Franchising is a relatively old concept in South Africa, having some Euro-American retail outlets owned by local businessmen for a while now. The likes of McDonalds or Wimpy are typical examples of this, but some within the country have started establishing their own franchises and exporting them. It is a business model that has proved itself viable over decades, with relatively reasonable success rates across the world.
A franchise is an agreement between the franchisor (the grantor of the franchise) and its franchisees (those who acquire a franchise), granting the franchisee the right to operate under the name of the franchise and use its trademarks, know-how, methods and procedures. Moreover, the franchisee stands to gain from initial and ongoing training and advice offered by the franchisor, as well as having access to bulk deals and group marketing campaigns. But the franchisee is still responsible for marketing in their own territory.
Despite its popularity and relative ease to operate, franchise experts advise against rushing into such agreements if one lacks the necessary knowledge about the industry they want to operate in. They say it is advisable to read the franchise agreements before deciding to invest in a franchise. The franchising motto is “you’re in business for yourself, but not by yourself.”
Benefits of investing in a franchise:
Things to consider:
Head of Franchising at FNB Business Banking, Morne Cronje explains the state of franchise business in South Africa and services rendered by financial institutions to prospective franchisees.