The launch of a R107 million fund could see the rise of many more franchises, especially with big names like Burger King and Walmart having opened in South Africa in recent months.
The Franchise Fund, launched last month, is an initiative between Business Partners, the Development Bank of Southern Africa and the National Treasury’s Jobs Fund. The fund’s financing model requires just a minimum contribution of 10% of total financing from the franchisee.
The funding is structured such that the Jobs Fund finances 50% of the total financing requirement, less the franchisee’s contribution, while Business Partners finances the remaining 50% portion of the total financing requirement.
Gerrie van Biljon, executive director of Business Partners, says applicants are required to undergo an evaluation process and training in order to qualify for funding.
“The evaluation process and training programme is designed to ensure that the franchisee has made the correct decision to start a business of this nature.
The evaluation process focuses on the character and personality of the entrepreneur, while the training focuses on their ability to successfully run a business,” says Van Biljon.
Only on completion of training can the franchisee begin operating their business.
Following the training, monitoring of the franchisee begins.
This includes regular mentor visits to the business premises, evaluating performance and offering guidance to the franchisee. In addition to financial support, a portion of the funds from the Jobs Fund’s contribution has been set aside for technical assistance.
No interest is levied on the funds disbursed for technical assistance.
Beneficiaries only need repay this portion of the funding after having settled the portion assigned to financing the purchase of the franchise unit.
Van Biljon says the funding that an applicant will qualify for under the Franchise Fund will depend on the nature of the franchise they want to purchase.
For some franchises the capital requirement is less than R500 000, while for others the requirement is higher.
Entrepreneurs would only be able to buy franchises from franchisors that have been accredited by the SA Franchise Warehouse and Business Partners.
Franchisors must also comply with certain minimum requirements, such as
- The provision of proper founding documents.
- Full membership.
- Accreditation to the Franchise Association South Africa.
- They will also need to have a successful track record.
Van Biljon says the SA Franchise Warehouse will handle the training, scrutiny and monitoring of the franchisees.
The fund officially began processing applications at the beginning of this year.
It has already completed its first few deals.