Starting A Franchise In Johannesburg - Everything You Need To Know

Getting into the dynamic space of trade and commerce is a dream nurtured by a string of passionate and driven individuals. While some forget about...

  • Starting A Franchise In Johannesburg - Everything You Need To Know
    Lethabo Moodley Image Lethabo Moodley

    Starting A Franchise In Johannesburg - Everything You Need To Know

    Getting into the dynamic space of trade and commerce is a dream nurtured by a string of passionate and driven individuals. While some forget about their aspirations when they enter the professional world, others become more determined to turn into the makers of their destiny. It is not easy to keep self-motivated people away from the spirited business sector which promises a high return on investment and zenith of success. The story of such dreamers is the same in all the countries including South Africa which is grappling with a series of economic challenges. Though it has revamped itself to move away from the shackles of Apartheid and strengthened its position in the African content as the second largest economy, it has miles to go. From reaching over 400 billion US dollars in 2011 to tumbling back to 294.84 billion US dollars in 2016, the country has witnessed a steep decline in its GDP. The primary reasons for this downfall have been the shortage of qualified and skilled professionals, political instability, corruption and ineffective bureaucracy. Just like every cloud has a silver lining, the franchise sector has seen a boom in the face of the plummeting economy. This indicates that the timing is perfect for entrepreneurs to invest in a franchise business for sale in South Africa.

    The franchise domain has been considerably growing with its contribution to GDP increasing from 9.7% in 2014 to 13.3% in 2017. The upward trend has made many international franchise networks enter the South African markets. From Domino’s and Pizza Hut to Starbucks and Krispy Kreme, the most prominent brands are vying for a piece of the pie. There were over 840 franchise systems and more than 40,000 outlets operating in the country in 2017. The National Development Plan aims to create 11 million jobs in the sector by 2030. As much as the investors are showing a keenness to own a tried and tested business model, local investors are also willing to expand their businesses by branching out into franchise outlets. The most significant turnover in the sector is generated by the fast-food and restaurants segment followed by retail, building, office and home services and childcare and education. If you are interested in buying a franchise business for sale in Johannesburg, you need to be equipped with the following bits of information:

    1. Assess Your Ability To Own A Franchise

    The first step towards becoming the owner of a franchise is to evaluate yourself as an entrepreneur. Ask yourself pertinent questions like Can I commit myself to this responsibility? Can I afford to invest a significant amount in an endeavour? Would I be able to support my family with the ongoing expenses? How will I get the funding? After you have successfully found satisfactory answers to all these questions, you must head to the next step.

    2. Choose The Franchise Industry

    It is not necessary that you need to have prior experience in the industry you choose for buying a business for sale in Durban, but you must pick the one that fits your preference. Once you have selected a specific domain, you have to conduct market research about the industry, its growth patterns and turnover followed by carrying out a due-diligence of the company which you have selected. You must make sure that the product or service offered by the franchise will continue to attract customers in the long run as you would not have much say in the development of the offerings. Contact other franchising outlets in the network to get a clear picture of the support being extended from the franchisor and the level of competition in the market. You can attend franchise seminars and exhibitions to understand how the system works and which would be the right choice for you.

    3. Arrange For The Flow Of Capital

    Unlike other small businesses, banks are more than happy to fund new franchises given their low-risk business model. It is easier to get a loan from the bank if the franchisor is a reputable and recognised name in the market and holds a proven track record. Most banks offer a loan of up to 70% of the cost and the rest of the 30% has to be arranged by the buyer and preferably should not be borrowed. This will make you assess your household expenditure, collateral that will be given as security to the bank, and the need to create a business plan with all the financial projections for the first five years. Keep a backup plan ready if the projected return on investment does not match with the real-time figures. You can take assistance from the franchisor in creating the business plan for rough estimates related to reaching the break-even. This will help you get a clear picture of the flow of capital and expenditure incurred.

    4. Legal Documentation

    Get the disclosure document from the franchisor which as per the Franchise Association of South Africa Code of Ethics and Business Practices must lay down all the information related to the franchise transparently to the qualified prospective buyer. In addition, there will be a franchise agreement which is a kind of licence agreement that defines the contractual business relationship between the two parties. It must have details of the trademarks, copyright, intellectual property, etc. It should elaborate the grant of the intellectual property right along with the payment clause and obligations to be followed by both the parties and more such information. The buyer has 14 days known as the cooling–off period to review the information and sign the franchise agreement.

    5. Setting Up The Franchise

    This is the time for the prospective buyer to get the funds in place and sign the franchise agreement after being sure about the financial condition of the franchisor. Visit the location of the outlet and work in tandem with the franchisor to find the best geographical area according to the level of competition and proximity to busy residential and commercial complexes. Sign the lease agreement and make payment for the rental deposit of the property. Employ qualified staff and start the training process as scheduled by the franchisor. Confirm the launch date, and begin your journey on the path of entrepreneurship.

    Endnote

    When you buy a franchise for sale in South Africa, you get a turn-key business with all the supplies, training and support in place. With your management skills, networking ability and problem-solving approach, you can take it further heights of growth and success. The procedure of starting out as a franchisee is quite simple, and with the right knowledge, you can have your outlet running profitably on a busy street in no time.

  • Author Info Lethabo Moodley

    A business expert, Lethabo Moodley is a management consultant who has been working across domains since 2005. His rich experience includes a Masters degree in business administration from the prestigious Gordon Institute of Business Science and Doctor of Business Leadership degree from Unisa Graduate School of Business Leadership. He has been actively working as a consultant with the biggest firms in South Africa and his contribution in the growth of these organisations is considered invaluable. He has saved a lot of small businesses from going bankrupt and has renewed the lost success streak of the big fish in the market. Business2Sell is delighted to have him onboard for his insightful blogs.