South Africa has heaps of franchising opportunities available. In this post, we take a look at what the most popular franchises in South Africa are. Furthermore, we evaluate profitability and whether or not franchising is a good option. If you’re interested in going into a franchise this is the ideal article to read.
What are the advantages of a franchise?
It’s safe to say that franchises often do really well. The reason is, they are already fully established and trusted by consumers. For instance, if a consumer is looking to book a vacation they typically do it through a well-renowned travel agency. Likewise, if someone is looking to sell their house, they usually go with a popular estate brand.
Hereunder is a list of advantages:
Brand recognition
A massive perk to franchising is brand recognition. Almost everyone knows about the brand and what it has to offer. As a result, franchised businesses do not have to build a brand or customer base from scratch. Consumers instantly know what to expect and what the business provides.
Brand recognition often helps franchisees succeed. The reason is, people can identify a brand by just looking at the logo. They instantly know everything they need to know without having to find out about it.
Free training
If a person starts up their own business they will not receive any training. Fortunately, franchises provide employers and employees with excellent training. This training often includes customer relations, system training, and more.
It’s vital to have adequate training when starting out a business. The most popular franchises in South Africa make this a prerequisite for all staff members. As a result, employers know how to successfully operate in the business.
Business assistance and support
Franchise owners receive business assistance from the franchisor. This includes marketing plans, equipment, store layout plans, and merchandise. Furthermore, the franchisor will assist in creating a successful plan to run the business smoothly.
Business assistance can also include mentorship, which is a huge perk. The franchisor shares their knowledge, tips, and ideas on how to operate the business. This guidance helps a great deal, especially for those who haven’t run a business before.
Less likely to fail
Franchises have a lower failure rate because of the advice and support they receive. It is less common for a franchise to close down in comparison to a solo business.
Buying into a franchise means that one is going into a successful and thriving enterprise. If the franchise isn’t running smoothly the franchisor will usually take note. They will then step in and give the franchisee all the advice that they can to prevent failure. Furthermore, they will evaluate what is wrong and help fix any issues.
Purchasing power
If a person were to start their own business they will need to find suppliers. These suppliers might charge them higher prices for items as opposed to franchises. The reason behind this is because franchises operate on a larger scale. Buying power also allows franchisees to have access to a larger network or suppliers. Furthermore, these suppliers are trusted and produce quality items.
Consistent customers
The most popular franchises in South Africa have consistency in clients. Customers always come back to the business because they know what the business has to offer. As a result, sales usually are always consistent too. Loyal customers always support the brands that they’re familiar with.
Profits
As we’ve previously mentioned, loyal customers always buy from the brands they know. As a result, profits are usually a lot higher than that of independent businesses. Franchises have a higher likelihood to turning profits, even though the initial investment is higher.
What are the disadvantages of a franchise?
Franchising certainly has its perks; however, there are also some disadvantages. Hereunder is a list of disadvantages to consider.
Franchisees aren’t fully in control
One of the biggest disadvantages of owning a franchise is that there is limited control. Most of the big decisions come from the franchise group. These decisions are made without any input from store owners. As a result, franchisees may feel like they don’t have a say in their own businesses.
High startup costs
Franchises have certain standards, which are often very costly. Most franchises require a big investment to buy into the group. This can often be a major drawback of franchising. Franchisees will have to pay an upfront amount of money to open the business.
Lower profits
Unfortunately, with the good comes the bad. Franchise businesses see less profit in comparison to owning their own enterprises. Monthly turnover profits have to be paid out to the franchise group. As a result, the franchisee sees less profit.
Limited growth
If a person were to start their own business they won’t have any limitations. Unfortunately, franchising has very limited growth. The most common complaint by franchisees is that they are dictated on how to operate.
Difficult to get out
Most franchises have an agreement term of a few years. These terms are contracted and are really difficult to get out of. Furthermore, selling the franchise can also be challenging. Franchisees will need the franchisor to approve who they sell the franchise to.
Higher Conflict rate
If there are some issues in the franchise the franchisor will step up and confront the franchisee. This might lead to conflict and could become a problem. Maintaining a good relationship is essential. However, these disagreements could affect the well-being of the business.
Lack of privacy
Owning a franchise means that there has to be complete transparency at all times. You will have to share financial and other information.
What are the most popular franchises in South Africa
In this section, we take a look at the best franchises in the country. All of these franchises have been successfully operating with stores nationwide. It should be noted that the list below is in no specific order.
KFC Franchise – 960 Stores across the country
Coming in at number one, KFC is the most popular franchise in South Africa. The brand has been established globally and loved by millions of South Africans. KFC offers affordable and tasty fast food to all of its customers.
Unfortunately, KFC is not looking to open any new branches in S.A. However, one could expect to pay close to R6 million to purchase an existing franchise.
Pick ‘n Pay Franchise – 1795 Stores across the country
Pick ‘n Pay is just about everyone’s go-to supermarket and clothing store. The brand started out as a family business and later turned into a franchise. The company’s turnover in the past year has increased by a staggering 7.1%.
The total investment requires to open a Pick ‘n Pay franchise will cost around R13 million. Of this amount, 10% will be required upfront.
SPAR Franchise – 886 Stores nationwide
The grocery store operates as four retail outlets:
- SPAR Supermarkets
- KWIKSPAR
- SPAR Express
- SUPERSPAR
The company is a popular household brand and is one of the most popular franchises in South Africa. SPAR franchises can cost anywhere between R6 million- R7 million. A major contributing factor to the price is location. If you opt to open a spar in a smaller town, you can expect to pay less than opening in the city.
Nando’s Franchise – 340 Stores across the country
The popular eatery started out with humble beginnings in Johannesburg, South Africa. The restaurant later branched off to other countries worldwide. Nando’s is loved by millions of people all around the globe. Thee Nandos franchises can be found in Africa, Asia, North America, Oceania and Europe.
Buying a Nandos franchise will cost around R6 million. The franchise fees cover the following:
- Fittings and Fixtures- R R1,260,000
- Kitchen equipment- R1,300,000
- Restaurant design and setup- R1,350,000
- Computer systems- R315,000
- Franchise fee- R220,000
- Design & Project Management- R430,000
- Shop fittings – R1,185,000
McDonalds Franchise – over 300 stores in South Africa
McDonald’s is another globally renowned brand that is loved by the public. Opening a franchise in South Africa can cost anywhere between R4 million- R6 million. McDonald’s Franchise costs vary depending on a number of things.
To break it down, McDonald’s looks at the following:
- Size of the restaurant
- Pre-opening expenses
- Location
- Equipment
- Inventory
- Seating
- Décor style
- Landscaping
- Signage
They will be able to provide a proper figure once they have the above information. With that being said, the franchise also requires the franchisee to have a minimum of 35% of the cash.
Chicken Licken Franchise – 240 Stores across the country
The Chicken Licken franchise is one of the most popular franchises in South Africa. The brand serves fried chicken and is extremely budget-friendly to its consumers.
One can expect to pay between R4.8 million – R6.8 million to open a Chicken Licken franchise. The main determining factors are the following:
- Drive- thru store
- No drive-thru
- Landlord contributions
- The size of the store
- Fixtures and fittings
The franchisee will be required to pay an initial R150, 000 franchise fee. Furthermore, an additional 12% of the turnover will have to be paid to the franchise. This 12% includes a royalty fee and an advertising fee.
Steers Franchise – 542 Stores nationwide
Steers offers delicious burgers and a great price. The company is known for its flame-grilled burgers that are extremely tasty.
The approximate cost of a Steers franchise (without a drive-thru) costs around R1.7 million. This is by far one of the cheapest franchises to own in South Africa. However, the cost might increase if the franchisee decides to add a drive-thru.
The franchise fee alone costs R159, 000. The set-up cost of R1.6 million (excluding VAT) covers the following:
- Equipment
- Shop fitting
- Furniture
- Fixtures
Additionally, 6% of the monthly revenue goes to royalty fees and 5% goes to advertising fees.
Food Lovers Market Franchise – 320 stores in South Africa
Food Lovers Market is the place to be if you’re looking for daily fresh produce. The company started out 25 years ago with a single store. They later expanded into a franchise and currently have over 125 stores in the country.
The average cost of a Food Lovers Market franchise is between R8 million- R12 million. They also require a 50% owner contribution. Furthermore, one can expect to pay a 2% franchise fee and 0.5% marketing fee of turnover. The initial agreement term is set at ten years.
Sorbet Franchise – over 200 stores nationwide
Sorbet is the perfect place to visit for your beauty requirements. The stores are known for their vibrant and relaxing environment.
Owning a Sorbet store can cost close to R2 million, which includes the R125, 000 franchise fee. Furthermore, a 50% cash deposit is required upfront. Any additional funding may be obtained from a financial institute.
For more information visit https://www.sorbet.co.za/own-a-franchise/
Debonairs Franchise – 473 restaurant’s
The infamous pizza joint has been around for over a decade. Debonairs is by far one of the cheapest franchise options in South Africa. Franchise owners can expect to pay from as little as R800, 000. However, this is completely dependent on the store size and location. The initial franchise fee is R100, 500.
Franchisees will also have to pay an additional 7% for management fees and 5% royalty fees. This will be required each month from the monthly turnover the store makes.
The bottom line
Franchises have so much to offer and they’re usually stipulated by accredited sources. As a result, the general public trust franchised owned enterprises over solo businesses. While this may be a good thing, it’s not always a guarantee for success.
However, owning a franchise allows people to get the support and advice they need. Franchisees often don’t need any experience when opening a business. They can smoothly transition and learn from their mentors.
The initial fees and startup capital are hefty; however, the profits always pay off. Unfortunately, most franchises require an upfront cash investment. This money cannot be borrowed from a financial institute.
If you choose to open a franchise, it’s best to choose one of the most popular franchises in South Africa. Furthermore, always weigh the pros and cons beforehand. Lastly, owning a franchise is a lot of work. You will always have to follow the guidelines set out by the franchisor.
