These are some of the most expensive franchises in South Africa right now
- Buying a premium brand franchise will cost you at least a couple of million rand.
- We look at some of the top options - including a Superspar franchise, which may cost you R16 million.
- For more stories, go to www.BusinessInsider.co.za.
South African franchises vary greatly in price and type. On the cheaper side of the franchise world are small fast food stands and local businesses that cost just a few hundred thousand rand to buy into.
Although these can deliver good returns, if you’re looking to buy into some of the country’s premium brands you’ll need to pay a lot more for them.
Here are some of the priciest options in South Africa.
Pick ’n Pay and Spar are the two premium supermarket franchises in South Africa. Although they both offer various store formats, including smaller express-type stores, their full-service supermarkets cost several million to open.
Pick ’n Pay
Some 304 out of the 552 supermarkets in the Pick ’n Pay group are franchisee-owned and run. These stores are large, and floorspace often exceeds 3,000 square metres. As a premium supermarket, franchisees are buying into Pick ’n Pay’s established brand, along with supply chains and premium locations.
But this comes at a cost. Depending on the size and location, a new Pick ’n Pay supermarket costs approximately R10 million to establish. Franchisees are also liable for ongoing franchise fees based on annual turnover.
Spar has 950 independently owned stores, franchised to the parent company. Like Pick ’n Pay, quite how much a new Spar will cost depends on the location, size, and nature of the business.
The premium brand under the Spar umbrella is Superspar, which requires a floorspace of at least 2,500 square metres. A new Superspar franchise will cost at least R16 million, sometimes as much as R20 million, and franchisees must have about R1 million in working capital.
Beauty franchises have continued to do well in South Africa, despite of tough economic times.
The most expensive nail and grooming franchise, Sorbet, is also one of the hottest franchises at the moment.
There’s also been a rise of day spa franchises in South Africa in recent years, and with branches countrywide that can cost millions to establish. Camelot is one of the premium brands in this sector.
One of the reasons behind Sorbet’s success is its diverse range of franchises available. Although it offers a simple nail bar that is relatively cost effective, its flagship outlets (the full-service Salon and the newer Sorbet Man) are significantly more expensive.
The total investment for a Sorbet Salon or Man is approximately R1.4 million. Together with deposits and working capital, you’ll need to have at least R2 million before you start trading.
Camelot Spa has thirteen branches located throughout the country, including at hotels. They offer more luxurious day spa facilities such as massages, along with traditional skin and nail options.
The business’s flagship operation, the Camelot Luxury Spa, is approximately 200 square metres. The initial franchise fee is R250,000, excluding VAT. Thereafter, successful applicants can expect to pay upwards of R2.5 million in set-up costs.
The cheapest established burger franchises in the country cost around R2 million, but the more expensive full service burger restaurants like RocoMamas, and the sought-after McDonald’s, cost significantly more.
RocoMamas is a full service burger chain, owned by Spur, that has grown rapidly in recent years. It is positioned as a premium burger restaurant, and its menu is considerably more expensive than competitors like Wimpy. As such, its new franchises have a heftier price tag.
The estimated set-up costs for a RocoMamas is R4.6 million. Franchisees should also have more than R120,000 in working capital. A monthly franchise fee of 7% of turnover is also charged.
McDonald’s may technically be a burger joint, but by virtue of the brand’s international clout they’re able to charge significantly more for franchises than competitors like Steers. Purchasing a McDonald’s franchise in South Africa entails a fairly arduous application process, and a sizeable amount of cash.
On the upper end of the scale you can expect to pay R6 million for a large McDonald’s franchise. Some 35% of this must be available in unencumbered cash.
Global giant KFC is currently fully subscribed in SA, and biased towards existing franchisees for new branches anyway. The best way to invest in a KFC in South Africa is therefore to purchase one from an established franchisee.
Reports suggest that a new turnkey KFC franchise operation in South Africa costs somewhere in the region of R6 million.
Like RocoMama’s, local business Nando’s has positioned itself on the premium end of the fast-food market. Most Nando’s branches are hybrids between a takeaway and sit-down restaurant. This increases the floorspace, and the overall cost of the franchise itself.
A new Nando’s costs approximately R7 million to establish. This includes equipment, shop fittings, and other features necessary to successfully run the business. After opening, franchisees must also pay 12% royalties on net turnover for marketing and royalty fees.
Takeaway and sit-down coffee is capturing an increasingly large share of the market in South Africa. A brand like Vida E Caffe may have done significant work to establish a market for gourmet takeaway coffees, but it’s the bigger restaurant style coffee shops of Bootleggers and Mugg and Bean that have the higher price tags.
Mugg & Bean
Mugg & Bean is an established coffee-centric restaurant owned by Famous Brands. It is a popular business that has a large food and drink menu, and occupies large floorspace in prime locations.This translates into a premium coffee shop brand that costs a lot to establish.
A new Mugg & Bean costs approximately R10,000 per square metre, and many stores are 250 square metres or larger. As such, you can expect to spend well into the millions to establish a branch of your own.
Staff training, liquor licences, a R250,000 joining fee, and ongoing royalties of 10% of revenue add to the initial investment.
Bootleggers is a young but growing coffee shop franchise with 18 branches in Johannesburg and Cape Town. Like Mugg & Bean, many of their branches offer a full restaurant service and occupy large floorspace, which increases the cost of the franchise.
A new Bootleggers outlet costs approximately R3.5 million in set-up fees, 50% of which must be available in unencumbered cash. The group is eager to roll out new stores, however, and thus are open to the idea of pairing up two franchisees interested in opening a store in the same geographical region.
Of all the franchises available in South Africa, filling stations are among the most expensive. That’s because they require extensive infrastructure, specialised equipment, and various legislative approvals.
Many modern petrol stations are also paired with convenience shops. These may generate additional income, but will increase the initial franchise fee substantially.
The exact cost of a filling station varies according to the size and location, but if you’re building one from scratch you can expect to invest many millions and wait several years for approval.
Because of the difficult legislative requirements, many choose to purchase established franchises instead.
In this case, you can expect a small, standalone brandname filling station to cost at least R2.6 million. An established filling station with a forecourt store, and pumping around 300,000 litres of fuel a month, can easily cost around R10 million.
But what makes the operation particularly costly is the working capital requirement to purchase fuel - this is usually in excess of R1 million.
South Africans love to drink, and some of the most expensive franchises in the country are in this sector.
Liquor City is one of the most successful standalone alcohol franchises in South Africa.
Although supermarket chains like Pick ’n Pay and Spar have eroded much of the traditional liquor stores’ market share, from a franchise perspective these usually require the initial purchase of the much more expensive supermarket franchise first.
Liquor City stores are upmarket, urban liquor stores, and are among the most expensive liquor franchises on the market. Establishing a new Liquor City franchise costs approximately R2 million, although existing independent stores can buy into the brand for significantly less.
Cubaña is an established brand, offering a turnkey bar and restaurant operation. The themed restaurant is not cheap, however.
Starting a Cubaña requires a joining fee of R750,000, and set-up costs as high as R10 million. This makes it one of the country’s more expensive franchise operations. Investors have to pay initial fees, coupled with an ongoing franchise fee of 8% of outlet turnover.
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