Starting a franchise is an attractive way to get into business for many entrepreneurs. The great thing about buying a franchise is that you’re investing in an established brand and business model that has been proven to work. This makes opening a franchise slightly less risky than starting a new business from scratch.
There are many franchise opportunities that exist in South Africa. These vary greatly in cost and can be highly profitable if done right.
In this guide, we’ll cover all the basics you need to know about starting a franchise in South Africa.
How Much Does it Cost to Buy a Franchise in South Africa?
The cost of buying a franchise purely depends on what franchise you’re buying. Other factors, like the size of the restaurant or restaurant style, will also affect the franchise price.
When you purchase a franchise, there are various costs involved. These generally include the franchise fee and application fee, the establishment costs, and applicants need sufficient working capital. On top of this, many franchises require monthly royalty payments, advertising costs, or a percentage of monthly profits.
So, how much does this all add up to? According to an article by Tshwaneline, here are the costs of some different franchises in South Africa:
- McDonald’s: Between R4 million to R6 million depending on the type of restaurant
- Nando’s: Approximately R6 million (Excluding VAT)
- Burger King: Approximately R5 million
- Wimpy: Approximately R2 million (plus 12% of monthly turnover)
- Debonaires: Approximately R1.9 million (plus 12% of monthly turnover)
- Barcelo’s: Approximately R1.6 million
- Steers: Approximately R1.3 million (plus 11% of monthly turnover)
- Kauai: Approximately R1.4 million (plus 10% of monthly turnover)
These are just a few of the most popular fast food franchises in South Africa. If you are considering investing in a franchise, then take a look at these 100 South African franchise opportunities.
Which is the Cheapest Franchise to Buy in South Africa?
In terms of restaurant and fast food franchises, some of the cheapest options are:
- Fish & Chip Co.: Roughly R645 000 starting cost plus R4400 monthly payment
- King Pie: Approximately R600 000 starting cost
- Zebro’s Chicken: Roughly R831 000 plus 4% of monthly turnover
However, franchise opportunities don’t end at fast food restaurants. There are many other areas of business that offer affordable franchising opportunities. Some franchising opportunities under R1 million include:
- Battery Centre: R500 000 setup plus R100 000 working capital
- Tutor Doctor: Roughly R550 000
- Just Property: Roughly R650 000
- PostNet: Around R805 000
What is the Most Profitable Franchise to Own in South Africa?
According to a report published by Business Tech, some of the franchises that make the most revenue per outlet include (in descending order):
- Burger King
- Fish & Chip Co.
- King Pie
Of course, the profitability of a franchise will change for each individual case. The biggest brands will naturally attract the most revenue. However, factors like location and management can play a major role in profitability.
How Do I Invest in a Franchise in South Africa?
The first step is to perform thorough research. You need to understand exactly how your chosen franchise operates, and establish whether you are suitable for the role. Different franchises operate in different ways, so it’s important to understand that the system will be a good fit for you.
Then you (the franchisee) will need to get in touch with the franchisor to understand franchising opportunities and establish what steps are involved in opening a new franchise. The franchisor will likely be very involved in the process.
Opening a franchise is not always an affordable way to start a business. You will likely require a franchise business loan, as well as having sufficient non-borrowed capital available.
Once an agreement has been made, the franchisee will need to follow the strict requirements of opening and operating the business, according to the franchisor.
Starting a franchise has many benefits. The main ones are that you can open a business with a brand that is already well-established, a business model that works, and gain support from experienced franchisors. The downside is that running a franchise can be very rigid, with a lot of strict rules in place.
South Africa has many franchise opportunities available. These cover all kinds of industries and range greatly in costs. If you find a franchise that suits you, it could be an excellent way to start a business.