Franchise Funding

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dubeh

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Hi guys

I need some insight and suggestions on a matter I have in mind. I am currently a final year varsity student and not really interested in joining the workforce and being employed in a larny big company.

I have an idea of opening a fast-food franchise chain in an area that I am sure that it is in demand, more especially because I spend a lot of time in this town. I have already 'secured' property to run the business as I had talks with the landlord over the holidays. Now the only problem I am currently faced with is the issue of funding. I have talked with financial planners and business bankers @ fnb and they haven't given me feedback that would put a smile on my face. Basically I have to have something on collateral or surety so that they could offer any funding.

Next thing I thought of are organisations like NYDA and Khula enterprise fund. I have yet to consult with them but I would appreciate feedback if any has on how they operate and if they were to fund a single company with funds ranging from R1.3-2M as these are the approximate cost needed to get the franchise off the ground

Lastly, any person have feedback with regards to turnover and profit of fast-food chains like Wimpy, Debonairs, Steers etc.

Thank you in advance.
 
I also looked into this a while ago.

Sadly, it seems that most franchisors require that you have up to 50% unencumbered (i.e. not borrowed) money available to put in up front, which will probably be the biggest hurdle unless you have rich and generous parents.

I'd be very interested in your feedback from the NYDA & Khula. Not sure what their position is on investing in this sort of thing.
 
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Unfortunately you are unlikely to fund the commercial first tier banks offering to fund 100% of a business start up, without you coming to the table and part funding it. Best bet is to following and try obtain seed funding from an appropriate fund.

Note however that as this is high risk, the return for them would be big.
 
Every second person has "an idea" that's gonna make millions, but no person is just going to give you money that will probably just be lost.

If you're convinced that your idea will definitely work then put up your parents house as collateral and I'm sure you'll get that loan!

Good luck!
 
Griz said:
Every second person has "an idea" that's gonna make millions, but no person is just going to give you money that will probably just be lost.

If you're convinced that your idea will definitely work then put up your parents house as collateral and I'm sure you'll get that loan!

Good luck!
Click to expand...

Unfortunately the house is under collateral for a business loan my father has to sustain his own business so that was out of the picture from the get go, was my 1st thought though.
 
Looked into this a while ago. Depending on what kind of franchise you looking for it's between R800k to R10mil to start up.
* Also with that price, the company offering you an opportunity will pick out the best location - they don't let you choose yourself.
* Also 99% of these franchised companies require you to undertake a 1 year minimum unpayed internship in an already setup franchised shop under their brand as training until they are happy you can do the job.
* Also the company offering the franchise will not let you open a store under their brand and hire someone else to run it - they require you to run and manage the store yourself. If you choose to no longer manage the store yourself or partly by yourself, your contract is usually null and void and you run the risk of losing the store.

Running a franchise is a ton more work than having a regular job will ever be - just letting you know.
 
^^vampire^^ said:
Looked into this a while ago. Depending on what kind of franchise you looking for it's between R800k to R10mil to start up.
* Also with that price, the company offering you an opportunity will pick out the best location - they don't let you choose yourself.
* Also 99% of these franchised companies require you to undertake a 1 year minimum unpayed internship in an already setup franchised shop under their brand as training until they are happy you can do the job.
* Also the company offering the franchise will not let you open a store under their brand and hire someone else to run it - they require you to run and manage the store yourself. If you choose to no longer manage the store yourself or partly by yourself, your contract is usually null and void and you run the risk of losing the store.

Running a franchise is a ton more work than having a regular job will ever be - just letting you know.
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Well I do understand its a lot ov work, I've worked part time @ a Steers &Debonairs joint store and I've seen the owner be the 1st person in and last to leave basically so I do understand that part, the others I didn't.

Thanx
 
Most of the websites like McDonalds and Steers etc should have their franchising info available directly with their rules.
Don't be swayed by what I have said I'm just letting you in on the few 'downers' I found out about the whole process that most don't see or don't know.

When I researched it the cheapest to open seemed to be a pizza perfect at R668 000 or pizza & chicken perfect for R788 000.
That's excluding VAT, staff etc
http://pizzaperfect.co.za/franchise_intro.htm

Good luck with finding the funding hope it works out!
 
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you could approach a card carrying member of the ANC to apply for a guarantee from the investment wing of the ANC, they back you and the banks will loan money. I dont agree with it, but use the system against itself ;)
 
A cousin of mine opened a pizza joint last year (after looking for over 3 years for an investor) and vampire is right in that it's the cheapest option. I'ld suggest also writing down a business plan and look into private investors too. It usually takes a couple of years until you find support but generally if your idea is great then it might work. Good luck!
 
The first thing you need to do is actually talk to the franchises you are interested in. Once you have decided on the franchise, then make contact with your bank.

The business bankers you normally find inside a branch (of any bank) is clueless on how to work with such a big deal. All the banks has mobile acquisition teams that normally handle large transactions like franchise funding.

All banks will require collateral and a contribution from you personally. However...

A form of collateral that you can offer the banks is the actual equipment used in the shop (called NGB's). Despite what they say, they can take bonds over equipment. It is just a lot of work for the bank.

If you make use of Khula then they provide an indemnity that the banks consider as collateral. In that case they have the security they need and they dont need it from you anymore. The other benefit of Khula is that the banks will also lower the capital requirement from you.

I can put you into contact with a few acquisiting managers from the banks if you are interested. I have worked with them often, so I know a few good people with the different banks. Feel free to PM me.
 
dakeyras said:
The first thing you need to do is actually talk to the franchises you are interested in. Once you have decided on the franchise, then make contact with your bank.

The business bankers you normally find inside a branch (of any bank) is clueless on how to work with such a big deal. All the banks has mobile acquisition teams that normally handle large transactions like franchise funding.

All banks will require collateral and a contribution from you personally. However...

A form of collateral that you can offer the banks is the actual equipment used in the shop (called NGB's). Despite what they say, they can take bonds over equipment. It is just a lot of work for the bank.

If you make use of Khula then they provide an indemnity that the banks consider as collateral. In that case they have the security they need and they dont need it from you anymore. The other benefit of Khula is that the banks will also lower the capital requirement from you.

I can put you into contact with a few acquisiting managers from the banks if you are interested. I have worked with them often, so I know a few good people with the different banks. Feel free to PM me.
Click to expand...

I only had a look at this this morning.

PM on the way !
 
^^vampire^^ said:
Most of the websites like McDonalds and Steers etc should have their franchising info available directly with their rules.
Don't be swayed by what I have said I'm just letting you in on the few 'downers' I found out about the whole process that most don't see or don't know.

When I researched it the cheapest to open seemed to be a pizza perfect at R668 000 or pizza & chicken perfect for R788 000.
That's excluding VAT, staff etc
http://pizzaperfect.co.za/franchise_intro.htm

Good luck with finding the funding hope it works out!
Click to expand...


a fish and chips joint start up fees are around R450k mark... maybe that's also worth looking into
 
Definately something I have also wanted to do. I wanted to open up a KFC for a few years now.

Some things to keep in mind.
All of the franchises will charge you royalties.
Before you even get the funding,a test will be done on you,your knowledge and your management skills to see whether you are capable of running it.
The funding will generally not INCLUDE building a place,why I say this is generally good fast food places have a centricity about them.They focus on areas and have rules to how another one may be opened near by.For a better understanding,Look no further than the KFC that was in Northgate(gauteng) a few years back. The centricity came within a 2km radius and forced them to shutdown as to many KFC's were within the area.

Funding wise, I would suggest if you are serious,to seek out a venture capitalist.
The larny large company you speak of,may not be everyones dream job,but what the job will give you is knowledge and credibility to make it far easier to open your own business.

For business tax queries.See my General tax queries.
Hope this helps and gl with finding the funding required
 
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