Good as New

Retrenchment pushed Adriaan van Bergen to start a highly successful niche franchise in home maintenance.


Good as New

When Adriaan Van Bergen started Bergen’s Appliance Repairs &Spares in 2002 he had never fixed an appliance before.

But he knew a gap in the market when he saw one, had enough technical know-how to conceive how the business might work and was something of a serial entrepreneur having launched eight successful small businesses.

“Bergen’s was the ninth business I launched, at the same time as running a biltong business, Bergen’s Sweets, Spaza Nuts and a host of other things,” he says.

“I was retrenched in 1995 from an FMCG sales and marketing company which is really where it all started. I had to make a plan to earn money, so I started all these different small businesses. Bergen’s Appliance Repairs &Spares was the one that ‘took’,” he explains.

After opening the second branch ten months on the heels of the first, Van Bergen realised the business had legs and ditched his other eight businesses to focus solely on building the Bergen’s brand.

Filling a market gap

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The concept was simple but brilliant: Provide a branded, professional, good quality repair service for out-of-warranty home appliances. “No one was doing it. Of course there were single-operator handymen but they weren’t offering consistent service or quality, or a trusted brand,” Van Bergen explains.

With no formal education or technical training, Van Bergen says that in many ways his upbringing paved the way for the success of the business.

“My father is a very technically talented person who worked on the mines, and my mother was a Tupperware sales lady who had a real gift of the gab, so I got the technical side and the sales side from them,” he says.

He opened the first Bergen’s Appliance Repairs &Spares branch in Randpark Ridge in 2002, growing the business to five branches before franchising in 2004.

“It was always my intention to franchise – right from the word go. But I wanted to make sure I got the model 100% right before going into franchising. And because there wasn’t this kind of business around, I had no model to work from. So I used the first two years of setting up branches to panelbeat the model into something that I then knew could be replicated easily by franchisees,” he explains.

Branching out

Today the business has 27 Bergen’s Appliance Repairs &Spares branches – eight of which are company-owned – and in 2012 the first Bergen’s Solar franchise was launched.

In the same year, the business launched Bergen’s Appliance Maintenance, a non-franchised insurance business that offers cover for home appliances.

“Our future growth will be in Bergen’s Plumbing, Bergen’s Electrical and Bergen’s Home Automation – all of which will build on the core Bergen’s brand. Our vision is to become the homeowner’s go-to brand for all maintenance issues. That’s our niche,” Van Bergen explains.

It’s a niche that’s worked well. The business has enjoyed consistent growth since starting, and all franchises with the exception of just two have made money from the first month.

“That’s not to say I haven’t made mistakes. In the beginning I learnt a couple of tough lessons about taking on investor buyers who weren’t owner-operators. I had to salvage a couple of branches because of that and now we don’t consider franchisees unless they are going to operate the business themselves,” he says.

The growth is partly due to an investment in targeted marketing. “Radio campaigns have really worked for us. We started them in 2005 on small stations and then did campaigns on 94.7 Highveld Stereo and Jacaranda FM in 2010 and 2011, which gave us a really good growth spurt and increased not just our customer base but the number of prospective franchisees too,” says Van Bergen.

The business was perfectly pitched during the recession when consumers were looking to repair existing appliances rather than replace them, but it’s done equally well during the property boom.

Unpacking the business model

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The Bergen Appliance Repairs &Spares business model is simple, well-priced and profitable. Unlike many franchise models, Bergen’s has just one tier.

The business is run out of fixed retail premises following a strict ‘collect, evaluate, quote’ model. “All quotes are obligation free. If a client doesn’t take up the quote we return the appliance free of charge,” says Van Bergen.

“While we do repair items on a client’s premises, we don’t like to do so unless the appliance is really large and shouldn’t be moved. We have tried to steer clear of being a bakkie-brigade business with technicians on the premises. This has allowed us to spare customers having to pay a call-out fee, which is an important differentiator,” he adds.

All branches are run on a profit share basis. A typical branch will include a chief technician, second technician, driver and carrier, each of whom receive a percentage of the profit of the business. This reduces overheads from day one and drives ongoing productivity. Recruitment of staff is included in the franchise price.

It took Van Bergen a while to get the model right. “I ran the business for three years without profit share and just couldn’t increase the productivity. Then I tested it at one of my branches. Initially, nothing changed for the first three months until I realised that my staff didn’t understand how profit share worked. So I ran a workshop with them to explain the concept and how percentages worked and the penny just dropped. It was like a rocket taking off,” he explains.

In an industry in which good technical skills are scarce, the model also plays a key role in helping to retain staff. “Staff earn double to three times the industry average,” says Van Bergen.

Priced right

The Bergen’s Appliance Repair &Spares franchise costs R350 000, making it an attractive and accessible option to people looking to enter the franchise space. Van Bergen claims that typical franchises generate a net profit of between 35% to 40%.

Like other parts of the business, the price was determined partly by trial and error. “When I launched the business I priced it at R95 000 and had absolutely no interest from the market. Then a businessman friend of mine suggested the price was too low and didn’t show the value of the business, so I pushed it up to R150 000. All of a sudden people started showing interest. Since then the price has increased with inflation and as the business has grown and become more sophisticated in its offering,” he says.

There’s a 5% monthly franchise fee but no central marketing fund fee. In return for their money, franchisees get a full turnkey operation that includes tools, spares, shopfitting, marketing material, signage and vehicle wrap, uniforms, fixtures and fittings, office equipment and stationery.

“We have worked out down to the last detail what people will need. And we keep stockholding to a minimum. Franchisees never have to carry anything more than R5 000 worth of stock at any one point in time,” Bergen indicates.

Getting manufacturers on board

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Over time Van Bergen has managed to forge good relationships with appliance manufacturers.

“I knew I didn’t want to become a warehousing operation so I needed a relationship with manufacturers and distributors to access spares,” he explains. It was clear that the first large distributor he approached thought he was something of an upstart asking for discounts and rebates. “But they took a chance on me. They said for every R10 000 of business they’d give me a 1% rebate, up to 5% for business over R50 000. It doesn’t sound like a lot but it adds up when you start writing big numbers,” he says. That’s on top of the discounts he’s negotiated, which are passed directly onto franchisees.

The business uses second-hand spares but only with full customer consent and approval. This helps to keep costs down and is often offered as an alternative to customers who don’t accept the initial quote. “Sometimes spares aren’t available for certain appliances and the cost of importing other spares can be very expensive, so it’s important to be able to offer second-hand spares where appropriate,” he says.

Fancy yourself a franchisee?

Vital Stats

BERGEN’S

  • Founded in: 2002
  • Founder: Adriaan van Bergen
  • Minimum investment required: R350 000
  • Monthly royalty: 5%
  • Unencumbered capital requirement: R50 000 + Bakkie
  • Expected time from signing agreement to opening for business: 4 – 6 weeks
  • Average time for return on investment: First month
  • Hot spots for development: All major towns and cities where Bergen’s is not yet established

Facts and stats

  • The average household has 15 appliances.
  • Franchisees get a territory with a 5 km radius ’safe zone‘.
  • A branch with a R100 000 turnover can hope to net on average R38 000 to R40 000 a month.
  • Almost half the branches are run by women and many franchisees are women.
  • Bergen’s Solar can be added to an existing franchise or purchased separately.

Ideal franchisee

  • Owner-operator
  • People skills
  • Sales skills
  • Administratively strong
  • Franchise fee or at least 50% of the investment if you are planning to approach a bank for financing.
  • Important! Technical skills are not a requirement at all. Skilled technicians carry out all repairs while franchisees run the business.
Juliet Pitman
About the Author
Juliet Pitman is a regular contributor to Franchise Zone. Franchise Zone is published by Entrepreneur Media SA. It offers advice and franchising opportunities in South Africa.

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