Franchising is often viewed as a safer route to business ownership, but success isn’t guaranteed – especially if you go in with the wrong expectations.
“Franchising is not a shortcut to wealth. It can generate money, but it’s not a passive income, and it’s certainly not an easy retirement option. It’s hard work, it takes grit and planning and, often, it will require a complete lifestyle adjustment,” says Morne Cronje, Head of Franchising at FNB.
Whether you’re considering franchising as your next career move or to fund your retirement, there are some important considerations before you sign the dotted line.
Pursuing franchising without a clear objective often leads to poor choices like buying into the wrong concept, underestimating capital requirements, or simply not having the stamina for the hours involved.
Franchising suits people with an entrepreneurial spirit, but who can still follow rules. If you’re someone who wants total freedom to change your menu or reinvent your business model, you’ll likely struggle.
Franchise systems are built on consistency, and that means structure. That’s not to say you can’t be creative; but your innovation must operate within the boundaries of the franchise’s standards, processes, and branding.
If you’ve worked eight-to-five for thirty years and think you’re going to sit back while the money rolls in, franchising will likely be a rude awakening. As a franchisee, you’re the first one in and the last one out. Your weekends, evenings and holidays belong to the business now.
If you’ve been earning R40 000 a month, for example, and now you’re only able to draw R20 000 from your franchise, that shortfall can become a serious issue. Also factor in tax, medical aid, retirement savings and other costs that were previously covered by an employer.
A packed store isn’t always a profitable one. You need to understand margins, overheads, and what kind of volume is required to turn a real profit.
A fast-food franchise as an example, might look thriving from the outside, but with input costs rising and operating hours stretching long into the night, profit margins could still be thin.
“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,” says Cronje.
