Franchisees interviewed<\/strong><\/p>\n The highest proportion of turnover generated is by the fast food and restaurants sector (29%), which is not surprising given that it is the largest sector.<\/p>\n Three sectors share a further 43% of the estimated turnover in similar proportions \u2013 building, office and home services; retailing; and business-to-business services.<\/p>\n 38% of franchisees have business units\/stores in shopping centres\/malls, and 35% are located in high streets, where most passing trade occurs.<\/p>\n The survey noted a significant increase in the number of businesses situated on high streets, with an accompanying decline in the number of businesses in shopping centres\/malls.<\/p>\n Time in business<\/strong><\/p>\n over 40% of franchisees have been in business for more than ten years, with an average of 10.3 years.<\/p>\n Initial working capital required<\/strong><\/p>\n The number of franchisors who believe that it takes more than a year for a new franchisee to break even has increased markedly from 26% to 40%.<\/p>\n A year ago, 73% of franchisors estimated that it would take less than a year for a new business to break even.<\/p>\n Deposit<\/strong><\/p>\n Roughly 25% of franchisees claimed that they owned the property on which the business is situated. A similar number were unable, or refused to give the amount of the deposit paid.<\/p>\n Among the balance, the average deposit paid was R45,724 – or 1.8 months of rental.<\/p>\n Size and cost per square metre<\/strong><\/p>\n The average rental paid per square metre is R167 and the average number of square metres occupied is 391 square metres.<\/p>\n The annual escalation percentage for rental averages out at 8.5%.<\/p>\n Payments made to franchise owner\u00a0<\/strong><\/p>\n For the upfront franchise fee, the average amount paid is R467,000, where the fast food and restaurants and personal services franchisees appear to have to pay the highest upfront fees.<\/p>\n The average management services fee was calculated at 6.3% of turnover. These fees are highest in the childcare, education and training sector and lowest in the retailing sector.<\/p>\n Marketing and advertising levies would cost a franchisee 2.6% of turnover, on average, with the figure rising to 7.0% in the health beauty and body culture sector and dropping to 1.7% in the automotive products and services category.<\/p>\n Roughly a third of franchise owners claimed to make more than 100 payments and\/or collections on a monthly basis to the franchise head office and franchised outlets.<\/p>\n Biggest challenges<\/strong><\/p>\n The main challenges facing franchisees are finding the right staff, being able to offer consistently good service, and the poor economy.<\/p>\n Secondary challenges are growing the business with new customers, running costs and keeping prices competitive.<\/p>\n The number of franchisees (79%) who are optimistic about the future of their businesses has remained stable; however, more uncertainty and negativity are shown this year than last year.<\/p>\n Annual turnover<\/strong><\/p>\n The median annual turnover claimed is R2,680,000, while the\u00a0average net profit claimed is 9% in the last financial year.<\/p>\n Within the first year of operations, 46% of franchisees expect to break even; however, a downward trend is noted for breaking even in the first six months.\u00a0\u00a0This is in contrast to the three in four franchisors (60%) who make the same claim.<\/p>\n Time taken to break even\u00a0<\/strong><\/p>\n Approximately one in six franchisees make in excess of 100 payments and\/or collections on a monthly basis to and from the franchise head office and to and from the franchise outlet.<\/p>\n Usage of banks among franchisees is fairly evenly spread among First National Bank, ABAS\/Barclays and Standard Bank with Nedbank in fourth position.<\/p>\n Brand performance by sector\u00a0<\/strong><\/p>\n![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2017\/09\/Categories.jpg\")
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