MANDATE REPORT

1. History Background

Fully describe the business's activities

This ladies fitness franchise is sought after with no new franchises available in Pretoria East.  The current owner has invested and started the franchise in June 2013.  They have grown to 130 members in a short time.  170 members are break even and the summer is the best months for new members, normally 20 per month.  Established franchises can have 900 members after a while.  You do the math. The owner will consider a partner to help grow the business or he will also be willing to sell the business outright.  Now are you a new partner or a new owner?

How long has the business been established?

Since June 2013

How long has the owner had the business?

1 year

What steps are in place to solve "load shedding" problems

N/A

2. Present Market

How does the business operate on  a daily basis

Staff open and closing the business.  Owner is hands off due to other business commitments.  The lack of Owner Input is also the problem currently

How are the clients attracted to the business

Well-known brand.

What Advertising/Marketing is carried out

Franchisor advertises.  They do flyers and knock and drop in the area.  They have also tried boards on the busy road.  They are also using some social media with a Facebook page.  As more members join the momentum builds up.

Does the business have any contract work

130 contracted clients.  The breakeven point is 170 clients.  The successful franchises in the group have 600 to 900 franchises as example.  With 5000 households in the immediate area this franchise has huge scope.

What competition exists

Normal for the area, but they offer a specific service to a specific demographic.

What are the seasonal trends

Busier in summer. People obviously want to look good in summer.  So you grow the contract base in those months and then sustain them through winter.  They have only had one summer, so you buying in at the right time with August to March the growing months.

3. Financial

Is the business VAT Registered

No

What VAT documentation is on file?

N/A.

Are there up to date management accounts?

Yes

What audited financials are available, income statement and or balance sheets?

Not done yet.

What percentage of the business is cash/credit?

5% Cash, 15% Credit Card, 80% Debit Order

What is the age analysis of the debtor’s book?

None

How could the profitability of the business be improved?

More marketing can be done, they are on track with the franchisors projections which shows that it takes 24 months to establish a franchise.

Is Seller finance available and for what amount?

No, the seller either requires a sale or partner that can help funding the growth and also either be hands on in the business or provide some marketing funds.

4. Staffing

What is the total staff complement?

2 Staff members

Staff Breakdown and length of service

Manager / Instructor -1, Instructor - 1

Do any receive special perks, bonuses or incentives?

Commission on certain sales

Are they on contract?

Yes

Do any have management potential?

Yes, 1 Manager/Instructor.

How involved  is the Owner in running the business

Owner is in hands off.

5. Premises

When does the current lease end?

June 2018

Is there an option of renewal & what period

Yes

What is the annual escalation %?

What are the trading hours?

Mon – Fri  06:00 – 10:00, 15:00-19:00

Sat 07:00 - 10:00,

Sun Closed

What is the square meterage of the business?

172 m2

Is a copy of the lease available?

Yes

Do you require a licence?

Franchise Agreement.  Normal establishment for a new franchise is R300,000.  This is a resale so you also save by only paying R100,000 and if you become a partner you dont have to pay a fee.  The staff has also completed all the courses with the franchisor to the value R20,000 to this level of training.

6. Assets

Is a full asset list on file?

Yes owner to provide

Are any items not included in the sale?

Some personal items of the owners.

What is their overall condition?

Good.

Do any require repairing?

No

How have they been valued?

Replacement Value

Which assets are on lease/HP and with whom?

No

What are their settlement amounts?

N/A

Will Seller settle or Buyer to take over?

N/A

Are copies of agreements available?

N/A

Are they presently insured?

Yes.

7. S.W.O.T. Analysis

Strengths

A new franchise, with huge room to grow with more members.  No new franchises in Pretoria East Available.  Training of staff at R20,000 completed.  New Franchise establishment fee paid of R300,000, you save R200,000 at least.  Equipment of R390,000 included.  So a value of R690,000 if you started a new franchise like this, which you cannot get in the area.  All this for R190,000.  You save R500,000 and that excludes 12 months of marketing cost and the 130 contracts already in place.

Weaknesses

Owner needed.  Six months away from been a good earning franchise, why you get the discount.

Opportunities

Grow the business by increasing the client base is all you have to do.  Stay on track with the growth

Threats

None perceived.

8. Reason For Sale

What is the reason for the sale?

Owner bought this for someone else that has moved on.  He has other business interests.