Selecting the right Franchise option for you
The franchise sector in South Africa continues to grow and thrive despite testing economic conditions. This thriving and growing sector, comprising 668 franchised systems, with just over 30 000 franchised outlets and 17 franchise business sectors, is a significant employer of manpower employing more than 300 000 people nationally.
For those wanting to enter the sector the big question to address is what industry would suit them best? Richard Mukheibir, CEO of Cash Converters says there are so many options to choose from and sometimes informative events such as expos tend to be more overwhelming than helpful. He says there are very distinct differentiators between a retail franchise for example like Cash Converters and a fast food franchise.
“Take for example the number of hours you are happy to dedicate to the project. Fast Food franchises often require dedicated long hours and if you are not prepared to put in the extra time and make a full time commitment this may not be the option for you. Many retail franchisees on the other hand, while happy to commit, still want evenings free so this is a better option for them.”
Other criteria like the type of person you are, your bias towards wearing business attire or a uniform, how much time you need to spend on your feet, will you need to travel are also questions to keep in mind when selecting the correct franchise option.
Franchising is definitely not for everyone. Potential franchisees need to be honest as to motives and look at their health, lifestyle and family situation to see they all fit into the plan to become part of the sector.
Franchisors in turn have recognised the importance of selecting the right personality for their franchise system upfront.
Any franchise brand will tell you that as their business has grown they have realised that the level of success is determined as much by what the franchisee brings to the table, as by the strength of the brand, product offering, operational and marketing support and the location of the site.
Mukheibir agrees saying the relationship between franchisor and franchisee should be balanced and highly consultative, collaborative and transparent. Franchisees also need to be offered intense training and support from the franchisor.
The following provides a useful guideline when considering the different franchise options:
|RETAIL FRANCHISE||FAST FOOD FRANCHISE|
|Generally a 10 year term of franchise agreement||Generally a 5 year term of franchise agreement|
|Fees payable to franchisor of generally 3 – 5%||Fees payable to franchisor of generally 7% +|
|Generally 09:00 – 05:00 and Saturdays||Longer hours, weekends and public holidays|
|More flexible controls from franchisor||More stringent controls|
|Slower returns but more sustainable in the long run||Quicker returns but greater pressure to maintain|
|Higher profit margins||Tighter margins|