1. Introduction p. 1 2. Key Franchise Details p. 1 3. Background of the Alunite Franchise p. 1 4. Information Regarding Current Franchisees p. 2 5. Profile of the Ideal Alunite Franchisee p. 2 6. Site Details p. 3 7. Franchise Agreement Summary p. 3 8. Franchisor Support p. 4 9. Operations Manual p. 5 10. Financial Information p. 7 Curriculum Vitae of Key Franchise Officers Appendix One Accountant’s Certificate Appendix Two Director’s Statement Appendix Three Business Plan Appendix Four The Alunite Franchise Agreement Appendix Five Dear Prospective Franchisee, Thank you for showing interest in our very exciting franchise. Southern Africa has an enormous housing backlog which, compounded by population growth, will almost certainly increase to crisis proportions in the years ahead. Homes are desperately needed by all sectors of the population, and needed as cheaply and quickly as possible. The demand for the materials and services our Alunite stores can provide will increase in line with the need for housing. Information in this document should be read in conjunction with the information found in the CD 1. Introduction: This document should help you to make up your mind. While it includes some information about your contract (franchise agreement), don’t rely on it alone to understand your contract. Read all of your contract carefully. Buying an Alunite Franchise is a serious undertaking. Take your time to decide. It is recommended that you have the contract explained to you by an attorney and you should seek accounting and financial advice on the franchise proposition. Other documents which may be of interest and are recommended to study are: • The Alunite Marketing CD – (supplied with the disclosure document) • The FASA booklet “How to Evaluate a Franchise - (obtainable from FASA) The Alunite Franchise hereby state our commitment to the supply of the disclosure document and franchise agreement at least 14 (fourteen) days prior to the signing of the franchise agreement or any other binding document. 2. Key Franchise Details: 2.1 Legal and trading name of franchisor: Alunite CC trading as The Alunite Franchise 2.2 Contact details: Alunite Franchise 39(b) Stella Road Montague Gardens 7442 Tel: (+27) 021 551 3433 E-mail: [email protected] PO Box 37066 Chempet 7441 Fax: (+27) 021 551 3479 Web address: www.alunite.co.za 2.3 Key franchise officers, shareholders and employees: Charles Fleming (Franchisor) Ian Martin (Managing Director) Jonathan Fleming (Technical director) Joan Swart (Administrative) 3. Background of the Lumber City and Alunite Franchise: The first Lumber City opened its doors in Lansdowne, Cape Town in 1979. Soon, there were a few stores in the Western Cape and in the middle ’80’s some of these stores were franchised. In 1989 Charles Fleming bought the Lumber City in Montague Gardens and a few months later opened a Glass and Aluminium business. By 1993 he opened another 3 Lumber City’s. In September 1994 he bought the Lumber City Franchise. At the time there were 8 Lumber City’s, all of them in the Western Cape. Soon he discovered that to manage his outlets and expand the Lumber City Franchise effectively at the same time, was an impossible task. His mission was to be the biggest group of flat board merchants in Southern Africa and to accomplish his goal, he sold his retail outlets, including his Glass and Aluminium business and in 1997 established the Lumber City Franchise Office and concentrated on the expansion of the group. At the time of writing there are 34 Lumber City franchised stores. (There are currently 3 in Botswana, 1 in Namibia and 1 in Nigeria). Page 2/… 2. The Lumber City Franchise Office has, over the past 12 years, developed the business into a well respected and internationally recognised brand name with stores spread through-out Southern Africa, including Botswana, Namibia and Swaziland. The core business team, including Charles Fleming, Ian Martin and Jonathan Fleming who has had years of personal hands on experience in glass, aluminium and franchising, have collated their knowledge and experience to form The Alunite Franchise Group. Tried and tested business formulas and strategies have been incorporated into the business infrastructure of the business ensuring that the franchisees will benefit from the wealth of knowledge and experience. Our primary goal at the Alunite & Lumber City Franchise Office is to ensure maximum growth of the Group – ensuring optimum margins and associated pricing edge maintained over stand alone competitors. 4. Information regarding current franchisees: 4.1 Contact Details: AREA / PROVINCE EST. TEL. / FAX. MONTAGUE GARDENS Western Cape POLOKWANE Northern Province KILLARNEY GARDENS Western Cape SANDTON Gauteng PAROW Western Cape KHAYELITHSA Western Cape SILVERTON Gauteng GORDONS BAY Western Cape 2006 Tel: 021 5553546 Fax: 021 5553659 Tel: 015 292 6431 Fax: 015 292 6432 Tel: 021 5566766 Fax: 0215560172 Tel: 011 4444028 Fax: 0865538705 Tel: 021 934 4513 Fax: 021 934 7326 Tel: 0733680361 Tel: 0834540851 Tel: 087 151 1012 Fax: 012 804 9425 Tel: 072 862 8530 Fax: 021 856 0240 2007 2008 2008 2010 2010 2011 2012 PHYSICAL / POSTAL ADDRESS E-MAIL / OWNERS Unit 8, Ganci Park, 9 Stella Rd, Montague Gardens E-mail: [email protected] PO Box Ilyas Ganey 15 Rupee Street, Superbia, Polokw ane, 0699 E-mail: [email protected] 20 Van Bruggen Street, Polokw ane 0699 Adam Abrahams Unit 3, c/o Laguna + Killarney Ave, Killarney Gardens E-mail: w [email protected] PO Box 37066, Chempet 7442 Willie Pelser Stand 102, Unit 1, 4 Caroline Str, Eastgate Gardens Commercial Park E-mail: Marlboro [email protected] PO Box 1758, Gallo Manor 2052 Marlboro Akbar Walele cnr, De La Rey & Modderdam Ave, Parow Indust. E-mail: aluniteparow @telkomsa.net PO Box 37066, Chempet 7442 Llew elyn Langeveldt 43 Levuyo Drive, Bongw eni, Khayelitsha, 7784 E-mail: [email protected] PO Box Robert Mabanga & Frikkie van Zyl 602 Kobus Street, Silverton, Pretoria, 0121 E-mail: [email protected] P.O. Box 11155,Queensw ood, Pretoria, 0121 Ebrahim Khan & Leon Beneke 18 Bloubos Street, Gordons Bay 7140 E-mail: [email protected] P.O. Box Cor Jordaan, Erik Engelbrecht & Gail Jordaan 4.2 Note: You, the prospective franchisee, is entitled to contact any of the franchisees listed, or alternatively to visit any outlets operated by a current franchisee (by appointment with the franchise office) to assess the information discloses by the Franchisor and the franchise opportunity offered by it. 4.3 Terminated franchises: No Alunite branch was terminated since 2006. 4.4 Litigation: There is no current or unresolved litigation with any of our existing or former Alunite franchisees. 4.5 Proceedings against the Lumber City Franchise: To date there has never been any material debt, criminal, civil or administrative proceedings, or bankruptcies / insolvencies concerning the franchisor, the Alunite Franchise Office or its officers. 5. Profile of the ideal Alunite Franchisee: There is far more involvement in being a successful franchisee than having the money for a franchise. Having said this, many franchisees come from all walks of life which includes: lawyers, teachers, farmers, bankers, representatives and sales staff from a wide variety of businesses and they have all made a great success of their businesses. Listed below are a number of personal attributes which are important in the success of a franchise: 5.1 Have an interest in and preferably knowledge of this particular franchise. 5.2 Be prepared to work as hard as is necessary to get the job done. 5.3 Have an interest in meeting people and be capable of getting on with the buying public. 5.4 Have a satisfactory credit history. 5.5 Have the total support of their family. Page 3/… 5.6 Be self-motivated. 5.7 Be self-disciplined. 5.8 Be sales-orientated. 3. 6. Site details: When searching for a building to house your new Alunite, the following should be considered: 6.1 The noise factor of the machinery – most shopping complexes will not allow . 6.2 Three phase electrical points for the compressor (single phase is sufficient in smaller stores) are needed. 6.3 High volume buildings are preferred. 6.4 A minimum of 200m², rectangular/square shape with open floor area and straight walls. 6.5 At least one big industrial door for the ease of offloading glass and long lengths of aluminium extrusions. 6.6 Semi-industrial areas suit this type of business and the rental is much lower than that of shopping centres. 6.7 Enough customer parking must be provided. 6.8 Buildings in popular industrial areas where a mixture of businesses are found which will not only attract specific customers, but also the broader buying public. 6.9 Shopping centres are not suitable for an Alunite store, for the following reasons: 6.9.1 The rental is to high. 6.9.2 The ceilings are to low. 6.9.3 The offloading of glass & aluminium extrusions in parking areas is virtually impossible. 6.9.4 The difficulty of loading your own trucks/LDV’s in parking areas. 6.9.5 The difficulty of loading your customer’s goods in parking areas. 6.9.6 The typical Alunite client prefers to shop in industrial areas where other commodities for his trade are obtainable. 6.9.7 Complaints of the noise from other lessees in the complex. 6.10 The size of the store will be largely determined by the following: 6.10.1 The viability of the trading area. 6.10.2 The amount of capital you wish to invest in the business. 6.10.3 The quantity of stock you can hold. 6.10.4 Your expansion plans. 7. Franchise Agreement Summary: Following are a summary of the key clauses in the franchise agreement: 7.1 Termination (Clause 62) The term of the agreement is for 10 (ten) years from the opening date unless the licence and franchise is otherwise terminated by mutual consent of both parties or in accordance with the provisions stipulated in the Franchise Agreement. 7.2 Renewal (Clause 62) The agreement is renewed automatically for further periods of 1 (one) year unless either party gives notice of cancellation at least 12 (twelve) months prior to end of current time. 7.3 Goodwill (Clauses 68 and 77) On sale or disposal of the business, the goodwill is included in the calculation (in certain circumstances) as indicated in clauses 68 and 77. 7.4 Assignment of rights (Clauses 63 – 76) The LICENCEE may only assign its rights under the agreement with prior written consent of the LICENSOR. Any new LICENCEE will have to enter into a new agreement with the LICENSOR. 7.5 Effective date (page 1 line 18) This is the date of the first day of trading (opening date). From this date the 10 (ten) year agreement term is calculated. 7.6 Shopping hours (Clause 19.5) Although the franchise agreement stipulates fixed business hours, consent may be obtained from the LICENSOR to alter the above to suit the trading style of the area and other complications that may arise. 7.7 Licensed Territory (Clause 87 – 90) The territory for which the license and franchise agreement is granted is indicated on page 1 of the franchise agreement under the heading “Definitions” point #2. 7.8 Financial information (page 9 point 11): At the end of each financial year a Balance Sheet and Profit and Loss Statement must be forwarded to the Franchise Office. 7.9 Consumer Protection Act: In terms of section 7 of the Consumer Protection Act, a franchisee may cancel a franchise agreement without cost or penalty within 10 (ten) business days after signing such agreement, by giving written notice to the franchisor. Page 4/… 4. 8. Franchisor support: 8.1 Initial support before opening: 8.1.1 Help with the interior lay-out of the store. 8.1.2 Help with the lay-out of exterior signage. 8.1.3 Help with the completion of all credit applications with suppliers. 8.1.4 Help with the selection of the initial stock to suit the store size, projected turnovers, finances available, etc. 8.1.5 Help with the ordering of the initial stock. 8.1.6 Organising of signage for the exterior of the building. 8.1.7 Help the franchisee in acquiring the machinery needed. 8.1.8 Software point of sale package (optional) – database supplied. 8.1.9 Software glass cutting optimisation program (board cutting program) available. 8.1.10 Goods available from the franchise office includes: Invoice books, order books, credit return vouchers, overalls, T-shirts, golf shirts, vehicle decals and exterior signage. 8.1.11 Assisting the franchisee ensuring that the “1-6 Week Plan to Open an Alunite” is followed and on track with the time table, which includes inter alia the following: - Registering of new Closed Corporation / PTY (LTD) - Suitable premises found - Suppliers notified of new franchisee and location - Credit applications completed - Internal lay-out of store done - Application for telephone, fax and modem lines - Application for electricity connections - New bank account, overdraft facilities, interest rates and bank charges negotiated. - Credit card machine organised - Order machinery. - Order material and build sliding tables, cutting- & crimping tables, aluminium extrusion & glass racking, etc. - Negotiate leases / HP’s for vehicles. - Register for VAT, PAYE, UIF and Regional Services. - Advertise for staff - Etcetera 8.2 Support before and during period of opening: The prospective franchisee will undergo a minimum training period of one week at the Alunite store in Montague Gardens and the Franchise Office before commencing the opening of his store. The training will include: How to manufacture the basic aluminium PT and Sliding Window and Patio Doors. The usage of the instruction manuals for the manufacturing of aluminium products. How to operate and maintain the machinery. How to use the computer programs Methods of quoting, etc. 8.2.1 5 Day assistance by one of our operational staff before and after opening day. 8.2.2 During this time the franchisee will be trained to use: - All programs regarding: costing of aluminium and glass products complete price lists of the above glass cutting optimisation administrative forms (Letterheads, Jobsheets, Quote forms, etc.) legal documentation (I.e.: Letter of Appointment, Warning letters, etc.) - Machine operation and settings Page 5/… 5. 8.2.3 The franchisee will be assisted with the offloading of stock, the display, packing and pricing thereof. 8.2.4 The operational staff member of the franchise office will organise marketing material from suppliers 8.2.5 The operational staff member will assist with the mark up and gross profit percentages of each commodity and ensure that the franchisee understand how to use the computer programs effectively. 8.2.6 During this period the operational staff will make sure that the franchisee can use the Operations Manual on CD effectively. 8.3 Ongoing support: 8.3.1 Ongoing pricing negotiations with suppliers is done from the franchise office. 8.3.2 The franchise office is at all times committed to attempt to solve any problems that may occur from time to time. 8.3.3 The franchisee is responsible for local advertising. 8.4 Advertising & Marketing: The Alunite Franchise does not charge a marketing and advertising fee or levy. Each franchisee is responsible for local advertising. The Alunite Franchise advertise the products and services on their website and parties who require assistance and quotes are referred to the relevant franchisee. 9. Operations Manual: The Operations Manual is on a CD and consists inter alia of the following: 9.1 Product Knowledge – The product knowledge section on the CD contains the following: CASEMENT WINDOWS (PT or Top-hung windows): - Illustrations of windows and sizes - Standard aluminium extrusion profiles - Hardware required - Illustration of a typical outer frame assembly - Illustration of a typical sash assembly - Illustration of the tubular sash assembly - Illustration of the machining of mullions - Illustration of sectional views - Illustrations of the equal and unequal leg of outer frames - How to fit gaskets and glass to a sash - Friction stay and handle assembly - Aluminium extrusion and glass cutting formulas - Additional detailed manuals provided SLIDING WINDOWS: - Illustrations of sliding window configurations - Standard aluminium extrusion profiles - Hardware required - Illustration of a typical outer frame assembly - Illustration of a typical sash frame assembly - Illustration of a vertical cross section - Illustration of a horizontal cross section ( of 2, 3 & 4 sashes sliding) - Illustration of the machining of weep holes in the cill - Illustration of the machining of jamb rails - Illustration of the machining of the sash outer jamb Page 6/… 6. - Illustration of the machining of the sash inner frame - Illustration of the machining of the sash interlocker - Illustration of the machining of the inner sash interlocker - Illustration of the machining of the cill baffle plate - Illustration of the handle assembly - Illustration of the anti lift block assembly - Aluminium extrusion and glass cutting formulas for 2, 3 & 4 equal sashes sliding - Additional detailed manuals provided SLIDING DOORS (PALACE DOOR SYSTEM): - Aluminium extrusion profile identification - Hardware identification - Typical configurations - Additional detailed manuals provided SHOPFRONT FRAMES - CLIP 44: - Aluminium extrusion profile identification - Hardware identification - Typical frame configurations - Additional detailed manuals provided 9.2 Business Model – The business model contains the following: A Detailed drawing of a suggested floor lay-out. Detailed set-up costs List of machinery, fixtures and fittings and the estimated costs Suggested stock. Suggested staff compliment. Estimated overheads. Additional expenses that the franchisee can expect. A projected cash flow for each model. A projected income statement and balance sheet 9.3 Interactive budget plans on an Excel Spreadsheets: Spreadsheet 1 – Budget Spreadsheet 2 – Actual Spreadsheet 3 – Budget and Actual 9.4 Business Documentation: The logo in a BMP file Branch Letterhead Request for Credit and Suretyship Business Card Quote forms Job sheets (Administrative, Workshop, Fitting teams, Glazing, etc.) 9.5 Legal Documentation – Disciplinary Procedures in interactive files in English and Afrikaans: Permanent Employment Contract Temporary Employment Contract Disciplinary Code Page 7/… 7. Disciplinary Policy and Procedure Written Warning Final Written Warning Notice of Disciplinary Hearing Notice of Outcome of Disciplinary Hearing Notice of Appeal against Outcome of Disciplinary Hearing 9.6 Signage: Photographs of the building and vehicle signage. 9.7 Fixtures and Fittings: Printable presentations for the manufacturing of the following fixtures and fittings: Glass cutting table Crimping table Mitre saw sliding table Aluminium extrusion storage wall brackets Aluminium extrusion storage rack Assembly bokkies A-frame for glass & mirrors Wall mounted racking for glass & mirrors Racking design for delivery vehicle Design of a L-shaped counter 9.8 Golden Business Rules: Everyday rules and business practices found to be of invaluable use in business in general and specifically in an Alunite trading environment. 9.9 Pricelists: The Excel pricelist program can be downloaded directly from the Operations Manual CD onto the hard drive of the computer. 10. Financial Information: Two different business plans are available. They are the Alunite Business Plan (Appendix 4(a) and the Ambitious Alunite Business Plan (Appendix 4(b). After establishing your needs, the finances available, the area of operation, the size of the building, etc., the appropriate business plan will be available on our website (password needed) to you. The business plan contain, inter alia, the following information: - Estimated Staff Compliment - A Cash Flow Projection - Estimated Overheads (monthly expenses) - An Income Statement - Estimated Establishment Costs - A Balance Sheet - Estimated Opening Stock - The Total Investment Required The total investment required is set out at the end of each business plan and is subdivided in the following categories: 10.1 Initial Entrance Fee: The entrance fee of R30 000,00 is payable upon the signing of the franchise agreement by both parties. This cost is for providing the support from the franchise office as stipulated on page 4 & 5 of this document under the headings “Initial support before opening” and “Support during period of opening.” 10.2 Monthly Payments to the Franchise Office: The following fees are payable to the Lumber City Franchise Office each month: Royalties 2% of gross turnover (inclusive of VAT) Website Hosting Fee R 50,00 (inclusive of VAT) Page 8/… 8. 10.3 Establishment Cost: There is an itemised listing of the estimated costs associated with setting up a Lumber City Store in each business plan. These items include: Registration Fees (e.g. Closed Corporation, VAT, etc.), Deposits (e.g. Rental, Fuel, Electricity), Office Equipment, Decorating, Signage, Computer Hardware, Racking and Counters, Stationary (e.g. Invoice-, Order-, Quote-, etc. Books), Advertising (opening specials), Machinery (bought cash), Clothing (e.g. Overalls, T-shirts, etc) and Sundries. 10.4 Initial Working Capital: The amount calculated for the initial working capital is the highest estimated negative figure reflected in the closing bank balance in the cash flows of the business plans. In all cases this figure is reflected in month 3. 10.5 Unforeseen Expenses: One would be naïve not to budget for unforeseen expenses. In the business plans the following expenses were taken into consideration: - Bad debt = 2% of debtors - Theft = 1% of turnover - Unforeseen escalation on Expenses = 10% of expenses (excluding depreciation) 10.6 Total Investment Required: In each business plan the estimated values of the above four categories are calculated. The sum of the four categories is the total investment required. Summary Curriculum Vitae of Key Lumber City Franchise Officers: 1. Charles Fleming: Prior to Lumber City: • Teacher for 12 years • Actively involved in the building industry and a qualified draughtsman. Becoming a Lumber City Franchisee: • Bought the Lumber City franchise in Montague Gardens as a going concern in 1989. • In the following 4 years opened another 3 Lumber City stores. Involvement in the Franchising Industry: • Bought the Lumber City Franchise in September 1994. • Established the Lumber City Franchise Office in 1997, concentrating on the expansion of the Lumber City Franchise only. • Established the Alunite Franchise in 2008. Currently there are 7 franchised stores. 2. Ian Martin: Prior to Lumber City: • Senior electronic technician at the Post Office for 15 years. • Owner of cabinet making and building venture. Involvement in Lumber City: • Manager at Lumber City Montague Gardens in 1995. • Owner / operator of a Lumber City in Cape Town in 1996. Involvement in the Franchising Industry: • Joined the Lumber City Franchise Office in 1997. 3. Jonathan Fleming: Prior to Lumber City / Alunite Franchise: • Owned and managed the Alunite in Montague Gardens. • Owned and managed the Alunite in Parow. Involvement in the Franchising Industry: • Joined the Lumber City and Alunite Franchise Office in 2010. 4. Joan Swart: Prior to Lumber City: • Bookkeeper for a big Bookkeeping Firm in Cape Town for 8 years prior to joining Lumber City. Involvement in Lumber City: • In house bookkeeper for the 4 Lumber City stores and the Glass & Aluminium store belonging to Charles Fleming from 1991. • Head of the administrative department of the above group of companies. Involvement in the Franchising Industry: • In charge of all administrative duties since the establishing of the Lumber City Franchise Office in 1997. 39(b) Stella Road, Montague Gardens 7441 P.O. Box 37066, Chempet 7442 Tel: (+27) 021551 3433 Fax: (27) 021551 3479 E-mail: [email protected] Website: www.alunite.co.za Dear Potential Franchisee Selecting a professional and viable franchise opportunity out of many different businesses on offer today, can be a difficult task. Making the decision to invest capital into a venture should be based on the grounds of ensuring that you join a company that has a reputable and credible brand name, is well established and has been operating for an acceptable period of time. The Alunite Franchise Office appreciates the concerns of a potential franchisee and as such encourages you to scrutinise our operation. The first Alunite opened in Cape Town in 2006 and currently we have stores throughout South Africa as well as in the Western Cape, Gauteng and the Northern Province If one takes a closer look at our stores, and discuss our business with the owners, it becomes apparent that owning an Alunite is a good, solid investment! A dedicated owner and staff ensure long term sustainable growth of the business. Taking cognisance of the above, I am able to certify to the viability of an Alunite Franchise. The Alunite and Lumber City Franchise Office is well established and in a sound financial position. We are able to pay all debts as and when they become due. Yours sincerely Charles Fleming (Franchisor) ALUNITE CC Reg. No.: 2005/048148/23 C. Fleming (Franchisor) I.J. Martin (Managing) J.A. Fleming (Operations) J.C. Swart (Administrative) In association with the Lumber City Group Business Plan for an Alunite Store Business Plan for an Ambitious Alunite Store Both the above Business Plans are obtainable on our website (www.alunite.co.za). To view these Business Plans (and Franchise Agreement) you must click on “members area” You will be requested to enter a Username and Password which is obtainable from the Franchise Office on request. The Franchise Agreement Both the Franchise Agreement is obtainable on our website (www.alunite.co.za). To view the Agreement, you must click on “members area” You will be requested to enter a Username and Password which is obtainable from the Franchise Office on request.