Think twice before buying a franchise in these sectors
Franchising is a well established industry in South Africa, attracting both local and global franchise brands. With so many choices, it’s easy for budding franchisees to get stuck with the wrong franchise, and possibly end up losing all their investments.
There are many factors to consider when making a decision to buy a franchise, one of the most important is the industry within which the franchise brand is located. Food franchises, for example, while very popular, are highly competitive.
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See also: Read this before you buy that franchise
Gerrie van Biljon of Business Partners Limited, an SME specialist risk finance company, gives three more industries to give a skip this year.
1. Discretionary industries
These are the industries with products or services that are considered a luxury rather than a necessity, and are usually the first to be avoided by consumers when money is tight. Examples of these include, jewellery stores and beauty spas. Van Biljon suggests rather looking into necessity products and services such as petrol stations or convenience chain stores.
2. Real estate franchises
While the property market showed modest growth of 6.5% house price in 2014, van Biljon says there are far too many real estate franchises for the market to be lucrative. Moreover, in the last few years there has been an onslaught of new franchise real estate companies that are carbon copies of each other.
3. Transport and logistics industries
With PWC’s Retail and Consumer Outlook for 2014 showing the consumer market having shrunk by 0.4%, van Biljon advises against the logistics and transport franchises such as courier brands. This is, he says, because the amount of goods being transported has seen a decrease, making the market an undesirable one.
