Lubricants blender and supplier Blue Chip Lubricants is overhauling its branding and business structure, and this includes expanding through the establishment of a lubricants franchise, the first of its kind in South Africa.
“Blue Chip Lubricants is breaking new ground by being the first in its industry sector to expand through franchising,” says franchising expert Franchising Plus consultant Eric Parker, one of the cofounders of successful fast-food franchise Nandos.
He says that by replicating the franchise business format through owner-operator franchisees throughout the country, Blue Chip Lubricants would be able to gain a significant advantage in its industry sector, while creating small business opportunities for other entrepreneurs.
“By having a premium product, providing exceptional service and exceeding customer expectations through a strict mechanism of duplication and with the commitment of owner-operator franchisees, any business can thrive to become a recognised brand,” he adds.
Blue Chip Lubricants’ expansion plans include gaining a national market share through franchising its brand and tapping into the largely untapped agricultural and retail markets, which would be in addition to its current involvement in the mining, industrial, engineering and automotive markets.
The proposed franchise roll-out would see the company follow a three-tier strategy.
Initially, the company would own its own franchise outlets, allowing the franchisor to keep close tabs on how the business is run and what improvements are needed.
The second tier would involve joint venture outlets, where the co-owned franchises would operate jointly in partnership with franchisees.
The final tier would see the establishment of fully fledged operator-owned franchises in outlying areas, affording entrepreneurs the opportunity to buy into the brand. These franchisors would depend on the blenders for their services and products, reducing transportation costs and delivery times, while increasing the level of service to outlying customers.
The franchise expansion plan was initiated through a pilot operation in Rustenburg, which has performed beyond the company’s expectations, breaking even in only two months.
Blue Chip Lubricants co-owner Gary Marais tells Engineering News that the Rustenburg pilot’s success is attributed to the concentration of mining and related industrial activities in the area. He says that the market holds a lot more potential and so further expansion of the franchise in the region is likely.
In light of the global financial crisis, which has left many companies scrambling to retain capital, it may seem odd timing for the company to launch a large-scale expansion plan. However, Marais explains that this seems to have worked in the company’s favour, in that many companies would rather increase their efforts to maintain their existing vehicles and equipment than replace them, which has translated into increased expenditure on consumables such as lubricants.
The expansion plan calls for 12 franchises to be set up in major metros and big towns, starting with the establishment of four franchises in the first year.
“Once the model has been perfected in South Africa, the potential to master-franchise into the rest of Africa is a very real possibility,” concludes Marais.