.THE economy of South Africa has enjoyed a significant growth in the business cycle for the past nine years the longest economic expansion period in the country's history, which Johnny Ray, the director and manager of 0861 Travel Pty Ltd said was ideal for a travel agents franchise venture.
“The travel industry continues to show growth,” Mr Ray said. “South Africans are amongst the most travelled people in the world.”
Mr Ray added that the enterprise was also augmented by the fact that travel runs parallel to a growing economy and therefore seized this opportunity.
Consequently through a management buyout they purchased business components from ATL Travel Pty Ltd and Travcon Pty Ltd which were subsidiaries of another company known as Afritourism Limited.
Amongst the integrated components was the already developed brand of 0861Travel.
Since the new franchise firm sprang to life under the banner 0861 Travel Pty Ltd, the International Air Transport Association (IATA) and Association of South African Travel Agents (ASATA) licences previously held by the company’s predecessors were not transferable.
According to business analysts, franchise ventures are known to have a high success rate compared to other small businesses.
Part of the 0861 Travel’s quest to venture as a franchisor was focused on entrepreneurs who were also keen to seize opportunities in the travel business and also “the need to introduce previously disadvantaged groups into the travel industry as many government departments and other businesses were promoting Black Economic Empowerment (BEE) contractors.”
In order to ensure that competent travel agents have the opportunity to trade, 0861 Travel set competitive criteria in the selection of the prospective travel agents.
Prior to the signing of the contract the new business owners were furnished with the necessary information and part of the franchise agreement read:
The Franchisee has conducted an independent investigation of the business contemplated by this
agreement and recognises the nature of The Franchise business may evolve and change over time, that an investment in The Franchise involves business risks, and the success of the venture is primarily dependent upon the business ability and efforts of the Franchisee.
Furthermore the franchise concern conducted a study for the business and the financial implications noting that the new travel agents could only start making profits after the first two trading years.
“The general feasibility study was always on our website and this model was used as a guide for all franchises depending on each franchisee’s set of circumstances was like.” Mr Ray said. “Basically we projected losses for the first two years.”
The franchise establishment acknowledges that the world is fast becoming a global village and therefore took a great step towards bridging the digital divide.
The company provided a business solution through a cutting edge and highly interactive tool known as Multires. The browser based system has proved to simplify business transactions in travel industry through its amazing database.
If this development can be anything to go by there is high probability that the barriers, which had previously hamstrung new travel agents, will be broken.
The concept of a franchise business is to provide a system that can guide people into business, but thereafter their own abilities would play a major role assisted by easy to use systems.
In addition to Multires, franchise owners used Worldspan for airline bookings.
Setting up a franchisee entails location assessment, shop fitting, communication infrastructure, training, the procurement set of Multires and Worldspan including running the IT, setting up with suppliers, formulating a business plan and assisting with finance applications.
The franchisor charged affordable set up fees with the vision of yielding returns on their investments over 10 years through royalty fees.
“We were trying to keep down the costs of the franchisee as this is one of the factors that cripple businesses in the first two years,” the manager said.
The company was committed to steer the new companies towards success because firm’s balance sheets have revealed that at least ZAR 4.6 million was invested into the franchise business venture over three years.
From what can be established, the franchisor was successful in terms setting up a store and enabling the franchisees to trade as the majority of 0861 Travel’s initial franchisees are still in business, under the same banner or a different name.
Although the company has reduced its operations in the franchise division is currently operating as a virtual agent through an amazing 120 websites, which it will expand into a great business operating platform.
The IATA licence was not part of the contract agreement though it was important for the company to bargain through the number of available ticket providing companies but the advent of e-ticketing had taken the edge off this concept.
In a bid to promote corporate agents especially BEE companies who were involved in government contracts the franchise operator decided to make a provision for this in order to extend the payment period.
Consequently IATA was approached in writing to de-register the licence under Travcon Pty Ltd and effect a new application under the name 0861 Travel Pty Ltd.
Prior to this process the franchisor notified all franchisees through e-mails about this development and made arrangements for the travel agents to deal directly with airlines through this transition.
Correspondence between the franchisor and IATA revealed that the process muddled and it has been established that in October 2006, IATA’s head office in Geneva, Switzerland sent a licence cancellation of sales agency agreement notice to a wrong address.
Basing on the contractual agreement between IATA and the company this notice was defective and the effective notice was emailed on 7 February 2007.
As a result the adage pen is mightier than sword rang true but for the wrong reasons as some sections of the travel media reported inaccurate versions regarding the IATA affair.
It has been established that Melany Bendix, managing editor of Travel Industry Review (TIR) published articles on 0861 Travel alleging that the company had misrepresented being a member of IATA to the new franchisees whereas the licence was never part of the contract agreement and the licence belonged to Travcon.
Prior to the publication of the articles, Ms Bendix wrote an e-mail to a new 0861 Travel franchisee, Meeta Gopal, which had possible effects of weakening confidence and crippling the company’s franchise network.
Part of the email where she was “the bearer of bad news” said
“As discussed I have attached a list of former franchises that have had bad experiences…I also think that it is better not to tell Johnny (Mr Ray) that you have spoken to me or anyone else until you have decided on the course of action.”
The attached list was questionable because out of the six people mentioned, only two of them had contracts and had already failed in the business which means they would blame the franchisor.
Whilst other four did not sign the franchise agreement and were part of a group of franchisees who were in a clandestine deal to buy the business but their efforts had hit a snag when their bid was rejected by the management of the company and obviously they had negative comments about the franchisor.
This means that Ms Bendix was delivering bad news instead of doing the noble profession of news gathering.
Examining the media reports:
One of the article said: “…once off refundable fees, which have earned the Rays, at least R1, 5 million…” and further alleged that profits from fees where used to buy a property in Rondebosch. But documents show that it was bought on a 100% bond by a CC.
The other stated that one of the franchisees was paid ZAR 40 000 by the company as part of a loan repayment but receipts confirmed ZAR 90 000 was re-paid.
In another report were claims that: “0861 Travel‘s financial statements did not meet ASATA’s financial criteria…” The fact is 0861 Travel Pty Ltd was not a member of ASATA but this licence belonged the previous structure ATL, whose balance sheets were unavailable because it had stopped trading paving way for the new company which had to wait for a year for the balance sheets to be available.
However efforts to get comments from Ms Bendix proved fruitless.It brings into question the honestly and reliability of her entire article on 0861Travel and Johnny Ray.
There is possibility that negative publicity was a strategy designed to coincide with some franchisees trying to extricate themselves out of the 10 year contracts as they took advantage to get involved in the controversy conjured up by media reports to get out of paying franchise fees after they got what they wanted for a small fee.
“We will however be litigating against the franchisee who breached contracts in due course,” Mr Ray said.
Since some of the former decided not to adhere to contractual obligations by not paying royalties it means there might be motivation of greediness.
It has been established that franchisees negotiated their way out the contracts through advocate Louis Nel, also a columnist with TIR magazine on legal issues, who did not disclose his ties to TIR to 0861Travel or Johnny Ray
One might be left wondering on what was the motive behind the media articles. Could this be where the “revenge” factor comes in?
According to Mr Ray the bad publicity is a symptom of a problem which has roots in AfriTourism Limited, a company that was listed on the Botswana Stock Exchange (BSE) in March 2003. Mr Ray’s wife, Jane was in the board of directors of one of the subsidiaries of this company.
Mrs Ray wrote a letter to the board of directors exposing some irregularities in the company’s finances and this is alleged to have led to the CEO, Glynn O’Leary, being fired in 2004.
Also of note is that Mr Ray was reportedly to have objected the re-appointment of non executive director of Mr O’Leary’s because under the latter’s leadership the AfriTourism posted poor results but his objections were overruled by the majority of the board members. Six months later the company was put into voluntary liquidation by the Major shareholder just weeks before a report by the BSE was to be published after it had suspended Afritourism for irregular financial reporting.
Mr O’Leary (Global Images) is a former business partner of John Simpson, chief editor of TIR magazine and there is a possibility that Mr O’Leary might have influenced his ex-partner to “smear the name of the Rays as an act of revenge that was born” at the then beleaguered AfriTourism.
This revelation might be an invaluable contribution as to why TIR published “unconfirmed facts” which almost left 0861 Travel with a bleeding image.
Neither Mr O’Leary nor Mr Simpson could confirm that they were partners or have anything to do with media reports.
However travel journalists should continue to operate within the ethical course of their work and must not stoop to lower unethical levels of the conduct by advancing personal agendas under the guise of investigative reporting.
One businessman who refused to be named said, the 0861 Travel story was the first sensational report to appear in any travel publication.
There should be a collective responsibility and by infusing ethics into the practice through writing unbiased articles will shape the industry.
The other effective way of ensuring standards are maintained in the travel sector is for the travel media houses to subscribe to the press Ombudsman.
|
