A franchise (or franchising) is a method of distributing products or services involving a franchisor, who establishes the brand’s trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor’s name and system.
Franchising Services In South Africa
Do your due diligence and research correctly, and the South African market can offer much promise for incoming brands
South Africa is often overlooked by franchisors looking to expand overseas, which is a real pity, as the South African franchise scene is very strong. In fact, it boasts a franchise association (Franchise Association of South Africa) that is celebrating 40 years of being a voice for the sector and is the leading franchise association on the continent.
Franchising accounts for 15.7 percent of South Africa’s GDP, with an annual R721bn turnover, despite the country having a major minerals export business in gold, platinum, and diamonds. There are approximately 850 franchised brands currently with 41,000 outlets, with this number growing annually.
Although the franchise sector in South Africa has struggled in the last couple of years due to the slowing of all economies worldwide, it certainly seems to have weathered the tough times well and is now coming out the other end. Now is a good time to enter the market.
What you need to know
If you are looking to expand to South Africa there are a few things you need to look into first. The most important aspect is the exchange rate of the South African rand versus other currencies. Also, the country now has a minimum wage set by the government, which is monitored very carefully by the authorities.
For food retailers, South Africa has a sugar tax which is usually shared by the suppliers and the sector – this has caused the cost of living to rise slightly, as you would expect.
For retailers, another big factor to really research is site selection, which is very important, including the demographics of the site. Also, the cost of fit-out, which is certainly a lot less expensive than most other western countries due to the cheaper labor costs across the board.
For example, to set up a 300-seat steak house franchise could cost anything from R1.5m to R2.5m, which is roughly It’s worth noting that most equipment can be purchased much cheaper in South Africa and is always readily available.
Selection of a master franchise is a very important decision for any franchisor looking to expand their brand, but even more so in South Africa, as an incoming franchise must comply with the Black Economic Empowerment (BEE) regulations, which means that a company must have a black South African on its board.
There are exemptions that can be granted but this needs to be thoroughly checked out when setting up a master franchisee. I suggest you seek out local legal advice with a reputable law firm. Companies that do not comply will not be considered for any government tenders.
Test the market
My advice to any company looking to expand to South Africa is to open a couple of branches in select areas to actually test the market for your products. This may seem onerous but will be well worth the effort and expense in market research, as most people will not contemplate buying master rights until you can prove it will work in their market.
This is especially true with food products, as local taste and presentations of food need to be checked – what works in your country may need to be changed slightly for the market that you are seeking.
The opportunities on offer
I was asked recently why Starbucks was unsuccessful in South Africa, and the main reason comes down to the costs of fit out and equipment, which was in many cases brought in from the U.S., which caused massive costs to franchisees. Also, the cost of product was above the local coffee suppliers.
Which franchise is most profitable in South Africa?
Which franchise makes the most money in South Africa?
KFC – from R6 million.
Nando’s – from R7 million.
Debonairs – from R2 million.
Steers – from R1.7 million.
McDonald’s – from R4 million.
Chicken Licken – from R4.8 million.
Roman’s Pizza – from R2.4 million.
Which is the best franchise to own in South Africa?
The top 3 franchises to invest in out of the 10 most profitable franchises in South Africa
Jeff – The modern day to day services app that’s revolutionizing the franchise world. .
Globbing.
Nandos.
What franchises are available in South Africa?
7 South African franchises you can open for less than R1 million
Debonairs – from R900,500.
Wilcote – from R520,000.
3@1 Business Centre – from R695,000 (ex VAT)
Zebro’s – from R949,000.
H20 International – from R325,000 (excluding VAT)
The Bed Shop – from R500,000.
Sorbet – from R1 million.
How much is KFC franchise in South Africa?
KFC South Africa brand owner, Yum International, has noted that the company is not currently looking for new franchisees. According to the latest franchise data available from KFC, new franchise owners could expect to pay close to R6 million for a new franchise.