Buying a franchise in south africa

Rather than starting your own business, you can purchase an established successful business . Buying a franchise has it’s advantages and disadvantages, but it is at least a path to self employment. Before you invest, make sure you do a lot of investigating and preparation.

A successful franchise system is built on the premise that all units operate under a common brand and operating system.  The franchise system ensures that every franchisee is doing business in the same way, and that every store is supporting and reinforcing the brand.

advantages of buying a franchise 

Franchisors typically support franchisees in every area of the business. This usually includes ongoing contact with dedicated support personnel for marketing, staff training, technology and other aspects of daily operations.

Fees

The franchise fee is an up-front, one-time fee charged at the beginning of the process. The franchise fee will be due when you sign the franchise agreement. A cash down payment is common, with a loan financing the balance.

Legal disclosure

In a franchise, legal requirements are stringent and will be contained in the Disclosure Document, which contains all the information about the company and the opportunity being offered. This must include the history of the franchise system, key employees, any litigation or bankruptcies, all fees and costs, all rules and restrictions related to the business operation and the audited financial statements.



franchise pitfalls

  1. Ineffective franchisors. Beware of franchisors who are only in it to make a quick buck at your expense. Contact other franchisees in the system and ask as many questions as you need to ask to determine the viability of the franchise concept.
  2. Family business. Avoid franchise systems that employ lots of family members. A good franchise company needs highly skilled and seasoned management.
  3. Unstable concept. If the franchise model is new or constantly changing, beware. It may simply be unworkable.
  4. Compliance rules. If the franchisor does not listen to franchisees’ feedback, it may become impossible to work in the system.
  5. Does the franchise company run a collaborative environment in which its employees listen to franchisee concerns, or is it a bureaucratic nightmare demonstrating low concern for franchisee results and relationships? The franchise company doesn’t get to answer this question. You need to seek out a number of franchisees and hear what they have to say about the relationship.
  6. Inadequate start-up capital. It may take up to three years before you really see how much money your franchise will make. But too many new franchisees don’t think that far ahead and fail to plan accordingly. Lack of funds has doomed many a franchise.
  7. Poor location. Location is everything when it comes to business. A highly-recognisable franchise will still fail if it is hidden away from the view of its target market. Place your franchise in the best spot you can afford.
  8. Market saturation. Small territories are restrictive. You also have to take into consideration other similar business in the area. Consider setting up in a different area, or buying into a different industry altogether.
  9. Inadequate promotion. Brand recognition alone is not enough to promote a business. Make sure you have your own marketing campaign.
  10. Inflated expectations. Many franchises fail simply because their owners have unrealistic expectations. Like any other small business, it requires hard work, dedication, and lots of time before you can reap the profits.

How to succeed in franchising

  1. Choose a product or service you care about. Consider hiring a consultant to analyse whether you are a good fit for the business opportunity you are thinking about buying into.
  2. Among the most common mistakes new franchisees make, is signing on before adequately researching the business properly.
  3. Contact current and former franchisees to get their feedback, using names from the franchise circular from the franchisors. Never make a commitment based solely on information provided on the Internet or over the phone.
  4. Pick a franchise system with a long track record.
  5. Think carefully about location and look at the local population characteristics, income levels, lifestyle trends and traffic patterns.
  6. Be prepared to be an owner-manager. Your chances of success will be far greater if you are closely involved in the business on a daily basis.
  7. Follow the rules. Franchises aren’t designed for the independent-minded. They depend on a by-the-book execution of a business plan, adherence to proven systems, and a willingness to follow directions.

Secure the finance

If you’re still interested in pursuing the opportunity you will now need to secure the funding. There are many forms of funding, but the most common form is a loan from a bank. The franchisor will often assist you with your application, suggesting a preferred bank and providing templates for you to complete your business plan.



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How much it costs to buy a franchise in South Africa

Preparing To Buy A Franchise in south africa