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Is a franchise for you?

A franchise is a business opportunity that allows the franchisee (you) to start your business by legally using someone else's (the franchisor's) expertise, ideas, and processes. The franchising industry in South Africa has seen continued growth in 2018 and is expected to be boosted by the appointment of Cyril Ramaphosa as president of the nation. This is according to Tony Da Fonseca, chairman of the Franchising Association of South Africa (FASA), who believes the franchising business format will continue to outperform the overall economy.

FASA's latest franchising survey (published in November 2017) shows the sector's performance as remaining on an upward trend, with 845 franchisors and they're over 40,000 franchisees generating sales of R587 billion – this contributed 13.3% to South Africa’s GDP. South Africans are also showing an increasing appetite for becoming a franchise owner, according to a BusinessTech poll conducted earlier in February 2018. The poll found that 61% of readers were interested in buying a franchise, while 3% (145 votes) indicated that they already owned at least one.

If you need to raise capital for your venture, buying into a franchise business is a good idea, financiers like to approve these kinds of startups. The risk is usually lower than starting an independent business.

Before buying into a franchise, it is important to do some research. What is the upfront investment, and what are the monthly costs? Approach some existing franchisees and ask them, how they would rate the services the head office is offering. You want to build a long-term business relationship, so make sure you feel comfortable. Find out what the franchisor expects from you, do you need to have experience in this industry?

Before being able to raise the capital via financiers you need to have preapproval from the franchisor. Then you need a business plan, containing information about the business, yourself and the location you want to open your business.

Here are the seven simple steps to buying a franchise in South Africa:

1. Approach the franchisor.

2. Find out more about the franchise.

3. Understand the Franchise Agreement

4. Complete the application process.

5. Draft the business plan and financial forecast.

6. Raise the necessary funding

7. Sign the Franchise Agreement

8. Complete training and support

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