Establishing a PubGauteng
The intention of this exercise is to assist
the first time entrepreneur to note some factors which might influence his/her
decisions when establishing a new Pub.
The intention is NOT to give legal or
financial advice. All information is available for the entrepreneur to use at
his / her own discretion and risk and Frik Liebenberg Business advisory
services cc does not except any responsibility whatsoever for losses which the
entrepreneur may occur when using this information. This information is by no
means comprehensive and must be adjusted to suit specific situations and to
suit provinces other than Gauteng.
Opening a new Pub is an exciting venture but
not without risk.
Before you jump in and start spending money on
your new venture, stop and read these few pointers that may save you money and
loads of frustration.
The question is often asked “Where do I
start?
1.
SAPS Clearance.
You need a SAPS clearance certificate
confirming that you do not have a criminal record. This step can take up to six
weeks, so start with this before you do the rest.
- Take a copy of your I. D. document and
R59.00 to your local SAPS during office hours.
- Ask them to do your fingerprints for the
purpose of an application for a Liquor License.
- Once
you have your fingerprints taken, hand the fingerprints together with your
receipt of R59.00 and a copy of your I. D. document to:
The Criminal Records Centre, First
floor, Bothong Plaza West Building, 271 Francis
Baard Street, (Previously Schoeman Street) Pretoria and deliver the original Police clearance Certificate to our
office
or
You can send us the original
finger prints, copy of the receipt of R 59.00 per set of finger prints and a
copy of the Identity Document/s and we will deliver it to Pretoria and arrange
for collection at an additional cost of R 800.
2. Premises.
You
need premises before you can even apply for a Liquor License. The public area
must not be less than 30m2. The ideal is that your premises are +500m or more
from a church, school. However this is not always possible. Do not start
spending money on renovating the existing building or start building a new
building or sign a lease contract on the building before you have
cleared the following:
- Visit your local Municipality’s Town
Planning or Land Use department
and confirm with them that the premises or stand that you want to use are
suitable for a Pub. (You need the ERF number of your premises)
- Request a Zoning certificate from the
Municipality on the stand that you
intend to use. Your Liquor License Consultant must be convinced that the
zoning is correct. In Gauteng you need a Local Authority Approval (A letter confirming you may apply)
for a Pub in addition to the
zoning certificate.
- Negotiate a Lease Contract. If
you are not the owner of the property then you require a lease contract
between you and the landlord. Be careful when signing the lease contract.
Read the conditions very careful, especially with regards to the
following”
1. Escalation clause.
This means the amount the rent will increase after every year. An annual
escalation of up to 8% is acceptable in today’s economy. (Do not accept a 12%
escalation clause for this is too high in today’s terms 2014.)
2. Right to renew.
The renewal clause gives you the right to renew the lease contract after the
expiry of the lease. There should be a % increase or a rand figure of the first
year’s renewal increase in rent with an escalation clause for every year
thereafter until the end of the renewed contract. The applicant is welcome to
contact the writer for more information. (Do not accept a clause stating “The
lessee has the right to renew the lease contract, without a clear stipulation
of the cost of the lease after renewal.)
Note: The monthly payments stipulated on the lease contract
can be inflated by the lessor’s on-costs such as administration cost, security
cost, cleaning cost, rates and taxes etc. Establish first what extra cost will
be charged before you mak a decision.
A
guideline on the influence of rent on the profitability of a Pub is that if the
rent is in the region 10% or more of a Pub’s turnover, you are paying too much
rent which will inflate your overheads out of proportion.
3.
SARS clearance.
Apply for your Tax clearance certificate at
SARS. If the applicant is a juristic person such as a Company, the Tax
Clearance must be in the name of the company otherwise the tax clearance
certificate must be in the name of the applicant/s.
4.
Liquor License Application.
- Contact a reputable Liquor License
Consultant to give you a quote clearly
confirming all cost. Investigate the Liquor License consultant and ask for
references. Make sure you know what is included and what is excluded in
the quotation. Apply as soon as possible because a Liquor License
Application can take a long time. (4-6 months or longer) You can apply on
existing premises or on a stand on which there is no building yet.
Your
Liquor License Consultant will give you a list of requirements for a Liquor
License Application.
Don’t
attempt to do a DIY job on your Liquor License application unless you are fully familiar with all aspects of
the Liquor Act.
Section
23(3) of the Gauteng Liquor act reads: “Where an application for a license has been refused by the
Board, no new application may be made in respect
of the same premises within a period of one (one) year from date of refusal,........” If it takes six months
before you receive a refusal from the board
it means that you have wasted 18 months before you can apply again and then you might wait another 6 months
before your application can be approved.
That could mean 24 months which you might pay rent on an empty shop.
5. Start planning your shop.
Decide
on your target market. (High income, Medium income or Low income group). Your
products that you will sell and your shop furniture depends on this decision. (As
well as the outlay and image of your shop).
- Pay
attention to the condition and suitability of the shop’s floor. If it needs replacement, estimate the cost. The
shop floor is part of the image you wish to portray. It must be practical
for high traffic, easy to clean and non-slip.
- Painting and renovation
the shop. Estimate the cost to paint and renovate. Choose your colours wisely. Steer clear of a dull neutral
colour.
- Determine
the security requirements and cost
such as burglar bars, safety doors, alarm system, armed response and new
locks for the shop (Don’t use the old locks. You don’t know how many keys
are floating around.) Install security mirrors, CCTV cameras, dummy
cameras, an alarm system with armed response and safes
- Design
and estimate the cost of the signwriting
and promotional material. Proper signage and graphics are crucial to
establish brand recognition and must portray the message load and clear
that your shop is a Pub. Decide on a Name and Logo and colours of the
business. (Remember your business must “jump out in the street”. It simply
means that your business must not melt into the surrounding shops but
stand out very clearly) You must be able to read the signwriting and
advertisements while driving at 60 km/hour. Rather write less than
clutter the signboard with too much information. Items may include Neon
Signs, Banners, Store Front Signs, Displays and message sign boards.
- The lighting of the shop is important.
It must suit the required ambiance of the type of business you intend to
operate.
- Bar Counter and Shelving. The
Bar Counter and Shelving should
be strong to support the weight of the liquor on display. Instead of
storing your products in a store room, you can create attractive displays
with it. Your shelves must be fully stocked. It creates the impression of
a successful store. Avoid partially stocked shelves. Wall shelving must
cover the walls, contribute to the image of the shop and must suit the
shop's decor. A good idea is to use the open space above the wall shelving
for promotion or alternatively it can be boxed with cladding or similar.
- Impulse buying Countertop Display. Well
selected display of smaller items usually bought on impulse can be
displayed on the back counter or shelving.
- Temperature control. Decide
if an air conditioner is required to control the temperature in your shop.
- Point Of Sale System (POS) and software.
The liquor trader must employ a powerful
POS system to control his cash flow, stock, shrinkage, and sales
statistics. Contact a reputable
POS supplier and decide on a system
that will at least scan each item, adjust the stock level automatically,
have a complete stock control system in place that will show any theft or
shrinkage after each stock take, have a minimum and maximum stock level
control with a re-order level flag. It must show the cash at hand and
control the empty bottles.
- Establish the suitability, quantity,
safety and convenience level of the parking
for your customers.
- Decide on your pricing strategy.
Visit opposition shops and determine their prices. Find out from suppliers
the cost price of your products. Decide on a price mark-up percentage. It
is not a good strategy to be the cheapest in town and never start a price
war!
- Decide on your product strategy. The
type of products you will sell depends on your target market’s income and
preferences. Initially and before start up it is difficult to know for
sure what products are fast movers, however you can talk to other dealers
who are outside your influence area. Establish the fast moving stock and
list them.
Unfortunately
you can not only stock fast moving stock. Some stock should be kept as a
service product to customers who are seeking alternative products.
Your
shop should be well stocked and must look successful. Do not allow partly stocked shelves but rather
reduce the number of shelves. Keep them stocked
to the brim.
- Diversify. If
you want to stock products other than liquor and smokers requisites, you
need to apply to the liquor board to stock such items. Examples are rugby
shirts, flags, biltong, braai equipment and other paraphernalia.
- Initially
stock high priced items such as
exclusive wines and whisky with care. Keep a low stock of it until you
have established the demand for it.
- Compile a Suppliers List with
alternative suppliers. Your purchases can
influence your profit margins dramatically. Shop around for better deals.
Do not buy from the local Liquor Store. Your relationship with your
suppliers is critical. Try to line up alternative suppliers where
possible. This should include refrigeration mechanics, electricians etc. Some
suppliers offer a percentage discount on bulk/case purchases. Buy all your
fast moving stock from them. The slow moving stock can be purchased
elsewhere and in smaller quantities.
- Decide on an Employment Strategy. Many
successful businesses have failed because of employees. Take note of the
following:
1.
Do not employ anybody to do
the work that you can do.
2.
Work out your budget and
cash flow before you employ anybody. It is not fair to an employee if you
inform them soon after you employed them that you can not afford them.
3.
Do not trust anybody. Ensure
strict financial a stock control. Do your own buying and stock control. Ensure
that your employees have no access to the Point Of Sale systems manager’s
files. You as the owner must enter all stock delivered into the computer
program and NO staff member may have any access to that program.
4.
Follow up the applicant’s
previous employees and get a reference.
5.
Follow up the applicant’s
qualifications.
6.
Draw up disciplinary
procedures for the employees. If an employee is found guilty of theft, do not
only dismiss the person. Lay a criminal charge against that person and
prosecute. Otherwise the person moves to a new liquor store and repeat the the
same.
- Insurance cost.
Some lease contracts requires the lessee to insure for shop- front windows
and other breakages. Also insure the Stock and Equipment.
·
Register
with the Receiver of Revenue such as Income Tax,
Employees tax (PAYE), Value-added tax (VAT) if applicable, Unemployment
Insurance Fund (U.I.F.)
·
Apply
for a Business License (if applicable) at your
local Municipality.
·
Appoint
a registered accountant. Seek advice from your
accountant on VAT registration and tax issues. You can save substantial amounts
of money by using professionals.
·
Decide
on your business hours and stick to it. Advertise
it at the entrance of the shop. You should keep in mind the security aspect
inside and outside the shop.
·
Decide
on the legal entity of the business
such as a Sole Proprietor, Company (Register the Company) or partnership (Draw
up a partnership agreement).
·
Banking.
Negotiate with different banks the Cash
deposit fee charged by that bank. (Cash deposits can attract huge bank charges)
Then open an account.
·
Order
your stock. Ensure that you do not run out of stock,
but do not over stock.
·
Credit
card machine. Negotiate with your bank for the
installation of a credit card machine.
·
Before opening buy an
advertorial in the local newspaper with opening specials. Limit the specials
both by quantity and time period.
6. Budget.
Work out a Budget. Without
a Budget you can fail before you opened
your doors. Remember to budget for the actual and hidden cost which are listed
but not limited to the following:
1. Cost
of the Liquor License Application.(± R13500 in 2014)
2. Cost
of your first payment to the Liquor Board on approval of the Liquor License.
±R1500 in 2014)
4. First
months rent in advance.
5. Cost
of stock.
6. Electricity
deposit.
7. Painting
and renovating the shop.
8. Tiling
the shop floor. (if required)
9. Lighting
and wiring. (if required)
10. Burglar
bars and safety gates.
11. Alarm
system and camera system.
12. Signwriting.
13. Stationary,
printing etc.
14. Cost
of equipment, furniture and fittings plus installation.
15. Cost
of electrical installation of equipment
16. Cost
of Point of Sale system and software.
17. Plumbing.
(if required)
18. Trading
License.
19. Computers
and software.
20. Employment
contracts.
21. Cleaning
material and equipment.
22. Transport.
(initially you can survive with a trailer)
23. Cost
of rent while waiting for the Liquor License.
24. Installation
the alarm system
25. Glasses.
26. Telkom
line.
27. If
your business is in Gauteng order a sign with letter 50cm high for the front
door which displays the following:
Name
of Business.
Type
of Liquor License (i.e. Restaurant)
Trading
times of the Business.
Liquor
License Number.
28. Fire extinguishers.
29. Pool
tables / dart boards.
Some
notes.
Make
sure that the electrical distribution board of the shop you have decided to
rent have the capacity to carry the electrical load of your equipment. Your
lease contract may have a clause placing to onus on the tenant to ensure that
the shop is suitable for your purpose. They will not rewire the electrical
distribution board.
1.
Minors.
Section 46 of the Gauteng Liquor act 2 of 2003. A licensee shall not sell or supply liquor on the premises to
persons under the age of 18 years....
2.
Intoxicated
persons. Section 47 of the Gauteng Liquor act 2 of
2003. A licensee shall refuse to admit
to the licensed premises or any part thereof, or sell or supply to an intoxicated person and shall have such person
removed from the premises or any
part thereof. (An intoxicated person is when his/her capabilities are so impaired by liquor that he/she is
likely to cause injury to himself/herself
or be a danger or nuisance or disturbance to others.
3.
No
liquor may be consumed outside a Pub.
4.
Business
Hours: Gauteng Monday
– Sunday 08h00 to 20h00.
5. Weddings and functions.
A Pub license does not allow you to
set up a Bar at a function. Your license only
covers your registered premises and within the constraints of your floor plan approved by the Liquor Board.
6. If the Liquor License is in the name of a Company or Close Corporation.
If
the license in in the name of a juristic person as mentioned above, a natural person must be appointed to manage the Pub. Contact
your Liquor License consultant.
7. If the License holder is not the person
who is running the Pub on a day to
day basis.
Then
a natural person who is running the business on a day to day basis must be appointed as Manager
8. Cash flow is
very critical. Don’t buy anything except stock. Avoid “Nice to have” equipment and buy them when your shop is
profitable. Many a profitable
shop has closed down because the owner ran out of cash.
Once
your shop is profitable, save at least six months overheads and invest it in
a sixty day account.
9. Makro factors influencing the sales
of a Pub.
As
with all businesses there are distinct factors, which are out of your control, that influence the turnover of a Pub. If I
may grossly generalize the following cycles
may be observed.
1.
Weather. – The higher the
temperature the higher the sale of beer and beverages. There is a distinct drop
is beer sales during rainy and cold days.
2.
Sport. – Sport such as an
important rugby / soccer match can influence your sales.
3.
Weekdays. – Generally
Mondays are much slower than Friday or Saturday.
4.
Months. – Generally November
and December are the busiest with February the slowest. Generally in spring
sales rise. Easter season will influence your sales dramatically and depending
on which days of the week the public holidays are, you will have dramatically
lower sales.
5.
Festive season. – This is
the busiest part of the year. You need to order larger volumes of stock because
most suppliers close over the festive season. Initially it will have a
detrimental effect on you cash flow if you do not plan for that. You need to
plan the fast moving stock such as beer. Again you can order a large quantity
of beer for the festive season, and if it rains for three weeks, then in
January you can be stuck with a large quantity of beer and a with a cash flow
problem. The opposite is also true. If you order too little and run out of stock,
you lose customers and sales!
6.
Time of day. Mornings are
slower and it picks up at 16h00.
7.
Time of the month. From the
10th until the 20th of the month is usually slower than
the rest of the month. But, if your target market is weekly paid customers, the
scenario will change.
8.
Labour unrest can affect
your business in that strikes reduce the expendable cash of your customers. It
takes a striker months or years to recover financially after a strike. If the
demonstrations are held in the vicinity of your shop, your sales come to a
virtual standstill. This can be expected from June to September.
Frik
Liebenberg of Frik Liebenberg Business advisory Services cc 99/05522/23 has
been a Business Broker since 1997 and a Liquor License Consultant since 2002.
Feel free to contact us for further information.
Frik Liebenberg
Frik Liebenberg Business Advisory Services cc 99/05522/23
082 556 8368
Elmien Liebenberg
074 373 1888
