Master Franchise in America
Creative Image Craft Painting studios have now become synonymous with the craft industry in South Africa and to date established 60 studios nationally, as well as 3 international studios being in Mauritius, Zimbabwe and Namibia. Over 3500 ladies attend classes nationally with a student life span of over 3 years (national average).
It is becoming increasingly clear to us that the trends in South Africa are no different than the rest of the world in our industry.
The craft industry has blossomed in the world. A number of factors have accounted for this including retrenchments, early retirements and the increase in the cost of living.
People attend our classes for a great variety of reasons some of which are.
- to learn to paint
- to relax and relieve stress
- to escape the world for a few hours
- to meet other like minded people
- to make new friends
- to be creative and make items for friends and family
People are in situations where they have to look for work to sustain their life style. Generally speaking they are ill equipped to gain work in an ever-increasing high tech world. This has created a need to generate income from self-skills.
At a recent exhibition in Johannesburg over 45,000 people attended a craft show, add to this the number of craft and flea markets that are on every weekend and it is easy to see the interest in craft and hobbies.
Teaching craft or painting is not a unique endeavour but coordinating it and managing it in a professional way are. Many people try to give lessons and generate income from this but soon fall by the wayside because of a number of reasons
- The continuous advertising required to generate clients is costly
- The self motivation to create new ideas and patterns is too time demanding and leaves no time for teaching
- The non access to relevant products at realistic prices from one source
- No set program to work to
- No credibility in the market place
- No business skills to operate the business effectively
- No interaction with other teachers (as they are perceived as a threat)
- Cannot afford to attend major craft shows as an exhibitor
These are just some of the reasons that the small operator faces when starting a home industry.
Creative Image has turned the home industry into a business with professional advertising, design, marketing and product supply as well as ongoing training and motivation. Add this to our unique designs ,products and operating procedure we create a winning formula.
In South Africa we have a limited number of people to market to, as arts and craft as a hobby is predominately a white orientated pastime, other than traditional arts and crafts practiced by the rural black population.
Having only 6 million white people in S.A.
Once this is broken down to the viable target group we finish with less than 1 million. We foresee the viability of opening up to 100 studios in S.A. as a feasible size market.
If one takes America and applies the same criteria, with its 300 million people the thought of the number of studios exceeding 2000 is not only viable but also a realistic expectation.
We would expect each major city to accommodate 20/30 studios( Johannesburg/Pretoria has 17 ) with smaller cities and rural towns having one or two.
Having spent the last 15 years perfecting our ideas and testing them in the market place, we have eliminated all the pitfalls that are out there and have gone forward to the success of today.
With limited potential in SA we are now looking to use our ideas in various countries overseas.
We have tested our market in Mauritius which has a totally different culture and life style. We found over the past 4 years that the attitudes of women are basically the same, their wants needs and aspirations are equivalent to western women. we have tried and also been successful in Zimbabwe and Namibia.
Taking the step to the American market will be a huge step for us. It will require enormous effort on our part in respect of the time we will have to spend in the US, and the infrastructure and training that will be required to make the franchise holder successful and give them a greater return on the investment.
Given the amount of returns that would accrue to the venture it could be asked why we do not want to do this on our own. The answer to this is clear we do not know the US its laws and geographical infrastructure, transport logistics and population disbursement. Taking these factors into consideration it is more prudent to align ourselves with an existing company that can assist with this and to provide capital to ensure the ventures success. Also an existing company may have a management setup nationally that can be dovetailed with our operation to ensure fast rollout.
A training studio would have to be set up that simulates a studio, so franchise operators know what to do when setting up their own studio.
Franchising our business in the U.S. will have vast differences than in South Africa by way of logistics. With the vast size of the market and given that each state is an entity in its own right the prospect of sub franchises per state or management setups may be required. In S.A We can handle all the co ordination from a central head office where as state or regional offices may be required in America. Divisions may have to be set up to allow for stock handling, as the number of studios increases.
Ideally it would be advisable to start in one state and progress from there building the infrastructure as required. This would also allow for training and opening of studios in a coordinated fashion as we do in SA..
Projected Turnover and Profitability for a 5 Year Plan
|100 STUDIOS @ $20,000
|SALES @ $10,000 PER STUDIO P/A X100
|100 STUDIOS @ $20,000
|SALES @ $10,000 PER STUDIO P/A X200
|100 STUDIOS @ $20,000
|SALES @ $10,000 PER STUDIO P/A X300
|ROYALTIES ON 100 STUDIOS @ $2000 P/S
|100 STUDIOS @ $20,000
|SALES @ $10,000 PER STUDIO P/A X 400
|ROYALTIES ON 200 STUDIOS @ $2000. P/S
|100 STUDIOS @ $20,000
|SALES @ $10,000 PER STUDIO P/A X 500
|ROYALTIES ON 300 STUDIOS @ $2000 P/S
|This gives us a total over the 5 year period
The opening of a studio costs approx. 20% of revenue (franchise fee)
The profit on stock is in excess of 50% so total profit over the 5-year period will be in excess of 16 million Dollars
This assumes that the studios only reach 500 over the 5-year period but in reality it should be 1000/1500. It also assumes that the franchise fee remains the same, but we have increased our franchise fee by 30% since we started. It also assumes that the studios will only do $10,000 in sales where some of our local studios are doing over $20,000.
Once you get into the 6/7/8 years as we are in South Africa the revenues increase drastically as you put more studios on with existing studios paying royalties and the stock sales multiplying.
These figures do not account for staff of head office or advertising costs for promoting the concept.
If you were to have each state set up to run as an entity in its own right . Each state should be able to establish at least 60 studios giving you faster penetration of the overall market and be able to set up at least 20 states in the first 2 years. This would equal 1200 studios or more than double the lowest projections for the 5 year period.
It becomes obvious that for this kind of operation, you will need the relevant staffing to control stock and supply You will need to budget for warehousing to feed the monster.
For the above exercise we used $20,000 as a franchise fee but a more realistic fee may be set by the franchise holder to suit what is acceptable in the market place. The franchise fee charged would be such that it corresponds to the student fees obtainable when a studio is operational.
In SA we charge R 200pm to the student your equivalent maybe $100 so a studio that has 60 students would be receiving $6000 pm in fees. So it would take only 4 months to recoup the initial investment so the possibility is that $30,000 or $35,000 could be charged for the franchise fee. In SA it takes about 5 months to cover the franchise fee.
Investigations on what current fees are being charged to students in the U.S for similar lessons would have to be done to decide on student fees for the studios. This would be so as not to overprice ourselves in the market place.
Additional Advantages For Master Franchise Holder
Other than the financial returns of the initial operation the advantage of having a number of outlets for the master franchise holders own products is relevant. Having a large number of outlets as a captive audience to launch existing and new products becomes obvious.
What Do You Get For Your Investment In The Master Franchise
We are offering the exclusive rights to market and sell the Creative Image concept, Using the Creative Image name and logo, our designs and formats, manuals and marketing programs.
So, as reflected in the above figures, by increasing your student level by two extra per class, you can increase your income by approximately $22,000 a year, and accordingly for every additional student your income increases proportionately. These figures reflect turnover and profit on goods sold. Your individual overheads will reduce these figures but should not exceed $100 per month, which is less than 10% of profits.
- Training of two of your staff in South Africa for one month to a standard that is acceptable to us to be able train other teachers who will be buying into the franchise.
- Training in Australia for staff for one month by South African founders of Creative Image.
- Assistance in selling the first franchise and training of the first operator.
- Directors of creative image to be in Australia for 6 weeks to launch concept.
- Design of all marketing needs for the Australia market to help start the master franchise.
- To assist with all marketing in a personal way via radio/tv and other media to help launch the franchise.
- To provide stock initially at export prices to start the franchise, there after to assist in obtaining local suppliers of products that are more cost efficient to source locally.
- Provide paint in bulk for local packaging in due course when supply demands
- To provide new products on a regular basis
- Directors to travel to Australia once a year. To do ongoing promotional work.
- Inclusion on website under Australian heading
- Stock to the value of $50,000
- Training manuals and patterns, plus ongoing supply of new patterns
- Ongoing training for Australian staff
- Ongoing projects and new ideas
Cost Of Master Franchise
The cost of the franchise has been worked out according to the viability of the country. We estimate that 1000/2000 studios can be established in America over a 5/7-year period. This would mean a cost of less than $2000 per studio. Given that each studio will generate revenues in excess of $100, 000 over the 5-year period. Even more the longer the studio operates (studios in S.A. are now in their 7 year) in total the revenues of the 2000 studios will exceed $100 million dollars.
These figures may seem at first glance to be unrealistic but one only has to take the S.A. operation and do the simple math to see that over the last 6 years we have put on 60 studios.
In all revenues from the local operation have exceeded 20 million
As can be seen in the other information supplied that each studio generates more than $70, 000.00 p/a which if an operator is with us for 7 years she puts approx. $490, 000.00 into the economy. Multiply this by 1000 studios and multi millions are put into the local economy. (This figure is reached by the purchasing and spending power of the operation and not what accrues to the business)
Not only are you putting money into the market place but you are creating jobs by
- creating sustainable income for the franchise operators -/+ 2000 jobs
- staffing to handle infrastructure _-/+ 20
- artisans to manufacture allined products
- import / agents
- transport agents staff
So the benefits also assist in the social responsibility of a company by helping the economy as a whole. This may also give an entry for assistance from government for various grants offered for job creation. Also the P.R that could be generated from this would help a company image.
COST OF MASTER FRANCHISE FOR AMERICA (USA) $3,5 MILLION US
ROYALTY PER YEAR AFTER THE FIRST 2 YEARS or 500 studios 2.5 % of new studio fees
Creative Image retains 25% non-profit in company for ongoing sale or operating rights.
You will need to have on hand approx $ 3/500,000 in stock
Franchise package will be tailored to suit your needs. Contact us for an assessment.
Things To Be Aware Of
One must also be aware that additional funds will be required to promote the concept and do regular advertising. We envisage that an equivalent amount to that of the franchise fee will be required to get the concept going. However there are a number of ways to get free advertising, which we will advise during training. The business should be self generating after the initial startup but cash flow is vital to be able to maintain a good stock level to be able to service the studios. In South Africa we carry approx. R500, 000.00 of stock on hand to service the 40 studios. With importing from South Africa you will also have to budget for the delivery time for sea freight. The current exchange rates should act in your favor in respect of stock purchases.
Last year we spent in excess of R300,000 on advertising in national magazines and distributed over 250,000 pamphlets nationwide. When compared with the U.S these amounts seem quite insignificant but in our limited market they are quite large for the local industry.
It is essential to know that this is a hands on business and will only succeed if it is attacked with gusto and passion. In the early stage it will be enticing to take on anybody with money to be a franchise operator but this will be to the detriment of the business as a whole. Your selection process and the standard of your operators will ultimately set the standard of your credibility in the market place