Wim Rothman owns the Mugg & Bean franchise in the East Rand Mall and has a message for those aspiring to enter the franchising sector: “You must love hospitality if you want to go into franchising. You must enjoy being around people, and you must be prepared to work long hours. This is not a business you can run remotely. You must be on the shop floor every day and put in the hard work. But the rewards can be tremendous.”
When Rothman talks of rewards, he is referring not just to money – though that can be good too. “I always wanted to be in hospitality, ever since I was young. I completed an international diploma in hotel management at Wits Technikon, and my very first job was as an assistant manager at Leipoldt’s Restaurant in Braamfontein. I couldn’t have asked for a better introduction to the industry.”
Leipoldt’s, now closed, was a landmark eatery in Braamfontein started by legendary restaurateur, the late Ben Filmalter, who went on to launch Mugg & Bean in 1996. Filmalter got the idea for a coffee-themed restaurant after a visit to Chicago in the 1990s, and opened the first store in Cape Town’s V&A Waterfront. By that time, Rothman had moved onto greener pastures, taking up a position at catering group Fedics before accepting the position of assistant food and beverage manager at the Fancourt Hotel in George, where he stayed for eight years.
Then came the call from Filmalter: “He told me he was launching a new coffee-themed restaurant in Cape Town, and wanted me to join him. It was the first time bottomless coffee had been introduced to SA. I was a little unsure whether or not this would work, but my gut told me to go with it, so I joined Mugg & Bean as regional manager for the Cape.
“It’s the smell of coffee and freshly baked muffins that pulls you in,” says Rothman. Most people would agree with that. Mugg & Bean went on to become a massive hit, boasting close to 220 outlets in a little over 20 years after start-up.
In the early days, market research was rudimentary: a store had to be in a shopping centre where Woolworths was located, and the area had to have growth potential. These days, market research has been honed to a fine art. Mugg & Bean was sold in 2009 to Famous Brands, the megalodon of food franchising with close to 2 900 stores in 21 countries, comprising 25 restaurant brands.
Having witnessed first-hand the rise and rise of the Mugg & Bean brand, Rothman decided 15 years ago that it was time to dip his toe into the water and acquire a store of his own. He came up with the capital to acquire the East Rand Mall outlet. The store was run-down and neglected because the previous owner was trying to run it remotely.
Rothman took it over and turned it around within months, illustrating one of the great maxims of franchising: the owner has to be involved in the day-to-day running of the business.
“Whenever times get challenging, such as they are this year, we go back to basics and focus on customer service,” says Rothman. “You have to remember that 80% of our business is repeat. If you look after your customers, learn their names, make sure they get the best quality food and service, they will come back. You can never take them for granted. One bad experience is all it takes to lose a customer, and you may have lost them forever. You cannot take that chance, not in a market as challenging as this.”
Focusing on the basics also means revamping the brand every five years, and the franchisor demands that store owners set money aside for this eventuality – which can amount to R1.5 million to R2 million every five years. Experience has shown that stores start to lose business when they omit this crucial step. Food fashions change, something head office monitors on a constant basis, but one thing that stays constant is the smell of coffee and fresh muffins.
Rothman has a few other tips for those planning to enter the franchising game: negotiate a low base rental when you first sign a lease, since the annual escalations thereafter will influence profitability. Most shopping malls include a percentage of turnover clause in the lease (usually around 8%), so your landlord is – in a very real sense – your business partner. You also pay 4% of turnover towards brand marketing and 6% in royalty fees.
Remember also that food is a seasonal business: November to February are the busiest and most profitable months, so you need to stash money away for the lean months.
Having Nedbank as his banking partner has been a vital part of Rothman’s business success: “They understand franchising at a very deep level, and know what types of products and services we need. For example, we get better rates on our credit card transactions than we can get elsewhere, and this makes a big difference to our bottom line. For day-to-day banking needs, I use the Nedbank branch here in the East Rand Mall, and I know the staff there by name. If I need a loan, I can pick up the phone and speak to the regional manager, who I also know by name. This makes life a lot simpler and smoother.”
Brought to you by Nedbank Franchising.