Questions & Answers About Owning a Mugg & Bean Franchise
Please note that any information listed may be changed without notice. This information should prove useful to a prospective franchisee in understanding and evaluating the purchase of a Mugg & Bean Franchise.
- How do I become a Franchisee?
- What are the Criteria required to become a franchisee?
- What is the cost to setup a Mugg & Bean?
- What other costs should be budgeted for
- What do I get when I purchase a Mugg & Bean Franchise?
- What does Mugg & Bean charge as Franchise Fee and royalty?
- How much money do I need before borrowings?
- Does Mugg & Bean provide a turnkey operation?
- How much money can I make from my business?
- What is the term of the Mugg & Bean Franchise Agreement?
- How is the marketing fee spent?
- What personal requirements does the operation of a Mugg & Bean restaurant place upon the Franchisee?
- Is the Franchise Agreement negotiable?
- What personal guarantees are required in a Mugg & Bean Franchise?
- Do I have to purchase my product supplies from specified suppliers?
- Do I need a lawyer?
- What about a partnership?
- What control do I have over my menu?
- What is Mugg & Bean’s policy regarding additional Mugg & Bean restaurants?
- What about ongoing support?
How do I become a Franchisee?You can identify a site and complete the application form on the website and submit it.
Should the site identified meet all the criteria and be sanctioned by Mugg & Bean, you will be notified and asked to come in for an interview. Alternatively fill in the application form and should a site that Mugg & Bean source become available, you will be contacted.
What are the Criteria required to become a franchisee?Each application will be evaluated on individual merit; however the evaluation criteria are as follows:
- Food service experience, at least 3-5 years.
- An understanding of how franchising works.
- Available capital to set up the business.
- Owners are expected to operate the business themselves.
- A positive attitude and good people skills.
- Agree to undergo psychometric testing.
- Not afraid of long hours and hard work.
- Service culture.
What is the cost to setup a Mugg & Bean?The investment required for a Mugg & Bean franchise will vary, depending on the size of the premises available for rental. The average Mugg & Bean restaurant has an estimated average development cost of R10 000.00 per m2 Excluding V.A.T depending on the size of the restaurant. For example: Should a restaurant be 300m2, then the setup cost will be 300m2 x R10 000 = R3 000 000 Excl V.A.T
There are many variables, in finalizing the cost like:
- The Landlords contributions.
- Complexity of the site.
- Store design.
- Size of location.
Please note that the above is a guideline and a more accurate figure is provided once all information pertaining to the site is finalized and a site survey is completed.
The above figures are exclusive of V.A.T.
What other costs should be budgeted for:Over and above the building of the shop, there will be other capital requirements like:
- Rental deposits – generally 2 months rental
- Electricity deposits – about R5000.00
- Stamp duty – calculated at 0.6% of the total rental value of the lease period
- Lawyers fees ( if required )
- License fees i.e liquor license, trading license
- Submission fees for plans – R1500 to R2000.00
- Staff training – staff meals and salaries during training – between R25 000.00 and R35 000.00
- Operational capital – R100 000.00
What do I get when I purchase a Mugg & Bean Franchise?Once you have been approved as a franchisee, signed the Franchise agreement and have paid the franchise fee, Mugg & Bean will provide you with the following:
- Assistance with the conclusion of a lease or rental agreement with the landlord.
- Assistance in the design, development and commissioning of the new restaurant, the cost attached to these are part of the development cost.
- Should you require capital The Mugg & Bean Franchise has an approved rating with certain commercial banks to which you will be referred.
- A 4-6 week training program during which you are taught all facets of the operation of your restaurant, which will take place in the Mugg & Bean Training Centre and Mugg & Bean restaurants. After which, there is a 2 week in-store training programme once your restaurant has been commissioned.
- The assistance of our Operations Staff with the opening of your restaurant. The Operations Staff will help you hire and train staff, clean and prepare the restaurant for opening and provide general assistance and guidance to you in the running of your restaurant.
- Access to the Mugg & Bean Intellectual Property (know-how), the loan of all Mugg & Bean Operation Manuals which contain recipes, formulas, operating procedures, and general reference materials for guidance in the proper manner of operating a Mugg & Bean restaurant.
- A team of personnel, experienced in all facets of our system, who are available on an ongoing basis for operational support and guidance.
- The right to use Mugg & Bean trademarks, which are applicable to your franchise in connection with the operation of your restaurant for the term of the franchise.
- Marketing of the brand and assistance in marketing specific to your restaurant.
What does Mugg & Bean charge as Franchise Fee and royalty?There is an initial joining fee, which is a once off payment for the duration of your franchise agreement as follows:
Joining Fee: R240, 000.00 (excl VAT)
You will be required to make the following franchise fee payments to Mugg & Bean Franchising on an ongoing monthly basis for the duration of the franchise agreement:
- A monthly management services fee of 6% on your restaurant’s gross sales (excl V.A.T)
- A monthly marketing fee of 4% on your restaurant’s gross sales (excl V.A.T)
How much money do I need before borrowings?
You must have unencumbered capital of at least 50% of the total setup cost in cash, which is to be applied toward the purchase and development of the franchise package.
The balance of the franchise package cost can be financed through various lending programmes of any bank or financial institution, subject of course, to fulfilment of their usual credit requirements.
Does Mugg & Bean provide a turnkey operation?Mugg & Bean does provide a turnkey operation. This is administered through our development team. However all suppliers are paid directly by you.
How much money can I make from my business?The profit potential of one restaurant versus another, prior to opening, is impossible to determine. Restaurant profitability is a function of many variables not the least of which is management. Profitability can fluctuate from market to market, and even restaurant to restaurant within the same marketing area.
Generally as a guideline earnings before drawing interest and tax varies between 12% and 20% of gross turnover excl V.A.T. But it must be clearly understood that the franchisor provides no guarantees or makes any promises in this regard. The size of the restaurant and trading hours also influence calculations.
It is most important that you read the Mugg & Bean Disclosure Document carefully and familiarize yourself with all obligations of the various parties.
What is the term of the Mugg & Bean Franchise Agreement?The Mugg & Bean franchise agreement, runs concurrently with the term of lease of premises but provides for a five (5) year term. Also, you typically have an option to renew for an additional aggregated period of five (5) years, subject to your fulfilment of certain renewal conditions and the conclusion of a further term of lease.
There is no additional franchise fee charged for the renewal term.
How is the marketing fee spent?This amount is spent on media advertising; merchandising materials, advertising production, research programmes, co-operative advertising, special promotions and public relations efforts; as well as any other projects or programmes intended to expand the brand.
We seek advice and direction from franchisee representatives as to the above expenditures, although we retain ultimate decision-making authority.
The franchisee is encouraged to place local advertising in addition to their advertising fee contribution, but such local advertising must be approved by the Marketing team prior to any publication, distribution or display.
What personal requirements does the operation of a Mugg & Bean restaurant place upon the Franchisee?This business is a most demanding one. It requires and responds to personal attention. You will be expected to operate your restaurant in accordance with Mugg & Bean standards of service, quality and cleanliness.
Is the Franchise Agreement negotiable?The terms and conditions in the franchise agreement have been established to maintain and protect the integrity of the brand. The franchise agreement is not negotiable.
What personal guarantees are required in a Mugg & Bean Franchise?Personal guarantees are required with respect to the execution of the franchise agreement and procurement of stock.
If you form a corporation to operate your restaurant, you and your spouse, (if applicable), as well as any other shareholders of your corporation and their spouses, (if applicable), are required to personally guarantee the proper performance of the terms of the aforementioned agreements.
Do I have to purchase my product supplies from specified suppliers?Certain licensed products are compulsory from specified suppliers.
Do I need a lawyer?Yes! We recommend that you have the terms of our franchise agreement and other related agreements explained to you by your lawyer.
What about a partnership?We do not generally allow sleeping partners or absentee owners to be franchisees. The operation of a Mugg & Bean restaurant requires direct supervision on the part of the franchisee.
Mugg & Bean therefore insists that an operational partner with a share of no less than 26% operate the business. The operational partner must purchase his share of the business.
What control do I have over my menu?The concept of Mugg & Bean and its specialty items allows no discretion to franchisees in determining the menu for a restaurant.
Menus are updated at least twice per annum and menu items are reviewed and prices re-evaluated by the Mugg & Bean brand team prior to new menu implementation.
What is Mugg & Bean’s policy regarding additional Mugg & Bean restaurants?New restaurants are located in markets where research indicates strong possibilities for survival. Our marketing plan of concentrating restaurants in an area is designed to provide strong brand recognition and strengthening our competitive edge.
The franchise agreement is non-exclusive. Expansion by franchisees is encouraged.
What about ongoing support?
Each restaurant is allocated a franchise manager. You can expect to receive consultation from your franchise manager on a regular basis and assistance when special problems arise.
These trained and experienced people keep franchisees up-to- date on new ideas, improved methods, new products, and marketing techniques, and generally act as sources of information to help our franchisees avoid the pitfalls of trial and error.
We trust that this information will provide an insight into the Mugg & Bean franchise option. If you feel that you meet the requirements as outlined in this brief and you are driven to become part of the Mugg & Bean family, then the next step is to submit an application form for consideration.
Request and read the disclosure document before committing to the franchise agreement.
Contact Person:Yvonne van Wyk
Tel: 011 651 5920
Fax: 011 651 5768
Once you have been granted and guaranteed a franchise, we will assign a business banker to you to run process your application. He/She will assist you with applying for financing and any other general enquiries you may have about the financing side.
For any financing enquiries please contact:
Absa Retail and Business Bank
Franchise Solution Specialist
Address : 4th Floor | Absa Towers West | 15 Troye Str | Johannesburg 2001
Tel: +27 11 350 8415 | Mobile: +27 82 452 3453
First National Bank
1st Floor |
FNB Building |
1 Enterprise Road |
Tel: +27 11 632 0396 | Mobile: +27 82 799 6404 | Fax: +27 86 529 4169
Nedbank Business Banking
National Franchise Manager
Address: Nedbank Head Office | 135 Rivonia Road | Sandton
Tel:+27 11 294 2829 | Mobile: +27 83 638 2220
Address: 6th Floor | Standard Bank | 30 Baker Street | Rosebank
Tel: +27 11 721 5141 | Mobile:+27 83 366 8305