure BEE merit to companies without the necessary production , business skills
and fiancial support .
• However well intended in the name of BEE industrialization ,some of these contracts have disastrous results due to poor execution skills and/or contractors inability to raise the necessary funding .
• Engineering Franchise concept bridges the expert production and business skill gap ,thus ensuring a positive outcome to all stake holders .i.e. The client get a quality and on time executed project , funding institutions are more pliable to issuing grants and seed capital to contractor and most important of all the impulse and development of profitable and successful small enterprise today , with probability and aspirations of a future large coperation in the future .
Licensed Franchisee’s
6Roshqott
Bussiness Market Structure Model
Holding Company
T&F institutions -Funding Support
SOC’S -CustomerSupport
Roshqott energy EnterpriseDevlopment PtySubsidiaries
Stakeholders
Model description
• Holding Company to be formed with60/40 BEE Partnership•Subsidiarycompanies 100% ownership .
• Enterprise Development company will be responsible for Franchisee acquisition and contracting: -Recruiting -Contract Formalization -Know how transfer and Trainning -Control and communication
• Roshqott Energy solutions company will be responsible for Franchisee Engineering and product / equipment support: -Equiment /Material technical specs. -Drawings -Main Equipment Procurement -Project Management.
• Franchisee 100% owner equity Holding company may take 20% equity BEE majority ownership. -Bussines management. -Balance of Plant Procurement -Project Management -Construction
SOC’s ,Trade and Finance institutions support is paramount . -SOC’S “Buy-in” and prefferred contractor stataus -DTI, IDC finance and grants -Equity fund investors
Licensed Franchisee’s
7Roshqott
Roshqott Bussiness Organizational Model
Holding Company
Roshqott energy EnterpriseDevlopment PtySubsidiaries
Enterprise Development
Incubator
8Roshqott
Engineering Franchises
PRODUCTS & SERVICES
● Licensee Recruitent and contracts
● Licensed Products & Services
● Kow how transfer and Training
● Construction Resources
● Control and Comunication
Stage 2
The franchising concept can be divided into three stages
Franchising framework
3 4
Network Maintenance and Automation
Ove
rhea
d li
ne
and
Su
bsta
tion
s ● Supplies● Engineering● S&M● General management
1-2 Years
● Supplies● Engineering● S&M
3-5 Years
2
Stages
Stage 1
Support services Phase Periods
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Stage 3 ● Supplies● Engineering
6-7 Years
Roshqott
The franchising cooperation can be implemented ondifferent levels
Engineering franchising cooperation model levelsComments
Franchisee sign forcontracts and ownin -house executionCIBD levels 6-7
Supplycontractualproducts+Engineering
Level 3 – Upon Financial and market maturity
Supply contractualproducts+Engineering +S&M+GeneralManagement
Franchisor signs forcontract andsubcontract partsupplies and servicesto Franchisee
Level 1 – recommended for start up companies
• The franchisee undergoes incubationperiod before being raised to franchiseestatus .
• Sign up as an Enterprise developmentcompany •
. Entrepreneur status (compulsory)
CIBD levels 4-5
Franchisor andFranchisee sign forcontracts andsubcontract partsupplies and servicesbetween one another
Supplycontractualproducts+Engineering+S&M
Level 2 – Ideal for SME’s companies
• Franchisee contract directly withcustomer
• Exclusivity• Entrepreneur status (compulsory)
• Franchisee is involved in thewhole process
• Exclusivity
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Detailed franchising case example
Roshqott
CIBD levels 1-3
Financial Investment Model
KPIStart up costs Royalties &Commissions
CAPEX <R2’0 Million
OPEX <R1’00 Million
BM : 0%Eng.:0%
Roylaties :0%
PricingModel
Level 3 - Franchisestage 3
Level 2 - Franchisestage 1-2
Level 1 - EnterpriseDevelopment
Entrylevels
CAPEX <R7’0 Million
OPEX <R3’00 Million
CAPEX <R11’0 Million
OPEX <R7’00 Million
BM : 0%Eng.:4%
Roylaties :5%
BM : 3%Eng.:4%
Roylaties :5%
Sales : R5-10MillionProfitability:20%Pay back :N/A
Sales : >R50MillionProfitability:12,5%
Pay back :3-5
Sales : R25-40MillionProfitability:15%Pay back :3-5 Years
Roshqott 11
Roshqott
The implementation of a franchising concept should startwith a clear plan and pilot phase – Execution in 12months
Pilot timeline
2 – 3 months 9 months
Pilot Design
LaunchpreparationInitial/quick
scoping
Go/No-goon pilot
Incubation through subcontract if project awarded
Franchise Roll-out Planning Franchise AgreementLaunch
pilot
Positive preliminary results No/No-go on roll-out
Unspecified
• Identify Territory• Identify project• Define operational risk• Attraction of franchisees• Start pilot 3-4 branches
• Attractive model that must get the buy-in from stakeholders
• Competitive advantage thanks to ascalable technological platform
• Test and learn in a larger network
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Roshqott
Roshqott has created an Engineering franchise networkconcept to grow and gain market share faster
Key elements in Roshqott’s franchising process
• Requisites:- Local market
knowledge- Technical
knowledge• Employees: •
There are threerolls:- ProjectManagement
- Construction
- Office director
Enterprisedevelopmentcontract with anexclusivity clause
Termination at endof subcontractagreement
Know-how transfer/Training• When the Enterprise Development contract is
signed the enterprise receives on-siteconstruction training for employees and forthemselves.
•The enterprisee can contract for additonalbusiness training and construction resources
Control and communication• Control is enforced through periodic steering
committee meetings from the central officeand through business targets definition
Reasons to cancelthe contract:
• Substandardproject quality/projectexecution
• End ofsubcontract
Developedenterprise reachesfinancial maturity
Know-how
transfer/TrainingExit
Previous to signature Contract End
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Contractformalization
Recruitment Enterprise
Development
Roshqott
Roshqott has created an Engineering franchise networkconcept to grow and gain market share faster
Key elements in Roshqott’s franchising process
• Requisites:- Local market
knowledge- Technical
knowledge• Employees: •
There are threerolls:- ProjectManagement
- Construction
- Office director
EngineeringFranchise contractwith an exclusivityclause
Termination at endof subcontractagreement
Know-how transfer/Training• When the Engineering Franchise contract is
signed the franchisee receives training foremployees and for themselves
• The franchisor transfers Business App. andalign franchisee with IT and brandingrequirements
Control and communication• Control is enforced through periodic auditing
from the central office and through businesstargets definition
Reasons to cancelthe contract:
• Substandardproject quality/projectexecution
• Growth belowobjectives
If the contract iscancelled Roshqottwould replace withanother franchisee
Know-how
transfer/TrainingExit
Previous to signature Contract End
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Contractformalization
Recruitment Engineering Franchise
Trainning Centre
Opentrainning
Rooms
Board RoomReception
Satelitemeeting room
Premises and Trainning Facilities
Head office and
Distribution Warehouse
Monte CarloKyalami Bussiness Park
Roshqott 15
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The franchising concept is a new and unique Concept in
South Africa – Main objective is enterprise and skills
development for Southern African Countries
Roshqott
PwC
Setting up and running a franchisingmodel: risks and benefitsC
Roshqott
Roshqott
Gain-Risk Analysis
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• Threat of loosing own identity• Pressure on Margins• Dependence on Franchisor operational and market power (products, procurementpower, process, image)
Franchisor
Franchisee
Risks
• Own business• Brand and products already
established• Independence• Increased customer trust
Gains
• Amortization of costs• Rapid expansion of regions possible• Relatively low initial investments
required• New client base achievement• Enables sales and entrepreneurial
approach along with flexibility
• Lack of interestedentrepreneurs/partners– In traditional recruiting channels (own
network)– Lack of brand recognition
• Lack of buy-in by Industry stakeholders• Increased complexity of management• Abuse of IP data by franchisee
PwC
Things to get right
Roshqott
D
Roshqott
The analysis of concepts has led to the identification of bestpractices from traditional franchising
Create trust andconsistency
Create trueownership andaccountability
Create one voice
• Develop a model that ensures clear and equitable relationships
• Ensure that policies, procedures and practices treat the franchisee as apartner
• Work together on joint business planning and allow for a model thatprovides enough flexibility for both sides to succeed
• A franchisees association – associate and get together
• Participate in the organization process to ensure franchisor interests arenot damaged
Transferable best practices
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