Franchise Funding In South Africa – Sheila Ujoodha | MIoD: “More diverse and inclusive boards deliver better results for companies and society at large”
African Franchise Report: Franchising in Africa covers the development and current state of franchising on the continent. To achieve the general objectives of the research, this in-depth analysis was made of 18 countries, which represent all five parts of the continents (South Africa, East Africa, West Africa, Central Africa and North Africa).
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The study reveals that, apart from the examples of South Africa, Nigeria, and North Africa of small Arabic / French and Arabic / English speaking regions, the franchising sector on the continent is not well developed. The research also notes the proliferation of large-scale South African and Zimbabwean brands, which have expanded beyond their (external) borders within the Southern African Development Community and beyond.
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Instead, opportunities exist in that area. Changing consumer trends provide a strong opportunity for the franchise market and various governments have shown their willingness to support franchise development. These opportunities include:
This study examines the relationship between finance and franchise development and analyzes the role of finance in driving franchise performance. The size of the franchising market in Africa is estimated at US$93.9 billion, and the total investment capital is estimated at US$37.6 billion. Additionally, the size of the financing gap for franchise financing is currently estimated at US$7.51 billion.
This research identifies the African diaspora as a strong financial and non-financial force for franchise development for countries of origin through remittances, business development, investment , research, innovation and knowledge. The Diaspora can play three distinct roles in the development of the African franchise sector:
In particular, surveys and interviews with various diaspora respondents reveal the following about investment in Africa:
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Franchises on the continent are organized in four different ways. The first includes countries that specifically grant franchising in their laws. The second is countries that have addressed franchising in other laws. The third group includes countries that do not specifically mention franchising in their laws but in laws related to the industry. The fourth category consists of countries that have abandoned franchising to become self-governing. Among the main findings of the report is that only two African countries, Tunisia and South Africa, directly regulate franchising.
African countries that want to strengthen their economies through franchising need to agree to international data protection standards for information shared between franchisors and franchisors and consider the security implications of intellectual property related to franchising.
Franchising has the potential to drive the next phase of growth on the African continent. Undoubtedly, the franchise sector is a critical but often overlooked potential avenue for economic growth. With 55 countries in the African market, many and fragmented, promoting business on the continent presents many challenges.
As part of the research, examples of successful franchises were analysed, enhancing the growth and development of the Nando’s franchise in South Africa as a comprehensive thematic study to identify key success factors and key lessons learned are also studied as examples of successful exits. First Franchise Operation Now! Take control of your future and connect today. Start Now Take control of your future and get involved today.
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Your passion and desire to own a business are the most important qualities you can have for long-term success, but you also won’t be successful without some sound innovation. To complete that adjustment process, there are many different sources of franchise financing that you can look into. Below, we cover a few.
Your franchisor is a good place to stop; they may have agreements with lenders to not only accept loans but also to facilitate the process and help you open quickly. Check this in the Franchise Disclosure Document or ask them directly.
Of course, using your own money to buy a franchise will create a debt-free business from the start. That would be a good start, but if you want to be a multi-unit operator you need money for growth, so this might not be a good strategy.
Conventional loans are a common source of franchise financing, but they are usually limited to business owners looking to expand units, or new owners with exceptional operating experience. In addition, lenders look for collateral in real estate that can be combined to reduce their risk. Seeds usually last 5-10 years.
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For those whose homes retain their value and who have or have a large percentage of equity in their homes, this time-tested resource for franchise businesses is still a good alternative. You may have to go through a lot more paperwork than you did a few years ago, but you can still use your home as a source of franchise income if you’re willing to take the plunge.
If you have a 401(k) or other retirement fund, you can create a C corporation that can be used to buy shares in your new franchise business, thereby financing it. Note that the IRS rules on this subject are still being reviewed, but companies that specialize in this area have been around for years and have helped many franchisees get started.
Small Business Loans are one of the most common sources of franchise financing. These loans are designed to reduce borrower risk by providing a primary guarantee from the federal government. SBA loans are very complicated to apply for and require a personal guarantee and mortgage to be placed on your property, so make sure you get professional help when applying for an SBA loan.
Finding a source of funding for your equipment purchase or rental will increase your chances of getting funding for the rest of your new business. At the very least, it will reduce the amount you need from other sources of franchise funding. Check with your franchisor to see if they have an agreement with one or more leasing and financing sources.
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When you start a small business that needs money, depending on your goals, you will need to prepare for all the financial options.
Listen from your smartphone or PC on WED 27 July 2022 | 5:00pm PDT and learn about different ways to support your franchise. Franchising can play an important role in the much-needed economic recovery after the crisis, but insiders believe that government support for the sector is lacking. Anita du Toit, franchise development consultant and director of Fundi Franchising, said: “The lack of special programs that support franchising shows that the government does not emphasize the role of this sector in economic development. Franchising takes hold more than start-ups and more economically viable than self-sustaining businesses. The fact that all major commercial banks have financing divisions focused on financing this sector shows that this is a very strong business in the business. .”
Although there are several programs that support small, small and medium enterprises (SMEs), the only direct support for franchising from the government is from the Small Business Finance Agency (SEFA). within the Department of Small Business Development, added du Toit. “It appears to be the only government agency that focuses on franchising, although the National Empowerment Fund (NEF) provides financial assistance under the IMbewu fund, and other initiatives provide funding which focus on change.”
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However, for those looking for support, the best way is often through other organizations, added du Toit. “SEFA is a member of the Business Association of South Africa (FASA) and has signed a memorandum of understanding (MoU) with the organization to assist business owners with financial applications.
“It is not always clear what SEFA’s requirements are, but applicants should contact FASA because there is an MoU,” explains du Toit. “One thing is to talk to commercial banks about government funding and guarantee schemes, as some of them work with these organizations to help finance.”
The franchise sector is a missed opportunity for change, job creation, economic development and skills development, writes DELIA DU TOIT
There is no major government plan for the sector and no program to capitalize on its impressive record of job creation and skills transfer. According to FASA, the sector employed nearly half a million people in 2019 across more than 800 operations with nearly 48,000 stores.
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“Franchising encourages job creation and skills transfer in a country burdened by high unemployment and skills shortages, but franchisors face strict regulations and administration,” said du Toit.
Shenelle Nair, engagement manager at Letsema’s investment management and consultancy, said easing regulations and barriers to market access will be key to the sector’s growth. And the numbers are there to save such drives. “About 70 percent of businesses fail in the first two years of operation, while Anita du Toit’s failure rate is estimated at 10 percent.”
“FRANCHISING CONTINUES TO CREATE JOBS AND REFLECT ON WORKING OUTCOMES IN A COUNTRY WITH CHALLENGING UNEMPLOYMENT AND NEED TO WORK, BUT FRANCHISES ARE FACING A CUMBER.
Letsema, a consulting and investment firm, said concerns about change had been raised in the past by others