“Tandem franchising, an innovative franchise model unique to South Africa, is offering franchisors the opportunity to grow their brand, retain initial majority control of the new franchise and shares in its profits, all while working to empower communities in need of economic development.”
Most companies have used franchising to expand their network as well as giving cleaners an incentive to own and run their own businesses. This presents an ideal BEE initiative in South Africa. Mila has decided to implement this system.
According to Stats SA, “among graduates the unemployment rate is 31% compared to 19.5% in the 4th quarter of 2018,” an extremely troubling fact given the 11% increase in just one year. Given the urgency of this crisis, President Ramaphosa has made the challenge of youth unemployment a central pillar of his economic development strategy. As outlined in his State of Nation Address in June 2019, making Economic Transformation and Job Creation one of the seven priorities for his administration.
The Franchisor (Mila) tenders for and secures a major cleaning contract e.g. with corporates for the commercial, industrial and or retail sectors. Mila then divides this work amongst a number of Franchisees. Because of the nature of the contract, the client (corporate) will enter into a contract cleaning agreement and pay the money directly to the Franchisor (Mila). Mila has a franchise agreement with the franchisee. In order to make it easy for the Franchisee, Mila will do the administration for the franchisee and pay the balance to the Franchisee. The Franchisee will then pay their specific expenses e.g. motor vehicle and keep the balance as profit.
Mila will assist each entrepreneur in registering a company (PTY) via CIPC as well as obtaining a VAT number. The entrepreneurs will go through a pilot phase which involves vigorous training and mentoring. We will assist the ‘start-up franchises’ with access to a market of potential employees (cleaners). The business owner will then employ 30 staff members, thereby increasing productivity, quality and accountability. Mila’s ongoing mentorship, training, compliance, governance and financial support is offered to each business via Mila Shared Solutions.
1. Franchise agreement signed between Franchisor (Mila) and Franchisee (Entrepreneur)
6. Franchisor invoices the Client on a monthly basis
11. Staff members are employed by the Franchisee – a minimum start-up of 30 staff members
2. Franchisee pays an initial start-up fee (Rx)
7. Franchise agreement signed between Franchisor (Mila) and Franchisee (Entrepreneur)
12. The Franchisee invoices the Franchisor for the contract value per site or group of sites
3. Franchisor retains a 49% shareholding and contributes in the same ratio as the Franchisee (51%)
8. The Client pays the Franchisor
13. Franchisee pays all salaries/wages, equipment, chemical and brushwork, administration fees etc together with a franchisee fee and agreed marketing fee to the Franchisor
4. Franchisor retains voting rights of 51% until such time as the Franchisee has taken 100% ownership
9. The Franchisor provides all payroll, administration, financial reporting as well as all legal and governance compliance
14. The net income retained is for the account of the Franchisee/Entrepreneur and aims to identify the entrepreneurs within the soft services industry
5. Contract cleaning agreements are entered into between the Client and Franchisor
10. The Franchisee manages Client relations and Operations per allocated sites
Cleaner – Owner
Almost 100,000 people are employed by approximately 1,750 contract cleaning companies countrywide
A few of the larger companies employ between 18,000 and 20,000 cleaners
Many medium-sized companies employ around 1,000 cleaners
Around 70% of the industry is small and micro enterprises employing fewer than 50 cleaners