Despite the economic downturn, franchising in South Africa has remained resilient and has typically shown positive growth rates, according to Sybrand Bezuidenhout, business development manager for franchise services at the Barclays Africa Group.
Bezuidenhout notes that this is particularly true for the franchising services category, which comprises 27% of the total franchising industry and has a combined turnover on excess of R133 billion per annum.
“Historically, the franchising services sector has shown healthy growth despite challenging economic times,” she said. “All indications are that it will continue to grow and positively contribute to the economy – especially if franchisees focus on providing quality products and top-class customer service.”
Some of the most popular franchise service options in South Africa continue to be fast food restaurants.
These are some of the most popular fast food franchise restaurants in South Africa and how much they cost to franchise.
KFC – R6 million
Despite KFC being by far the most popular fast food franchise in South Africa, it is not likely to increase its number of restaurants any time soon.
KFC South Africa brand owner, Yum International, has noted that the company is not currently looking for new franchisees.
However, existing KFC franchisees may elect to sell their businesses, and it is therefore possible to become a new KFC franchisee by purchasing an existing KFC business.
According to the latest franchise data available from KFC, new franchise owners could expect to pay close to R6 million for a new franchise.
With the only option to now buy a franchise from a current owner, perspective franchisees can expect this number to increase or decrease slightly depending on a number of factors such as location and demand.
Steers – R1.7 million
One of the cheapest franchise options on the list, Steers franchisees can pay between R1.7 million – R2.5 million depending on the size and type of restaurants they want.
The initial franchise fee is R159,900 for a Standard Steers, while the fee for a drive-thru Steers is slightly increased at R175,700.
Approximate set up cost for a Standard Steers is R1,650,000 excluding VAT, joining fee and contingency. Set up cost includes equipment, shopfitting, wet works, furniture and fixtures.
In comparison, the approximate set up cost for a drive-thru Steers is R2,350,000.
In addition, Steers franchise owners are expected to pay 6% of their monthly turnover in royalty and 5% of monthly turnover for advertising .
Wimpy – R1.9 million
New Wimpy Franchisees can expect to pay between R1.9 million – R2.5 million and an initial franchisee fee of R114,300 (excluding VAT).
Franchisees are also expected to pay 7% of their turnover in management fees and 5% of their turnover in royalties.
Debonairs – R800,000
According to Debonair’s South Africa’s franchising documentation, new franchise owners can expect to pay between R800,000 – R1,400,000.
In addition, franchisees can expect to pay an additional R100,500 as an initial franchise fee.
Similar to other Famous Brand-owned restaraunts, franchisees are also expected to pay 7% of their turnover in management fees and 5% of their turnover in royalties.
Nando’s – R6 million
More than any other restaurant, Nando’s gives perspective franchisees an almost exact breakdown of how much a new franchise is expected to cost.
The total amount of R6,060,000 (excluding VAT), is broken down into:
- Franchise fee – R220,000
- Restaurant design and set-up – R1,350,000
- Design & Project Management – R430,000
- Shop fittings – R1,185,000
- Kitchen equipment – R1,300,000
- Fixtures and fittings – R1,260,000
- Point of Sale/Computers – R315,000
McDonald’s – R4 million
According to McDonald’s South Africa, the cost of a franchise will vary, with actual costs only determined when an individual franchise is offered to an applicant.
The size of the restaurant, location, pre-opening expenses, inventory, selection of equipment, signage, seating and style of decor and landscaping will affect this cost.
This means that McDonald’s South Africa estimates the cost of a franchise to be anywhere between R4 million – R6 million, depending on the type of restaurant and other factors.
Applicants are are also expected to have a minimum of 35% of the purchase price of a restaurant in unencumbered, non-borrowed cash.
McDonald’s South Africa also does not allow partnerships or absentee investors of any kind.
Chicken Licken – R4.8 million
The set up cost for a standard Chicken Licken store is R4.8 million with the cost rising to R6.8 million for a drive-thru restaurant, depending on a number of factors such as landlord contributions and the size of store you wish to build.
The initial franchise fee is R150,000.
Chicken Licken also requires a royalty fee payment (6%) and and advertising share (6%), accounting for 12% of the franchises’ monthly turnover.