Franchises that Care for Kids

Franchises that focus on serving the needs of children and their families offer huge opportunities for people with the right mindset. Here is how to start a childcare business.


Franchises that Care for Kids

If you are thinking about starting your own business, a children’s service franchise might be the best way to take your first steps into the world of entrepreneurship.

Children’s service franchises vary greatly and the choices can be overwhelming. There is so much more on offer than the obvious options such as after-school care or party shops. South African entrepreneurs in this sector are very innovative and business opportunities range from day-care centres and pre-schools, to services in art and entertainment, education, science and nature, toys, hobbies and crafts, as well as sports and recreation.

There are pamper parlours for teens (great for parties), baby sitting services, cooking clubs, transport companies and dance schools. On a more serious note, Kumon, Master Maths, Active English and various other tuition programmes offer support that schools simply do not have the capacity to provide.

A booming education sector

According to President Jacob Zuma, “The most important investment in the future of any nation is in education. No legacy could be higher than that.” Social research has found that the most important years in a child’s development are those from one to six. Thus, the exposure to the world in which they live, the instruction they receive, and the habits they form during those years, affect their ability to learn and adjust as they progress through formal education.

“Kumon is the biggest and most successful educational franchise in South Africa, boasting over 400 franchises country-wide,” says Franchize Directions MD Lindy Barbour. Kumon offers maths and English extra-curricular education. Students from pre-school age upwards can benefit and improve or extend numeracy and literacy skills.

What the experts say about the childcare industry

Many experts expect the demand to increase in the children’s franchise market. They base their forecasts on the fact that more and more young parents have to work as a single income simply doesn’t make ends meet.

“This sector is growing quickly. The growth is predominately within education. Even in these difficult times, parents consider their children’s needs as a priority and will cut back on luxury items to provide the help they require,” says Barbour. “This sector will continue to grow for a number of reasons.

These services are always needed and parents – particularly new ones – tend to cut back in other areas to be in a position to provide their children with the best they can, from stimulation classes, to tuition, birthday parties, extramural activities and basic services like school collection,” she explains.

The advantage of child service franchises

Franchises and business opportunities in this sector range from investments as low as R7 000 to over R450 000. These franchises are typically well below the franchise industry average in terms of capital investment. “The barrier to entry is low,” says Barbour. “The advantage of this type of business opportunity is that it becomes an attractive way to supplement income whilst having the flexibility and time for one’s own kids.”

Innovation

“I believe that franchisors in this category do think out of the box, mostly because they have to. For example, they develop new activities and curriculums, party themes, accessories and so on,” explains Barbour. “As the barriers to entry and exit are low, franchisors must have a ‘pull factor’ in order to ensure the network is sustainable.

“The difficulty facing franchisors is funding the right franchisees. The motivation to buy these franchises is typically based on lifestyle requirements.” She says franchisors have to be more disciplined in selecting business orientated franchisees in order to ensure longevity of the business and lower the turnover rate of franchisees.

To extract the most value from this franchise category you must have an intimate understanding of the local community. Local area community marketing offers the biggest opportunity for success in this category. If your financial management acumen is not up to scratch, attend financial management training. It is essential to understand the numbers.

Franchise Funding

“I think the biggest threat that franchisees have to face is funding. They generally do not have access to formal funding facilities, as most are intellectual property and training based,” says Barbour.

What type of personality do you need to work with children?

Starting a business in the child services industry and making a success of it will require certain specific strengths. For example, good communication skills are vital. You need excellent organisational skills to manage paperwork, as you need to keep accurate information about the children in your care. Ask yourself these questions:

  • Do you like children?
  • Are you a people person?
  • Do you have experience working with children?
  • Are you a self-starter, responsible and reliable?
  • Are you willing to put in long hours, at least at first?
  • Can you lead well?

If you answered yes to all of the above, you could consider the children’s service franchise sector.

Will you set up the business at home or from commercial premises?

The franchisor may have specific conditions for the location of the business. This would depend on the type of franchise. If it is a simple business producing party packs it is easy to work from home.

What are the childcare needs of the community you aim to serve?

Before you decide to buy a franchise it is crucial that you identify the needs of the community you are part of. You also have a tremendous amount of flexibility when it comes to the exact services you choose to offer. You may limit your clientele to children in certain age groups or tailor your operating hours to meet the needs of a particular market segment.

Safety and health issues

Caring for someone else’s children bears a tremendous amount of responsibility and requires a serious commitment. When children are in your custody, you are responsible for their safety and wellbeing. It’s vital that you take out public liability and professional indemnity cover, to protect yourself against customers taking you to court for damages or accidents.

Abiding by the regulations

A bona fide franchise is supposed to deliver a potentially profitable business concept, a trademark and extensive initial and ongoing support in all facets of operating the business. This includes all the necessary operating permits. If this information is not recorded in the franchise agreement, problems may arise.

Franchise fees

Franchise fees are usually divided into upfront and ongoing fees. The upfront or initial fee is a joining fee. It grants franchisees access to the network and its intellectual property as well as entitling them to training and ongoing assistance in all facets of setting up the business.

Management services fee

This fee pays primarily for ongoing franchisee support. It is usually calculated as a percentage of  the franchisee’s sales and is payable either weekly or monthly in arrears. Fee levels vary from as little as 1% to 7%, depending on the type of business.

Purchasing fees

If a franchisor purchases products in bulk on the network’s behalf and distributes them to franchisees, a mark-up, purchasing or handling fee may be charged.

How to tell a fly-by-night operator

In South Africa, the franchise industry is not yet regulated. According to franchise consultant Eric Parker, “The reputation of franchising is poor worldwide and ignorance about franchising opens people up to being taken for a ride.” However, as a franchisee, as long as you are thorough and you conduct an extensive background check, you should not encounter any problems.

Warning signs (of fly-by-night operators) include:

  • Franchisors who want to collect deposits before interviews and profile testing
  • Non-existent disclosure documents and operations manual
  • Guaranteed promises of unreasonably high profits
  • No pilot operation
  • Reluctance to supply information
  • Franchisors who refuse to meet you at their offices – an indication of no infrastructure
  • Franchisors who pressure you by telling you there is a queue of prospective franchisees and push you to conclude the deal immediately
Membership of FASA

Always check if the franchise is a member of the Franchise Association of South Africa (FASA).

Vera Valasis, executive director of FASA, believes that franchisors who take the trouble to join the association must be prepared to go through FASA’s rigorous scrutiny of their franchise package (disclosure document, operations manual and franchise agreement) so that members can prove that they have taken the trouble to research and set up their franchises according to internationally accepted guidelines.

“We insist that FASA members have a pilot store operating for at least a year before being able to join the association and with strict rules on disclosure, we believe we can offer the public some degree of protection. As a result, FASA has had few fly-by-night members,” says Valassis.

 

Franchise Zone
About the Author
Franchise Zone is published by Entrepreneur Media SA. It offers advice and franchising opportunities in South Africa.

Related Articles

© Franchise Zone / Entrepreneur Media SA (Pty) Ltd. All rights reserved.

Disclaimer: Reliance on the information this site contains is at your own risk. Readers are advised to consult their attorney and/or financial advisor prior to pursuing any investment. Please read our Editorial Disclaimer and Terms & Conditions of Use.

Is this information out of date or incorrect? Report it to our webmaster.

Leave a Reply