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IDC

Day Month Year. IDC. Brazilian fact-finding delegation visiting SA. Presentation by Christine Engelbrecht 27 July 2010. INDUSTRIAL DEVELOPMENT CORPORATION Your partner in development finance.

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IDC

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  1. Day Month Year IDC Brazilian fact-finding delegation visiting SA Presentation by Christine Engelbrecht 27 July 2010

  2. INDUSTRIAL DEVELOPMENT CORPORATIONYour partner in development finance To be “the primary driving force of commercially sustainable industrial development and innovation to the benefit of South Africa and the rest of the African continent” Vision The IDC is a self-financing national development finance institution whose primary objectives are to contribute to the generation of balanced, sustainable economic growth in Africa and to the economic empowerment of the South African population, thereby promoting the economic prosperity of all citizens. The IDC achieves this by promoting entrepreneurship through the building of competitive industries and enterprises based on sound business principles. Mission Supporting industrial development capacity Objectives Promoting entrepreneurship Sustainable employment Growing sectoral diversity Regional equity Growing SME sector Industrialisation in the rest of Africa Broad-based black economic empowerment Outcomes Environmentally sustainable growth New entrepreneurs entering the economy Local beneficiation Growing export sector

  3. FRANCHISING STRATEGIC BUSINESS UNIT OF THE IDC MISSION: To support emerging entrepreneurs with limited access to capital to acquire and manage a sustainable franchised business in South Africa & to assist new franchised concepts to expand & develop. PRODUCTS: The IDC’s Franchising SBU offers the following finance schemes to the industry: • Wholesale finance for a brand with individual loans rolled out to franchisees over a period of time. • Directly to franchisees that require funding of at least R1 million.

  4. FUNDING CRITERIA AND TERMS • Franchisor • At least 3 outlets with profit history for more than 12 months (Pilot stores will be separately evaluated) • History re closures and / or relocations will be critically evaluated • Business plan for typical outlet based on performance of existing outlets in similar areas • Franchisee • Minimum unencumbered cash contribution - % based on strength of business model • Approval by franchisor • Approval of site and lease agreement with landlord • Site specific business plan must reflect economic merit • Terms and conditions • Minimum loan amount of R300 000 (R1m for individual applications) • Term loan (could be supported with equity type funding from special funds to make it affordable to BEE) • Interest rate: Prime related based on Credit Risk and Developmental Impact • Term: Maximum period of 6 years • Repayments: Structured to suit the needs of the business and could be stepped or amortised and include a capital moratorium • Security: • Security over the business assets (GNB / Suspensive sale / Cession of stock ) • Personal suretyship from franchisee • Pledge of shares and cession of loan accounts • Buy back guarantee from franchisor (if considered necessary)

  5. WHOLESALE FACILITY • Pre approval of roll out plan of a franchisor over a period of time • Max 5 outlets over a 18 month period • Due diligence on the franchisor • Strength of the brand, training and support provided, history of existing stores • Mini due diligence on the site and the franchisee as and when it is identified • Co-operation agreement between IDC and franchisor • Individual loan agreements between IDC and franchisees • Franchise agreement between Franchisor and franchisee • Benefits of wholesale facility: • Certainty of availability of funds for roll out plan • Reduce the time required to approve prior to opening • Terms and conditions of funding pre-determined • Known • Take strength of the brand and franchisor support into account • Structured to suit needs of the business Franchisor Franchise agreement Co-operation agreement Franchisee IDC Loan agreement

  6. CO-OPERATION AGREEMENT • Agreement between Franchisor and IDC to co-operate with regards to the roll out of outlets • Franchisor’s responsibilities: • Training of franchisees • Ongoing support / mentorship • Franchisee selection • Agreed % (normally 70%) of outlets for BEE (50%+ ownership) • Site selection (or evaluation) • Notify IDC of breach by franchisee • Provide / assist with information (financial and other) • Step in clause / buy back guarantee (as considered necessary)

  7. Day Month Year QUESTIONS? THANK YOU! The Industrial Development Corporation 19 Fredman Drive, Sandown PO Box 784055, Sandton, 2146 South Africa Telephone (011) 269 3000 Facsimile (011) 269 2116 E-mail callcentre@idc.co.za Website: www.idc.co.za

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