We never grow tired of spreading the message of franchising, namely “to be in business for yourself but not by yourself”. However, if you are a regular reader of whichfranchise, we cannot rule out the possibility that you grow tired of reading basic success stories so we decided to try a different approach for a change. This does not mean that we have not gone off success stories altogether, in fact, we have several in the pipeline and hope to bring them to you before the end of the month so keep visiting our website!
Today, we will show that not all franchises are created equal. Help is available but the onus is on you to make the right choice and avoid the bad apples in the basket. We also bring you some of the questions we received in course of the past month, and the answers given by our experts.
Although the following is a true story, names have been changed to protect professional confidentiality requirements.
A fellow, let's call him Pete, approached one of our experts in his capacity as a leading franchise consultant and asked him to rubberstamp a franchise offer he was about to accept. He openly admitted that he would have signed up without asking any questions, had it not been for misgivings expressed by his wife. As it turned out, his wife's concerns were well-founded and it was indeed fortunate that he sought professional advice.
The core business of the self-styled “franchise” was a service that is reasonably popular in the US but is virtually unknown in South Africa . The promoter of the “franchise” had developed the package locally. He readily admitted that he had not operated the business but claimed that his systems were superior to anything on the market. He also explained that to put the business on the map would require a high profile marketing drive. The high cost of such a drive makes a swift national launch a business imperative.
Moreover, the promoter told Pete that the systems and procedures he had developed are highly confidential and no details could be divulged unless Pete signed a binding franchise agreement first. Such a request is untenable but worse was to come! Before Pete would be permitted to even see the so-called franchise agreement, leave alone show it to an attorney, he would have to make a good-will payment of R50 000.
The following are just a few of the questions we received last month.
Q: I would like to know how much cash I need to invest in a franchise and how much I can expect to earn a month, say over the next three years?
A: Costs of setting up a franchise vary tremendously. They are influenced by the type and size of business you are interested in, the reputation of the brand (which could affect the amount payable as upfront fee) and working capital requirements.
Many of the listings on our website give an indication of investment levels. To answer the second part of your question is equally difficult. Franchises do not come with guarantees, your earnings depend on the viability of the business of your choice and the amount of effort you put into its operation.
Speak to several franchisors, once negotiations with one progress beyond the initial information stage, you should receive a disclosure document which will provide among other things detailed financial information. Most of the banks require and unencumbered cash requirement of between 30% and 40% of the total investment required.
Uniglobe — travel agency
For a full list SA franchise opportunities click here
The website www.whichfranchise.co.za lists bona fide franchise opportunities. It also contains valuable information on how franchising works. As far as locating franchise opportunities goes, we have made it easy for you to find what you are looking for. We have set up the site in such a way that you can search for opportunities according to various criteria, most notably by business sector and investment level. Come on, try it now!
Should you have specific questions related to the concept of franchising, we invite you to send an email to experts@whichfranchise.co.za . Our panel of experts will endeavour to provide answers, usually within 24 hours. This is a free service and places you under no obligation whatsoever but can help you a great deal.
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