Automotive franchises offer valuable car-related products, repair services and valeting services.
Typically previous experience in the motor servicing is encouraged however this is not a requirement, a franchise like Car Service City have said that they are looking for franchisees that have the personal attributes to become a successful business person, rather than someone with previous motor servicing experience. “Our current franchisees come from varied backgrounds, which include chartered accountants, MBA’s, former Marketing and Financial Directors,” it said on their website.
If you are considering being part of the big brands in franchising, here’s what you should consider:
The Franchise Factor research report on the automotive after market covers a number of sectors, which includes:
The franchising analyst Bendeta Gordon told BusinessLive said the increase was prompted by a tough economy that had changed new-vehicle purchasing patterns. As vehicles were kept for longer, the need for maintenance and other after-market services had grown.
Gordon added: “The bottom line is that franchising is a lower-risk opportunity directed at offering black entrepreneurs entry into the mainstream of economic activity by making small-and medium-sized franchised businesses available to them.”
The Manufacturing Indaba said that the automotive sector currently contributes 33% to manufacturing GDP and about 6% to overall GDP. It produces approximately 600,000 vehicles per year, supporting 113,000 jobs.
Gordon said the majority of the 79 franchised systems in the 2017 report – 28 – have ten or fewer stores, while only two have more than 251 stores. The estimated turnover of the the franchised systems are R32-billion in 2017.
She also said that while there were no firm figures to confirm, it was “likely” that these operators also took in about 30% of the sector’s R32bn turnover in 2017.
It depends on which franchise you are planning to buy in. For example, Car Service City said that the price of a franchise (with them) largely depends on the area one is planning to open the branch, as the prices range from R550,000 to R1,200,000.
On the other hand, according to the SA Franchise Brands, Midas asks for a conversion fee of R 50,000, while the franchise Tyres & More‘s requirements include access to funding, a total investment of R4-mil. of which R2.5-mil. is for set up costs and R1,5-mil for working capital.
Monthly fees would include your business insurance for the premises and things like the equipment.
According to the Franchise Association of South Africa (Fasa), most franchisors will insist that you fund between 30 –50% of the complete investment from your own resources. Fasa warns that if repayments are big, it would place strain on your new business’ cash flow.
The Entrepreneur Mag reported that if you are looking to acquire equipment, for example, for wheel alignment, you can:
Things you have to apply for include a business bank account and SARS Tax.
Laurette Pienaar, Nedbank’s national franchise manager, said to Moneyweb that similar to the franchise agreement, franchisees are encouraged to seek legal advice prior to entering into a lease agreement and supplier agreements.