The rapid growth of new franchise concepts across South Africa has seen an increasing number of people seeking to invest in businesses without doing due diligence.
According to Vera Valasis, executive director of the Franchising Association of South Africa (FASA), franchises that are younger than three or fours years are still deemed to be ‘new and developing’ and potential franchisees should investigate the franchise opportunity from a start-up with great caution.
“Many concepts do not have longevity and the chances of failure within the first two to three years of inception are very high. If the company is not an accredited member of the Association it is a real red flag,” she said.
Valasis added that a number of new franchise owners simply do not have the financial resources or are unwilling to invest in this aspect of developing a franchise company.
“Some new franchises get away with setting up a franchise company ‘on the cheap’ as they still seem to be selling franchises to unsuspecting potential franchisees,” she said.
“More importantly, franchise members of the Association are required to provide a written undertaking that they would abide by the Code of Ethics so even if a franchise assures a potential franchisee that the company’s documents are compliant with the Consumer Protection Act, the trademarks are registered and a support structure is in place there is still no onus on the franchise owners to conduct business on an ethical basis.”
Below BusinessTech looked at seven well-known franchises which are currently available to purchase for less than R1 million.
H20 International – from R500,000
H2O International SA has over 20 years experience in providing South Africans with water and air purification systems.
H2O said that a typical day involves motivating and managing your sales team and internal staff, manning your state-of-the-art water bar or water station, servicing existing customers, and ordering stock for more sales and rentals.
Set up costs range from R500,000 – R1,000,000 depending on the type of franchise, location and the quality of the source of the water to be bottled. The total set up cost provides you with a complete turnkey operation.
The Fish & Chip Co – from R700,000
The Fish & Chip Co currently forms part of Taste Holdings with the company boasting over 190 stores across South Africa.
According to its website, the lowest setup cost for a store is R699,000. However, this includes an initial joining fee of R140,000.
Other costs to consider are a weekly management fee as well as a weekly marketing fee.
Sorbet said that the exact amount of your investment will depend entirely on the size and condition of your selected store and varies from site to site. 50% of this amount should be available in unencumbered cash as a deposit (funding can be obtained for the balance).
According to the beauty store’s latest franchising costs, you can buy a 60 sqm nailbar for around R1.2 million, while a Sorbet Man or Candi franchise will cost you slightly more with a total cash requirement of between R1.6 million – R1.95 million.
Matrix Warehouse – from R1.35 million
Matrix Warehouse’s franchise support team use their extensive franchising and industry experience to guide franchisees in the running of their businesses.
The comprehensive franchisee introductory training conducted over 28 days at the Matrix Warehouse head office covers all aspects related to running a successful Matrix Warehouse outlet, including product training, business management and marketing techniques.
The franchisor also bulk buys stock from local and international suppliers and passes the benefit of its group purchasing power on to the franchisees.
Timbercity – from R1.6 million
For over 40 years Timbercity has been the market leader in its field of expertise.
In addition to the benefits of being a Timbercity Franchisee, it also offers the following as part of the package:
- Product focus – Expert knowledge and focus on core product categories related to cabinetry, carpentry and hardware. These include: Timber, boards, shelving, worktops, doors, kitchen hardware & accessories, mouldings, paint and coatings.
- Expert Services – Proven track record for offering cut shop related services such as cutting, edging and hinge hole drilling as well as computerized cupboard design & layout, board cutting optimization, quotations and deliveries.
- Business expertise and best practice sharing – Over 40 years of financial, marketing and operational experience available through a professional Support Office team.
- IT high-performance systems – Access to up-to-date product files and point of sale systems.
- In touch and on call – Access to a support team every working day and participation in regular regional meetings and national conferences
- Southern African Reach – Numerous stores across South Africa and now expanding into Namibia, Botswana, Mozambique and Zambia.
Maxi’s – from R1.9 million
Owned by Taste holdings, Maxi’s has served food for over 25 years.
In 2018 it launched a new contemporary image for the brand including a brand new store build.
The estimated cost of opening a store is R1.9 million with setup fees including building costs, equipment, joining fee and training.
Mochachos – from R1.9 million
Mochachos says that the investment required for a franchise will vary, depending on the size and condition of the premises available for rental.
The chicken restaurant said that each application will be evaluated individually; however, the basic criteria are as follows:
- Previous food service experience is beneficial;
- Owners are expected to operate the business themselves;
- An understanding of how franchising works;
- Available capital to setup the business;
- A positive attitude and good people skills;
- Not afraid of long hours and hard work;
- Understands the importance of customers;
- Works well under pressure;
- Systems and procedures orientated;
- An understanding of local markets and people;
- Excellent communication skills.
All prices sourced from franchise websites or SA Franchise Warehouse.