Attention all FASA Members! How can Franchisors earn B-BBEE points ownership using the franchise business model

The BEE (B-BBEE revised Code) scorecard divides business into three categories based on annual turnover i.e.

  • Exempted Micro Enterprises (EME’s) – annual turnover of less than R10m
    (However these businesses will automatically receive a level associated with its percentage of black ownership)
  • Qualifying Small Enterprise (QSE’s) – annual turnover of between R10m and R50m –
    must comply with all 5 elements of the revised BEE scorecard and
  • Medium to Large Enterprise (M&L’s) – annual turnover of more than R50m –
    must comply with all 5 elements of the revised BEE scorecard.

The five elements and the relevant weighting points are:

BBEE Score Points

You may be aware that the association has been invited by the Consumer Goods Council of SA to a discussion with the DTI on the Franchise Business Model and how franchisors can earn points towards ownership using the franchise business model.

This model has generated a number of Black entrepreneurs over a long period and that is the aim of the B-BBEE Act. The DTI has been indulging the industry on a number of concessions with regards to the B-BBEE Act as some of these are reflected in the revised Codes 000 and 300.

We are very interested in obtaining your view regarding the following and would really appreciate hearing from you:-

It is to be noted that each sector is subject to its own sector specific scorecard and it is incumbent on the franchisor to make sure they adhere to the specific requirements of that sector.The overall objective (for those less versed on the scorecard terminology) is to improve participation by Black people at the Ownership level and to come up with ways to incentivise businesses and recognise businesses for the efforts that they are putting towards this.Franchisors should feel free to share some of the work they have done even if it falls short of the BEE requirements, so that if any of the initiatives are scaleable they can be recognised for that and some best practice sharing can take place. The DTI’s stance on this is to co-create vs being prescriptive.Please submit your comments to fasa@fasa.co.za by no later than 24 September 2018.

1. For Franchisors/Franchisees whose main business operations are in or rely on Agriculture/Agri-processing – what are some of the actions that you would take to transform your business or the suppliers that your business relies on.
2. Given that as a Franchisor, each of your Franchisees are separate business entities and therefore as it is now, you cannot claim for any points under the first pillar on the BBEEE scorecard of Ownership, even if you have invested a lot of effort into recruiting Black Franchisees; if you were to re-design the Ownership element of the scorecard so that it takes into account the efforts you have made or are currently making, to recruit transformed Franchisees, how could that be done, in your opinion?Note: The 3 elements that fall under Ownership are the following:

–  Voting Rights (held by Black people)
–  Economic Interest and
–  Net Value (of the business owned by Black people)

3. How could you design your Franchise business model to support meaningful transformation? (Take into account all the 5 pillars of the scorecard, not just Ownership, eg Enterprise and Supplier Development).
4 How would the newly designed model differ from the current one?
5. What do you consider to be some of your:Low-hanging fruits to transform your business – those that could be done with ease and in a short space of time. If there are any concessions you would require from the Dti for example to make these happen, please highlight them here.

Long term deliverables – what could your business achieve in the longer term and what are some of the challenges that are hindering your progress (e.g. expensive funding for Black Franchisees, lack of equity from Black Franchisees, Black suppliers who are not able to meet your business demands etc)

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