DISCLOSURE DOCUMENT. 1.1 The Franchisor is Unitrade 28 cc, Registration Number 2002/040944/23.

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1 DISCLOSURE DOCUMENT 1. FRANCHISE DETAILS 1.1 The Franchisor is Unitrade 28 cc, Registration Number 2002/040944/ Street Address: 86 Tsessebe Crescent, Corporate Park South Midrand,Gauteng South Africa. 1.3 Postal Address: PO Box Randjiesfontein Telephone / Fax: / / website: henk@inso..co.za/mark@inso.co.za INSO ALUMINIUM (INSO)/PG ALUMINIUM obtained Full Membership status with the Franchise Association of South Africa (FASA) 1.7 INSO and Unitrade 28 cc is wholly owned by Mark Hamilton-Payne, Henk Myburgh and the PG Group. 1.8 The Bankers are Standard Bank 1.9 The Auditors are Louis Brill & Co (011)

2 2. BACKGROUND TO THE FRANCHISE Inso was established in 1998 by Mr Johan Diederiks. Before the establishment of INSO, Mr Diederiks was actively involved in the aluminium trade through his association with Wispeco (Pty) Ltd. (Wispeco) where he worked as managing director for five years. Mr Diederiks identified the opportunity for a specialist aluminium manufacturer which could concentrate on the manufacturing of aluminium French doors, sliding doors, windows and other aluminium products. He designed an aluminium sliding door which has become very popular amongst users of these doors. After Mr Diederiks left Wispeco, he was joined by a number of ex Wispeco senior executives who formed the core of his management team. In July 2005 Mark Hamilton-Payne, Henk Myburgh and the PG GROUP acquired the sharehoding in Inso and Unitrade. Mark and Henk were senior directors with the PG Group, with Henk having served as the Operations Director of PG Glass and Mark as the Managing Director of PG Glass. Both Mark and Henk have extensive experience in franchising having been instrumental in running out and managing the PG Glass Franchise strategy from 1999 to 2005 introducing 68 franchises over this time. The PG Group is a R2 Billion per annum glass company and dominates the glass market in Sub Saharan Africa. Inso has experienced tremendous growth with the injection of the new management team doubling the number of franchises since their introduction. Currently there are franchises operating in the following areas; Randburg ( Jhb) Johannesburg North Johannesburg West Johannesburg East Pretoria Pretoria Silver Lakes Polokwane/Limpopo Nelspruit (Mpumalanga Province) Rustenburg Klerksdorp Durban (whole of Natal) East London (Eastern Cape) Knysna Windhoek Namibia 2

3 Maputo Mozambique Vryburg Bethlehem Lichtenburg Van Der Byl Park Vryheid Newcastle Ladysmith Somerset West Paarl Vredendal Cape Town In 2010 in order to expand and create a greater public profile the franchisor acquired the PG brand. Consequent to this and through negotiation with existing franchises the objective is to grow the network using the brand PG Aluminium, a number of the existing franchises have rebranded as PG Aluminium while a number have remained trading as Inso Aluminium. The objective of the strategy is to create a more robust and larger network that will deliver the benefits of economy and scale. Experience has revealed that the issues which potential entrepreneurs have been confronted thus far, can be addressed by expanding business opportunities through franchising, whilst providing the necessary support to ensure success: Lack of access to capital Lack of training Inadequate support Lack of experience The aluminium market in which PG ALUMINIUM is operating in South Africa is growing rapidly. Market research has indicated a market size in excess of R1 Billion per annum. 3. FRANCHISE BUSINESS The basis on which the Franchisees will do business is briefly as follows ; 3.1 The Franchisee does business under his / her own name, but trade as PG ALUMINIUM (name of location).the name PG has been registered with the Registration of Companies. No litigation is threatened or pending in this regard; 3

4 3.2 The Franchisee gets the right for a specific territory to sell a range of aluminium related products; 3.3 The Franchisee is supplied with details of the equipment needed to establish a manufacturing concern. The Manufacturing operation is established by the Franchisee with the assistance of the Franchisor. 3.4 The Franchisee will be provided with marketing material to assist in the sales process. Local advertising concentrates on the fact that the Franchisees provides tailor made products at standard rate prices. Products and workmanship are guaranteed. 3.5 Top priority is placed on training Before the Franchisee starts operating the Franchise, he / she is extensively trained on all aspects which are regarded as important to ensure that he / she makes a success of the business; The Franchisor has arrangements in place with existing franchises and uses there facility to train new Franchisees in all facets of the business from manufacturing, installing, quoting etc. 3.6 Continuous support 3.7 The Franchisor team will on a continuous basis offer support, guidance and technical advice. This support includes: Negotiating best possible prices with suppliers of raw material; Assistance with technical problems; Training of staff, where necessary; Development of improved manufacturing techniques. 3.8 The franchise is granted for an initial seven year period of time, but the Franchisee should meet certain annual performance targets. 3.9 Franchisees purchase certain stock items from the Franchisor s stock list, at agreed prices. The management team of the Franchisors has many years of experience of the aluminium trade and negotiates the best possible prices with suppliers. The Franchisor seeks to purchase its aluminium extrusions at the best possible price. Although it is highly unlikely the Franchisees will be able to purchase these stock from any other supplier at a better price there are times and economic 4

5 circumstances that at times cheaper prices are available ( due for example to the presence of imported products) Franchisees manufacture and sell a fixed range of products but are provided with the expertise and training to manufacture on demand items. The following range of products are manufactured as regular items: Aluminium sliding doors Aluminium windows Aluminium French doors Aluminium Folding doors Aluminium Showers The standard range of articles which are sold are set out in Annex 2 hereto Successful franchises are trained on: The manufacturing process Costing and giving quotes Marketing the products and Installing products; 3.12 Where a Franchisee believes there is a market for specific articles, which the franchise network do not supply at a given time, this is discussed with the Franchisor. The Franchisor can, if it is convinced that there is a market for the products, add this to its sales offering. Franchisees must take into account the fact that they are often requested to manufacture specific products for specific projects and these are manufactured without the consent of the Franchisor, provided that the quality of the workmanship is good The Franchisor charges the Franchisee the following monthly charges: A royalty of 3.5% of the previous month s gross sales with a minimum of R6000 (plus Vat) payable by the 7 th of the following month. In return for the payment of the royalty and the advertising contribution, the Franchisor renders the following services: Franchisee gets the rights to manufacture and install the PG range of products in its territory and to distribute it in his / her territory; Support set out in Clause 3.5/6 4. ADVERTISING 5

6 The Franchisee concentrates on personal contact with his target market. Extensive advertising is, therefore, not needed. National advertising is managed at Head Office where a portion of the royalty collected is used to promote the brand. 5. CURRENT FRANCHISEES / COMPANY STORES 5.1 The contract details, locations, addresses, etc. of current company factories are obtainable on our website and At this stage, there are no unresolved litigation existing with current or former Franchisees. 5.3 No material cases, civil, administrative or insolvency concerning the Franchisor, its directors or officers have been instituted in the last five years. 6. PROFILE OF THE IDEAL FRANCHISEE 6.1 The PG Aluminium franchise solution is unique in that Franchisees do not carry a lot of stock. They are part of an exclusive network operating throughout Southern Africa with head office support. 6.2 The profile of the Franchisee is: A confident person A natural sales person with good selling skills A person with good product knowledge A self-disciplined, performance motivated and committed person A person with a positive attitude, energy and drive A person with good interpersonal skills An innovative person when it comes to generating new ideas to increase sales A person with a vision to expand the business A person who always puts the customer first A person with good communication skills A person who can identify customer needs and make customer service excellence top priority A person who places top emphasis on quality of service and quality in the factory A need and tidy person with good administrative skills A person who can achieve sales budgets A person who can use marketing and advertising strategies to assist with achieving sales 6

7 A honest and committed person with consistent standards A person who possesses at least a matric with 10 years business experience 7. GENERAL GUIDANCE ON SITES Franchisees who are interested in acquiring a franchise meet with representatives of the Franchisor who then investigate possible sites in the relevant territory. General guidelines for sites are as follows: Warehouse type site Light industrial area Accessible m2 Passing trade not a requisite The Franchisor is, on a continuous basis, seeking new sites for expansion. It may be possible that the Franchisor has already identified a site in a territory, which the potential Franchisee is interested in. In such a case the parties will jointly investigate the suitability of the site. The Franchisee signs the lease agreement as lessee. 8. FRANCHISE AGREEMENT MAIN PROVISIONS The main provisions in the franchise agreement, apart from those already discussed, are as follows: 8.1 Territorial Restrictions 8.2 Territorial restrictions are imposed however there are rights to trade outside the specific areas as more comprehensively described in the Franchise agreement. Lease Agreement The Franchisee signs the lease agreement, but the Franchisor must approve the site. 8.3 Termination of Agreement The agreement can be terminated if Franchisee does not meet certain targets. Such targets are set when the contract is signed and after year 2 are reset by mutual agreement between the Franchisor and the Franchisee. 8.4 Contract is for a 7 year period 7

8 Contracts are for a 7 year, however is renewable for further 5 year periods. The contract can only be assigned to a third party on approval of the Franchisor. The Franchisor must approve such a new party. 8

9 8.5 Stock The Franchisee purchases some stock articles from the Franchisor and other stock, if he so chooses, from other suppliers. Stock which is purchased from the Franchisor include: Finished aluminium: If the Franchisee so chooses such aluminium can be powder coated or anodized by the Franchisor. It is strongly advised that this is done, particularly where there are not manufacturers near the Franchisee to do such work. Hardware: The franchisor has established contacts with key suppliers who will supply Franchisees with competitively priced hardware. Glass : The Franchisee is advised to purchase most requirements directly from suppliers, name of whom will be suggested by the Franchisor. Other articles needed in the manufacturing process can be purchased from suppliers approved by the Franchisor. Franchisor will, in most cases, manufacture stock articles for purchasers on an order basis. For this reason, Franchisees must order stock articles for purchasers on an order basis. For this reason, Franchisees must order stock from Franchisor on as needed basis. The Franchisee buys stock on account which account is settled on 30 days from Statement. Statements are sent out on the 25 th of each month with payment taking place on the 25 th of the following month. Non South African Franchisees are required to prepay for stock either by way of a confirmed letter of credit or direct deposit. Transport of stock is for the account of the Franchisee with risk passing to the Franchisee upon the stock leaving the warehouse. 8.6 Franchisor Support The Franchisor gives extensive support to the Franchisee. In addition, the Franchisor is responsible for: Advising and assisting the Franchisee with site selection; 9

10 Training the Franchisee and key personnel. The Franchisee is trained for a period negotiated and as required by the franchisee in the factory of the Franchisor. During this period, the Franchisee is responsible for his / her own accommodation cost but is trained as part of the franchise agreement. Key staff, including sales representatives and other sales staff are trained for a period of 1 week at the factory of the Franchisee; Assistance with establishment of the franchise. Providing the Franchisee with acess to highly competitive aluminium extrusion pricing. 8.7 Franchise costs (Refer Annexure) Monthly Royalty The Franchisor charges a monthly royalty of 3.5% (five) of the franchise s turnover for the previous month, with a minimum fee of R As quid pro quo for the monthly management fee the Franchisee receives the services set out in paragraph 8.6 above Advertising (see Paragraph 4) 8.8 Goodwill and assignment of the franchise 10

11 The interest of the Franchisee in the franchise can only be sold or assigned with the consent of the Franchisor. The Franchisor must be satisfied that the proposed new franchisee meets its selection criteria and can meet his / her commitments. 9 FINANCIAL INFORMATION The Franchisee incurs the following financial obligations, after assessing the Disclosure Document and Franchise Agreement for seven days and making a decision to purchase the franchise: 9.1 Franchise Cost Refer to Par Establishment Costs The Franchisee incurs the establishment costs set out in the budget, Annex 4 hereto. The budget acts as guideline only but are based on the experience of the Franchisor, and reflects realistic based targets and expenses. Rental deposit Telephone, water & electricity deposit Cost of hiring staff Training cost of staff (non-sales representatives) 11

12 9.3 Leases / Hire Purchases The Franchisee has to purchase a small bakkie and may have to lease it. 10. TOTAL INVESTMENT 10.1The total investment including working capital, requirement is therefore: Initial Franchise Cost Initial Working Capital 11. Attached hereto as Annex is an application for the franchise and a statement of assets and liabilities which must be completed by interested Franchisees before serious negotiations are conducted for the sale of the franchise. This supplies basic information to the Franchisor to enable the Franchisor to determine whether the potential candidate meets its requirements. 12

13 CONTENTS OF OPERATION MANUAL Annex 3 VOLUME 1 : START-UP Section 1 : General Information Section 2 : Setting up the business Section 3 : Initial and Continuous Training Section 4 : Stationary and Dress Code Section 5 : Opening Assistance Section 6 : Profile of a Sales representative VOLUME 2 : RUNNING THE BUSINESS Section 1 : Stock and services Section 2 : Giving quotations Section 3 : Manufacturing Standards products Section 4 : Installing products Section 5 : Dealing with Customers Section 6 : Marketing Section 7 : Debtors Administration and Credit Policy Section 8 : Bookkeeping Section 9 : Personnel Administration Section 10 : General Administration Section 11 : Security and Safety Section 12 : Review Continuously Section 13 : Some General matters Section 14 : Franchisee / Franchisor Communication VOLUME 3 : PROCEDURES AND SOURCE DOCUMENTS 13

14 Annex 4 CASHFLOWS The cashflows attached hereto represent cashflows of the factory currently owned by the Franchisor / INSO ALUMINIUM. Given the right location, marketing endeavors and performance motivation, the Franchisee can achieve these figures and improve on same. In view of these figures being dependent upon the Franchisee s entrepreneurial endeavors, the Franchisor cannot guarantee the achievement thereof per se. 14

15 Annex 5 AUDITORS CERTIFICATE We, the auditors of UNITRADE 28 (PTY) LTD, hereby confirm that INSO ALUMINIUM (PTY) LTD. Is a going concern and is in the position to pay its debts as and when they become due. Yours faithfully 15

16 Annex 6 BUSINESS DECLARATION We, the undersigned directors of UNITRADE 28 (PTY) LTD, hereby confirm that: a) UNITRADE 28 (PTY) LTD, is in a sound financial position and is able to pay its debts as and when they become due; b) The business of UNITRADE 28 (PTY) LTD is viable; c) The Franchisees who acquire franchises from UNITRADE 28 (PTY) LTD, should provided there is proper management on their side, be in a position to conduct their business profitably. NAMES: SIGNATURE: 1. M Hamilton-Payne 2. H Myburgh 3. RPK Curle 4. SR Jennings 5. M Carew Annex 7 16

17 FRANCHISE DIVISION APPLICATION FOR FRANCHISE GENERAL DUTIES Your Name Your address Your ID Number Telephone Number (H) (W) (Fax) (Cell) YOUR QUALIFICATION Name of School Highest Standard Passed Year completed Qualification after School Name of Institution Year completed (If more qualifications, complete next blocks) Qualification after School Name of Institution 17

18 Year completed YOUR WORK EXPERIENCE (LAST 5 YEARS) Period Employer Job YOUR BUSINESS EXPERIENCE Year Title of Business Reg No. Type of business 18

19 YOUR BANKING HISTORY Name of bank Branch Name Branch Code Name of Manager Tel. No of Manager Type of Account Account No. No. of years Account held Mortgage / Bond NO YES If yes, state name of institution Account No. Vehicle Finance NO YES If yes, state name of institution Account No. Credit Card NO YES If yes, state name of institution Account No. Personal Loan NO YES If yes, state name of institution Account No. Other Type If yes, state name of institution Account No. Will you be able to raise 80% of the selling price of the Franchise? YES NO 19

20 If yes, how will it be financed? Have you ever been declared insolvent? NO YES If Yes, when? Year in which rehabilitated BUSINESS DETAILS (complete if applicable) Existing business details if applicable Business Tel ( ) Business Fax ( ) Business Street address Postal Code Business Postal Address Postal Code Are your business Premises owned? Yes No What is the approximate value of the property? R 20

21 If bonded, what is the name of the bank (attach proof of ownership, e.g. bond statement) What is the outstanding bond amount? R What is the monthly repayment? R Are your business Premises rented? Yes No What is the monthly rental? R What is the lease expiry date? Y Y Y Y M M D D What is the name of the landlord? What is the Landord s telephone number? ( ) 21

22 TYPE OF BUSINESS Sole Proprietorship Partnership Close Corporation (Pty) Limited Registration No: Nature of business Manufacturing Service Import / Export Retail Wholesale Other Describe your business 22

23 FRANCHISE REQUEST What experience to you have of the aluminium Industry? Why are you interested In INSO ALUMINIUM Franchise? State a potential venue, If you have already Investigated this? 23

24 YOUR FINANCIAL POSITION Value your assets: House Vehicle Furniture Shares Other Assets (list) TOTAL: Your Liabilities Bond HP / Lease Accounts Other (List) TOTAL: NET: Credit References: Name Telephone Amount

25 Proof of Working Capital: Will you be able to raise R... as working capital? YES NO (This is in addition to the purchase price of the Franchise) Will you be able to pay a deposit of R... YES NO Please attach proof of the above (i.e. bank certificate, etc) Any additional information to support your application further: 25

26 I M P O R T A N T N O T I C E The selection of franchisees and the award of franchise rights are based on the following point system: Total points = Nf + En + Ex Nf En Ex = Finances provided by Applicant = Entrepreneurship shown by the Applicant = Experience in the aluminium industry. SIGNATURE OF APPLICANT.. DATE 26