Enterprise Development – B ridging Economic Transformation F ranchising as an alternative
Content A B C D Roshqott
Content A Franchising – what is it about? PwC Roshqott
Franchise Concept F ranchising the Energy sector is an unique concept where Roshqott grants ; The rights to use its complete business package containing all the elements necessary to enterprise a previously disempowered person into the Energy business ; To enable him or her to run it on an ongoing basis, efficiently and profitably according to guidelines supplied; Franchised Business models are diverse ,ranging from selected products and services agreements to the complete range that include Substation ,Overhead line construction and HV/MV network maintenance The franchisee is the key pillar in franchising ; HV/MV network construction experience and knowledge of local market are key assets for the business model ; The premise is that franchisees can achieve better results than in own businesses, where franchising is used to grow the total served market and achieve cost reduction Roshqott 1
Entrepreneurship promotes franchisee’s best performance ey l ements for Success • Exclusivity: franchisee represents only Roshqott’s Products and services • Branding: Roshqott’s brand policy has to be followed strictly • Product portfolio : in most cases complete Product /service portfolio is offered • Engineering : full engineering including designs support • Advisory services: Set up and on-going training of staff • Entrepreneurship: franchisee are independent entrepreneurs with full P&L and staff responsibility • Costs advantage for the franchisee: access to Roshqott’s procurement chain Roshqott 2
A clear agreement about entrusted construction activities enables close monitoring of franchisees Typical activities for the Franchisor and the franchisee Main obligations of the Franchisor Main obligations of the franchisee •Supporting Franchisee drafting a Business Plan • Managing and Performing business activities •Engineering and design support • Providing business contingency plans •Support Franchisee on Preparation of tenders • Regional marketing •Main Equipment - procurement and supplies • Participation in training provided by Franchisor •Supporting business tools’ implementation • Recording and accounting for monthly, all business transactions •Advising on IT systems to be acquired by franchisee • Following all regulations provided by the •Advising on Personnel,Plant, equipment required Franchisee as per instructions and procedures •Providing detailed procedures and training documents •Supporting franchisee on-site SHEQ issues • Keeping in secret any information concerning agreement details ,IP or client’s data •Supervising and controlling franchisee’s activity • Preparing monthly management accounts •Providing detailed catalogue of activities documentation and submitting it to the Franchisee • Ensuring monthly payments to Franchisee of all fees/commissions and equipment supplies Roshqott 3
E ngineering,Technical ,Commercial issues are covered by franchisor – Construction management and on-site execution issues are covered by the franchisee Franchising: Different roles on the value chain Support functions: Human resources, finance, IT, general services etc. Distribution/ Suppliers Sales Customers Operations Logistics Functions Franchisor Franchisee 4 Roshqott
Product selection flexibility allows smaller but effective investments 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 be included as part of the standard package • Protection and automation systems 5 Roshqott
B Franchising models Roshqott PwC
Model description Engineering Franchise Conceptual • Government through Department of Trade & Industry and other Model Government organs dictates and influences SOC’s ,Municipalities and others , levels of BEE and SLD quotas that Government Institutions must introduce to achieve economic transformation . • O ften,these dictates are enforced through tender and finance grants awards on pure BEE merit to companies without the necessary DTI 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 SOC’S -BEE T&F institutions contractors inability to raise the Government Subcontract Quotas necessary funding . - BEE Funding Institutions • 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 , Licensed Franchisee’s 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 . Government Institutions Market Private Sector 6 Roshqott
Bussiness Market Structure Model Model description • Holding Company to be formed with 60/40 BEE Partnership • Subsidiary companies 100% ownership . • Enterprise Development company will be responsible for Franchisee Holding Company acquisition and contracting: -Recruiting -Contract Formalization -Know how transfer and Trainning -Control and communication • Roshqott Energy solutions company Enterprise will be responsible for Franchisee Roshqott energy Subsidiaries Engineering and product / Devlopment Pty equipment support: -Equiment /Material technical specs. -Drawings -Main Equipment Procurement -Project Management. • Franchisee 100% owner equity Licensed Franchisee’s 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 -Customer T&F institutions - Stakeholders -SOC’S “Buy-in” and prefferred Support Funding Support contractor stataus -DTI, IDC finance and grants -Equity fund investors 7 Roshqott
Roshqott Bussiness Organizational Model Holding Company Enterprise Roshqott energy Subsidiaries Devlopment Pty PRODUCTS & SERVICES ● Licensee Recruitent and contracts Enterprise Development ● Licensed Products & Services Incubator ● Kow how transfer and Training ● Construction Resources Engineering Franchises ● Control and Comunication 8 Roshqott
The franchising concept can be divided into three stages Franchising framework Stages Support services Phase Periods 2 S t a g e 1 ● Supplies 1-2 Years Overhead line and Substations ● Engineering ● S&M ● General management ● Supplies 3-5 Years 3 4 Stage 2 ● Engineering ● S&M 6-7 Years ● Supplies Stage 3 ● Engineering Network Maintenance and Automation Roshqott 9
Detailed franchising case example The franchising cooperation can be implemented on different levels Engineering franchising cooperation model levels Comments Level 1 – recommended for start up companies Supply contractual • The franchisee undergoes incubation Franchisor signs for products period before being raised to franchisee contract and +Engineering +S&M status . subcontract part +General CIBD levels 1-3 • Sign up as an Enterprise development supplies and services Management company • to Franchisee . Entrepreneur status (compulsory) Level 2 – Ideal for SME’s companies Supply Franchisor and • Franchisee contract directly with contractual Franchisee sign for customer products contracts and CIBD levels 4-5 • Exclusivity +Engineering subcontract part • Entrepreneur status (compulsory) +S&M supplies and services between one another Level 3 – Upon Financial and market maturity • Franchisee is involved in the Supply Franchisee sign for whole process contractual contracts and own products • Exclusivity CIBD levels 6-7 in -house execution +Engineering Roshqott 10
Financial Investment Model Pricing Model Royalties & Start up costs KPI Entry Commissions levels Sales : R5-10Million BM : 0% CAPEX <R2’0 Million Level 1 - Enterprise Profitability:20% Eng.:0% Development Pay back :N/A OPEX <R1’00 Million Roylaties :0% CAPEX <R7’0 Million Sales : R25-40Million BM : 3% Level 2 - Franchise Profitability:15% Eng.:4% stage 1-2 OPEX <R3’00 Million Pay back :3-5 Years Roylaties :5% BM : 0% CAPEX <R11’0 Million Sales : >R50Million Level 3 - Franchise Eng.:4% stage 3 Profitability:12,5% Pay back :3-5 OPEX <R7’00 Million Roylaties :5% 11 Roshqott
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