With the influx of big-name businesses such as Burger King and Walmart entering South African markets, franchising has become a popular way for many people to start their own enterprises.
It offers a tried-and-tested business idea, with products that are usually well-known to consumers.
This takes most of the start-up risk out of the equation, and allows the franchisee to get on with running the business and fine-tuning the profit-making performance.
Of course, all this comes at a price – and many franchisors (the company selling you the franchise) insist that you must bring some of your own money to the table, and not just get loans from the bank.
The total cost of setting up a franchise these days is seldom below a million rand; the costs usually include initial (setup) costs, upfront fees to the franchiser, an ongoing management service fee, and a contribution to the franchiser’s advertising fund.
The essence of a franchise is that every part of the business is mapped out for you, and the support offered is meant to help you fit into the key standards and procedures that should lead to success.
Some entrepreneurs might find this model a bit restrictive, as it may not allow much room for creativity. Such entrepreneurs would be better off trying their own ‘thing’ – and facing the risks that come with that.
So, what franchises are available in South Africa? While most consumers are most familiar with fast-food franchises around, there are plenty of other sectors of the economy where franchises prosper.
These include: automotive products and services, bakeries, childcare, education, leisure, health and beauty, and real estate.
How do you know which one is for you? Start with a lot of research. Have a good look at your own skills and abilities, to satisfy yourself that you have what it takes to run this kind of business. It might help to write down your skills, qualifications and experience. Then do the calculations for start-up costs; besides franchise fees, you need to pay for rental fees, equipment, supplies, food, employees’ salaries and advertising fees. Decide on what type of franchise you would like to consider.
There is plenty of information on the internet to help you do this, including a number of South African franchise organisations with useful websites – see the ”Find a franchise” box.
Contact the franchise brand that looks good to you; check that they are members of the Franchise Association of South Africa and have a good track record – you can never be too careful.
Find out about their financial and other requirements, and whether they have any opportunities in your area (most of the popular franchises have already been snapped up in the best locations). Keep close to your lawyer during this process, and get him or her to check any contracts or agreements that you may have to sign.
Investing in legal fees upfront to protect yourself will save you much heartache in the future.
- Paul Crankshaw is the managing director of Cobweb Information, which provides guides and fact sheets to the SA start-up community www.cobwebinfo.co.za.
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How to qualify to become a franchisee
A franchise is a business relationship between the owner of a trademarked business concept and an entrepreneur who pays for the right to use the concept to start a business the franchiser’s rules.
The person buying a franchise is called a franchisee, while the one who owns the franchise trademark is called a franchisor.
To qualify to start a franchise, one must stick to the rules and regulations that have been established by the franchisor.