Franchising may be viewed as a secure way to start a business, but it is not a passive income or an easy retirement option, said FNB head of franchising Morne Cronje.
South Africa has a growing franchise sector that spans fast food, retail, automotive services and education, but Cronje believes venturing into this does not offer automatic success.
He emphasised that buying into a franchise often requires significant upfront capital, but the cash flow challenges do not end there. Cronje said many new owners underestimate the gap between what they expect to earn and what they can realistically draw from the business.
Owners also have to budget for tax, medical aid, and other costs that would have been covered in a salaried job. Cronje said many may consider buying into a known brand as less risky than starting from scratch but highlights that potential owners need to approach the opportunity with clear eyes.
Unlike independent businesses, he said, franchises are built on strict systems. The appeal for customers lies in the consistency of the product or service.
“If you’re someone who wants total freedom to change your menu or reinvent your business model, you’ll likely struggle,” said Cronje.
He said the model is best suited to people with entrepreneurial drive who are still comfortable working within boundaries. While there is room for creativity, it has to be applied within the franchise’s established processes.
He said a busy store is not necessarily a profitable one, as rising input costs and slim margins can eat into revenue, particularly in sectors such as fast food, where volumes are high, but profit margins are thin.
Overheads such as staff wages, rent and utilities further squeeze earnings. Despite the hurdles, Cronje believes franchising remains a strong option for South Africans seeking business ownership, granted that they understand what they are getting into.
“Despite the risks and considerations, franchising remains a powerful way to generate income, provided you approach it with your eyes wide open. The truth is that success in franchising demands the same level of intent, energy, and commitment as any other business venture.
“There’s no substitute for due diligence. Understand the business, the model, your finances, your expectations – and most importantly, yourself,” said Cronje
