- There are a number of popular franchises that cost less than R1 million to set up.
- Drain Surgeon, 3@1 and Dream Nails count among the cheaper franchises on offer right now.
- For more stories, go to Business Insider SA.
Franchising is a popular way to start and own a small business in South Africa. According to the Franchise Association of South Africa (FASA), there are now more than 800 franchise systems in operation in the country.
According to research by Absa, the estimated turnover for the franchise market is R587 billion, which is more than 13% of local GDP. The industry grew by a compounded annual growth rate of 14% over the past five years.
Franchising is seldom the cheapest way to start a business, however. The added clout and safety of buying into an established brand often comes at a cost.
According to Abigail Makhubele, Franchise Development Manager at ABSA, “The mere fact that a franchise is a proven concept plays a key factor in attracting buyers.”
South Africa’s biggest, established franchises can cost many millions. But there’s a growing sector of the industry that’s targeting those with smaller amounts of cash to invest.
Makhubele warns that cheap or unvetted franchises aren’t necessarily the only way to go. “There are some bad operators out there who are looking for a quick buck, so be sure of the brand and the operators behind them,” she says.
Cheap, when it comes to franchising, usually means anything under the R1 million mark. But some businesses that have smaller footprints, or require less equipment, can be significantly cheaper.
With due research, there are some established, cost-effective franchises that can represent a good investment - and many of these will offer all the equipment and training to start operating a business, even without prior experience in the industry.
Master Maths is an education franchise that has a long history in South Africa. The company started in 1976 offering extra maths lessons using tapes and slides. They franchised the concept two years later, and today they have 112 franchisees and 140 centres operating around the country.
The business developed a computer-based maths teaching system, and they use this and other techniques to tutor more than 12,000 students each year.
Although the business already has a large footprint, they are open to applications from new franchisees around the country. From time to time, they also offer up existing franchises for sale on their website.
As part of the franchise agreement they offer training for new franchisees - either at the head office, or at an existing branch.
A new Master Maths franchise requires an upfront franchise fee of up to R45,000. Thereafter, franchisees will need to pay setup costs of approximately R200,000, and have access to a working capital of approximately R10,000.
The franchisor charges an ongoing management service fee of 15% of turnover, and a marketing fee of 2%.
Dream Nails is a beauty brand with a 34-year history in the country. The company has 33 stores covering various market segments.
The group owns several brands, which focus on different beauty treatments, from nails and facial treatments, through to massage therapies and eyelash extensions.
The cheapest franchise in their portfolio is the Dream Nails Beauty brand. This focuses on hands and feet, and they are currently looking for new franchisees to buy into the business.
A new Dream Nails Beauty store is typically 55 square metres in size, and has a franchise free of R100,000.
These stores cost an estimated R520,000 to build out, which includes drafting, fixtures and signage.
Beauty equipment and initial stock costs approximately R220,000. There’s also a fee for franchise opening support to an amount of R50,000.
This brings the total investment required to open a Dream Nails Beauty branch up to R890,000.
Bodytec is an Electro Muscle Stimulation (EMS) training facility that has expanded rapidly in recent years. They currently have 40 studios around South Africa and have been in operation since 2011.
They have franchise opportunities available. They offer a turnkey EMS training business, and the franchise includes the services on an in-house designer, equipment, manuals and software. The Bodytec franchise does not require franchisees to have any prior fitness industry experience.
Bodytec charges an initial upfront fee of R105,000. The studio set up fee is approximately R785,000, and they require a working capital of R75,000.
This brings the initial investment to R965,000.
They charge a monthly management fee of 6.2% of turnover, and a marketing fee of 2.5% of turnover. The minimum total monthly fee is set at R4,400.
Drain Surgeon is an emergency plumbing group started in South Africa in 1979. They offer 24-hour plumbing services, from blocked drains to geyser repairs and replacements.
The holding company operates a shared risk franchise model. This means the Surgeon Group head office manages infrastructure, staff and marketing platforms. Their ‘man in a van’ model allows artisans to join the group and focus on the practical aspects of the job, rather than the administrative.
In order to own a franchise under the ‘man in a van’ model, franchisees must have relevant plumbing experience.
A standard turnkey operation with the Drain Surgeon starts out at R280,000, excluding VAT. This excludes the leasing or purchasing of a relevant vehicle, but includes an upfront franchise fee.
3@1 Business Centre
3@1 is a business communication franchise that offers the public courier, printing, and internet services. The franchisor has been in operation for more than 20 years, and there are franchised stores located throughout the country.
They are looking for people to open up new branches of 3@1. They offer a turnkey business services store, along with staff and managerial training, lease and location assistance.
The average store costs R595,000, which must be available in unencumbered cash. This amount excludes a landlord’s deposit (usually around R50,000). Franchisees must also have a working capital of approximately R120,000.
Initial monthly royalties are 3% of turnover, with a minimum payment of R2,750, excluding VAT. They also charge a monthly advertising fee of R466, excluding VAT.
Here’s what it costs to buy into some of SA’s hottest franchises: Sorbet, Universal Paints, and Kids Emporium
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