PROSPECTUS
BUTTERFIELD BREAD is a new franchise
opportunity that has one purpose:
“To brand name a good bread”
Would you like a slice of the action?
The earning potential of a franchise opportunity is subject to many factors, such as
location, the amount of time you devote to the business, your management abilities
and the quality of the franchise support system.
We realize that as much as we love this business, it may not be right for everyone.
The hours can be long. The work can be both physically and mentally demanding. It
is the type of business that requires a level head, strong hands and a lot of heart.
If you share our passion for great bread and our commitment to running a first-class
business, you may want to consider becoming a member of the Butterfield franchise
family. We would be happy to help you, explore the possibilities.
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GROUP GROWTH
Since July 1997, Butterfield has established and successfully opened 106 bakeries across Southern Africa. Within the next
few years, we plan to open another 150 bakeries. Once this target is attained, Butterfield will be, by far, the best represented
as well as the leading retail brand in the bread business. Our flour consumption figures project, that within the next two
years, the group will be using in excess of 5000 tons of flour per month. This will make Butterfield a major role player in the
baking industry. Details of existing operational bakeries are listed on our website: www.butter.co.za.
PREMISES LOCATION
Where people eat bread, Butterfield has reason for existence. In smaller rural centres the operational size of a Butterfield
Bakery may be decreased from the general norm, however the nature of the main product suggests that a Butterfield Bakery
be established in all small towns.
The Butterfield Bread business plan revolves around retail and wholesale trade, therefore requiring high volume pedestrian
traffic in the vicinity of selected premises. Butterfield Holdings (Pty) Ltd has set up a dedicated development division,
managing information flow of possible premises, through a network of top leasing agents, property administrators and
development consortiums.
Due to high feet counts, generated by Butterfield bakeries, landlords express a keen interest towards accommodating
Butterfield Bakeries.
TYPES OF OPERATIONS
During the development of the Butterfield concept the formats in which the bakeries are presented to the public have
changed. Since December 2000 we only established the B240 and the larger B480 bakeries. The demand for smaller
bakeries to be set-up in smaller rural towns and villages grew to such an extent that additional bakery formats were
developed. The B120 bakery is a fully equiped self contained bakery that can manufacture the entire range of products. An
additional business opportunity linked to a Butterfield bakery is the Butterfield agent, to which all distribution functions of an
existing bakery is outsourced. Butterfield Holdings will finance the specified Butterfield delivery vehicle with which the
Butterfield agent will service the wholesale opportunities around the bakery. All costs to the vehicle will be for the account of
the agent and he will earn a commission on the value of product distributed.
FRANCHISOR INVOLVEMENT
The most important duties of the franchisor can be described as:
1. Marketing and upholding of the trademark, through the application of funds accumulated by the marketing royalty.
2. Design of outlets to concept specification. Detailed specifications, in line with modern technology and trends, to meet
all applicable requirements. This is what extensive research and experience in the fast food and bakery trade has
revealed.
3. Defining and implementing the Butterfield business system into the franchisee’s operation.
4. Continual back-up support in all areas of operations and administration.
5. Central negotiations with all relevant suppliers facilitated by bulk ordering.
6. Butterfield’s flour suppliers contribute towards the maintenance of certain essential services for which the franchisee
would have been liable. Currently, the group receives a contribution of 2,5% on all flour supplied by the official flour
supplier/s. This contribution is used for the following.
6.1
Technical equipment maintenance technical team that are responsible for on-going preventative maintenance
in all Butterfield Bakeries.
6.2
The subsidising of a labour consultant team that is responsible for all labour related matters of the entire
Butterfield group. Services include appointment and contractual issues, union negotiations, dismissal hearings,
CCMA representation etc.
6.3
Ongoing contribution towards various marketing related expenses that are not covered by the official marketing
fund of the group.
6.4
Maintenance and running expenses of the Butterfield training centre, for not only initial training of new
franchisees, but periodic refreshment and business management courses.
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ROYALTIES
The franchisor charges a variable monthly royalty calculated on purchases as follows:
10% Administration royalty and 5% Marketing royalty
Based on prescribed margins and selling prices the royalty equates to ±6% of turnover.
THE FRANCHISE AGREEMENT
The franchise agreement serves as a tool to the franchisor to set, introduce and maintain standards in an effort to maximise
the success of the concept and therefore every franchisee. The initial agreement is entered into for a period of ten years.
The franchisor does not have shares in the operation, but is entitled to 20% of the profit made, should the sale of any part of
the business, it’s assets or shares, be effected.
TRAINING
The franchisor maintains a fully equipped training facility for the theoretical and practical training of all newly appointed
franchisees, as well as ongoing refreshment courses. Training takes place before the opening of new bakeries, for a period
of 2 weeks, and includes all disciplines required to effectively manage a Butterfield Bakery. Such training is intended for the
key personnel of a franchise, while all other staff of the franchisee will be trained at the new bakery, prior to, and during
openings.
PROFITABILITY ESTIMATES
Annexure A provides a basic forecast of expenditure but will differ materially from bakery to bakery depending on it’s unique
overhead structure.
GROSS PROFIT
Gross profit percentage is greatly influenced by the following factors:
Stock control
Point of sale control
Recipe control
Sales mix between bread and confectionery
Prescribed selling prices and wholesale discounts
The Butterfield pilot store achieves a gross profit percentage of between 45% and 48%.
A Gross Profit of 45% is therefore defined as practically achievable. Anything less indicates gross deviations from standards.
In order to monitor operational and retail variances, which occur as a result of non-compliance with prescribed recipes, theft
of raw materials and finished goods, a comprehensive computer program has been developed.
The installation and use of a computer, to a specification so it can accommodate the software is therefore not negotiable.
OVERHEADS
The following factors directly influence overhead costs:
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Financial gearing - How much money is borrowed and the interest rate negotiated to calculate the loan repayment.
The norm is 60% borrowed capital @ prime + 2
Rental - Prime retail space is expensive. Wholesale-orientated bakeries however, do not pay enormous rentals.
Existing Butterfield bakery rentals vary between R 4 000-00 per month and R 18 000-00 per month.
Electricity and/or diesel energised ovens. Diesel or paraffin are options but neccesarily more cost effective.
LPG serves as an alternative but is costly.
Franchisee involvement – If additional management is required, the payroll will increase.
Labour costs in rural areas appear to be lower than in the metropolitan areas.
Distribution cost - Lower levels in counter trade requires wholesale business, in order to utilise store capacity.
Wholesale business is related to trade discounts and distribution infrastructure costs.
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SET UP COST
For details of set up cost and the contribution required by the franchisee on the various bakery options, refer to Annexure A.
FINANCING
Although the franchisor does not get involved in the financing of bakeries, it will provide any information required by the
financier. Extensive concept introductions and business plan submissions, have been made to Bankfin, Stannic,
Nedenterprize and the Industrial Development Corporation. The aforesaid have all approved Butterfield as a national
franchisor and will grant loans, subject to their criteria.
GETTING STARTED
What now? How do I go about becoming involved in this exciting venture?
Step one is to complete the application form, which can also be printed off our web site. Submit the application to the
address stated. On receipt of the application, the franchise department of Butterfield Holdings will respond, via fax or post.
Once provisional approval of your application is obtained, a meeting will be arranged to introduce ourselves. The finer detail
of the concept will then be discussed. Discussions will include the timing of your opening and the location of your bakery, as
well as your introduction to existing franchisees and representatives of the financial institutions. On final Butterfield Holdings
(Pty) Ltd board, and financial approval, a provisional agreement will be entered into, whereby you, the prospective
franchisee will be required to pay an amount of R 20 000-00 being a partial payment of the eventual franchise fee.
At this stage the franchisee will be provided with a disclosure document.
THE KEY TO BUTTERFIELD‘S SUCCESS IS LARGELY DUE TO PRIME SITE SELECTIONS
Suitable premises can take months to source.
The less you as a prospective franchisee are concerned over where in the country your Butterfield Bakery is going to be, the
better your chances are of being accommodated sooner.
SET UP PROCEDURES
The duties of the franchisor include specification, design, costing, project management and quality control of the complete
project on behalf of the franchisee.
All construction disciplines are co-ordinated to such an extent that minimum time is spent on site. This enables opening the
outlet as soon as possible after beneficial occupation.
All training takes place during the set up of the bakery, which lasts for two to three weeks from the date of occupation.
CONCLUDING
Please take all the time you need to think and rethink this opportunity. The baking trade is competitive and physically
demanding. However, consumer patterns are predictable and are not easily influenced by other socio economic factors.
Please complete an application form in order to progress with the possibility of becoming a successful Butterfield franchisee.
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