Buying a franchise can be a hefty investment, especially considering the cost of high-end restaurant and retail franchises. We often get asked: What are the cheapest franchises to buy in South Africa? Franchiseek prefers the term” Affordable Franchises”, and you can see the affordable franchise opportunities available in South Africa listed in this category here. These lower-cost franchises generally require investments lower than R500,000, sometimes as low as R100,000. Franchises in this investment category often include education, personal, and business-to-business services. Just because a franchise costs less doesn’t mean that quality is compromised. When considering an affordable franchise, consider these guidelines before leaping into the world of franchising:
- Does the franchisor have a track record?
The franchisor should have a proven business model and, preferably, more than one branch or franchise that is already operational. The franchisor should have all the required franchise documentation, including a Disclosure Document and Franchise Agreement, that comply with the Consumer Protection Act (CPA). Read more about the legal requirements of franchising here.
- Does the industry appeal to you?
Just because you can’t afford a more expensive franchise doesn’t mean that you should buy any franchise that falls within your budget. For example, working in an education franchise for children requires patience and a genuine passion for education. Choose a franchise that suits your interests, and if you can’t afford it, wait or look for alternative sources of financing, such as friends or family.
- Do you have access to the funding required?
Many affordable franchises have low investment requirements due to the ability to run the business from home and the low need for expensive equipment. A lack of tangible assets makes it difficult for banks to finance low-cost franchises, so that you may need access to the entire investment amount in cash.
- Will the financial returns satisfy your income needs?
It’s essential to assess the financial requirements and potential earnings to ensure that the proceeds from the franchise will cover your income needs. If this is not the case, find out whether you can run the franchise part-time.
- Is the demand for the product or service provided by the franchise sustainable?
Trends often stimulate a proliferation of franchises in a particular category, but a franchise is a long-term investment. Assess the product or category for its potential longevity.
An affordable franchise can be a stepping stone to entering the world of franchising, but it will require the same amount of effort to make it successful. While the franchisor can offer guidelines, systems, software and marketing know-how, the success of any franchise depends upon the franchisee’s efforts. While a single affordable franchise may offer modest returns, many franchises allow franchisees to open multiple units, which can improve profits substantially. Whatever the investment level of a franchise, it’s prudent to investigate the opportunity diligently before buying a franchise.