At age 33, JJ Senekal is a franchising veteran. He started out as a waiter at the age of 18, and today owns shares in four Ocean Basket restaurants.
“When I was 19 I was about to take a gap year, and Jorge Araujo persuaded me to stay on and train as a manager, which I did,” says Senekal. “I became a general manager in 2006 and a partner in 2008.”
Senekal opened Ocean Basket Sunny Park in Pretoria in 2011 and with the profits built up from the first store, acquired three more: Mall @ Reds in Centurion, Bronkhorstspruit and the flagship store at Menlyn Park where Ocean Basket was first launched in 1995 by Fats Lazarides. Back then it was a 60 square metre store with six tables. Now it is a cavernous 1 000 square metres with five managers, 50 waiters and 30 back office staff.
Ocean Basket has been one of SA’s great franchising success stories. In 23 years it has grown from one to more than 200 restaurants in 16 countries, from Dubai to Durban, Nelspruit to Nigeria.
“Our story is very simple. We offer one protein – seafood. Our restaurants are family friendly, our food is great, service is excellent, and we try to get to know as many customers as possible by name,” says Senekal. In more recent times sushi was added to the menu, and now accounts for about 15% of sales. Senekal expects that to grow to 25% in the coming years.
These are the tried and tested ingredients of success in any franchising operation. Owner-manager operations perform better than absent owners. “If you look at the most successful franchise operations anywhere, the owner is involved in the day-to-day operations. It has to be that way to make a success of the business,” adds Senekal.
Another established ingredient of success is the need for a franchise operation to reinvent itself every five to seven years. Restaurants can become tired looking, and this drives foot traffic away. Keeping the corporate image fresh and appealing is vital to attracting and retaining customers in any business, especially food franchising.
Freshly frozen seafood is shipped to various countries daily. A single order once a week is all it takes to restock the restaurants of essential supplies.
What about the set-up costs? The Ocean Basket in Menlyn Park was recently revamped at a cost of R6.5 million, including R1 million in equipment that had previously been acquired. Senekal says Ocean Basket stores typically yield a net profit of 12-15% of turnover.
The biggest cost in any store is rental, with percentage of turnover clauses now standard in most shopping centres. This can swallow up to 8% of a franchisee’s turnover, but in a good centre, this is worth it. Then there is the franchising fee of 7% (4.5% is the Ocean Basket royalty fee – most competitive, 2.5% marketing fee which is used by the brand to drive feet).
Senekal now has interests in four Ocean Baskets and recently launched a coffee shop franchise, Fat Barista – the first store opened a few months ago in Serene Centre in Pretoria, with a second planned for Menlyn Park.
“I want to grow my portfolio of stores,” says Senekal. “Once you have one successful store, it is relatively easy to replicate the formula. You cannot be at all stores at the same time so you have to have good managers and give them opportunities to grow with you. Fortunately, I have excellent managers, but I am very much involved in the day-to-day operations. You have to be.”
The relationship with Nedbank has been critical to his business success. “We’ve banked with Nedbank for 12 years and what differentiates the bank to others is its understanding of franchising, and ability to develop products specifically for this type of business. For example, one of the big costs facing any new franchise operation is the need to put down a three month rental deposit when opening a store. Nedbank developed a policy in lieu of this rental deposit that makes it much softer from a cash flow point of view. We also get the best rates on credit and debit card purchases.”
What about the risks of franchising?
Competition opening up in the same centre is one. Shopping centres undergo refurbishment every seven or 10 years and this can drive traffic away. The same with road developments in the area. Other risks are more controllable, such as service levels and management quality. Which is why staff and management training is so critical to the ultimate success of the business, says Senekal.
Brought to you by Nedbank Franchising.