Eric Parker

This depends on your level of maturity, practical business experience and, last but not least, your ability to fund the necessary investment. Franchisors will generally look for prospects with some practical business experience. Perhaps your best bet would be to seek employment in a unit of the franchise you plan to invest in, work there for a year or two then apply for a franchise. This would give you an opportunity to learn the business from scratch without risking your own capital and prepare you well for your future role.

To begin with, you need to differentiate between initial fee and ongoing fees. The initial fee pays for access to the network’s intellectual property (brand, know-how, trade connections etc.) for the duration of the franchise agreement, plus initial training and assistance with the setting-up of the business. In suitable cases, this may include a “Grand Opening”. Shopfittings, equipment, stock and working capital are usually not included but are an additional responsibility of the franchisee. This should be explained in the network’s disclosure document, where it should be shown under the heading total investment. On an ongoing basis, you can expect to pay two types of fees, namely a management services fee and a contribution to the network’s marketing fund. The management services fee entitles you to receive extensive ongoing support as well as access to special deals set up by the franchisor. The marketing contribution will be used to fund national and/or regional marketing activities.

The fact that there are over 400 franchise opportunities available in South Africa, this question pops up with greater frequency than any other. Unfortunately, we have to disappoint you: KFC do not offer franchises to the general public. This stance has given rise to all sorts of conspiracy theories but the reality is quite simple. Many years ago, KFC has taken a strategic decision to grow their footprint through area developers. These area developers had to convince KFC that they have the ability (and the financial resources) to operate a regional structure that would encompass the operation of a minimum of about six restaurants plus the necessary infrastructure to manage the regional network, train staff etc. Given the density of KFC’s existing South African network, no new opportunities arise.

Setting up your business with a view to expand it via franchising later is an excellent idea. Franchising, in a nutshell, means that you offer your future franchisees a blueprint to business success. This means that you need to operate the business for a reasonable period, say 1-2 years. This will enable you to iron out all the kinks in the product range and the systems you use. Next, you need to document everything so that franchisees can follow your blueprint; this is done by creating an operations manual. You will also need marketing materials, a disclosure document and a franchise agreement.

Most importantly, you need to take a medium to long term view towards financial returns. The reason for this is that during the start-up phase, all your franchisees will be new. They will require much hand-holding whilst returns in the form of management services fees will be limited. On the upside, as the network evolves, returns from franchising can become extremely lucrative.

It is extremely difficult to provide meaningful cost estimates at this stage as this depends on sector needs and the extent to which you have managed to fine-tune your systems, procedures and processes. As a guide, the total package, if created by a reputable consultant with extensive input from yourself, will cost between R300 000 and R500 000. Subject to the necessary expertise and capacity being available in-house, you could do much of the work yourself, with the exception of drafting the franchise agreement; this requires the services of an experienced franchise attorney. We would also advise you to have a reputable consultant at least review your material before you launch the franchise in earnest.