I have been retrenched and am looking into buying into a franchise. Do I use my money to buy into the business in the hopes that it makes me a salary or rather look for capital elsewhere?

Making the decision to enter the franchise space is always scary because you never know whether the concept will succeed or fail. It is for this reason that you need to investigate the brand that has been identified in order to ensure that the franchisor has the proper systems and infrastructure in place to give […]


Making the decision to enter the franchise space is always scary because you never know whether the concept will succeed or fail. It is for this reason that you need to investigate the brand that has been identified in order to ensure that the franchisor has the proper systems and infrastructure in place to give your franchise all the tools necessary to make your investment a success.

Be wary of flight-by-night concepts, typically those that do not want to divulge franchisee information readily and do not have proper documentation as per the Consumer Protection Act, i.e. Disclosure Document.

Regarding the franchise finance requirements, you need to ensure that the business is funded at a level whereby affordability is never in doubt, i.e. we tend to consider owner’s contribution levels between 30% and 50% meaning that we can provide your business with a loan between 70% and 50%. This determination is based on varying aspects but more specifically:

  • location,
  • individuals experience,
  • affordability,
  • and the brand chosen.

Considering the above and your request regarding an adequate funding level, our suggestion would be to use the guidelines provided, i.e. 30% to 50% cash contribution thus allowing you to still have a portion surplus for your personal requirements. Ideally a viable business model should allow you to draw a salary, worse-case after month 3, failing which you need to reconsider your investment.

Prithivan Pillay
About the Author
Prithivan Pillay is the National Sales Manager for Franchising at Nedbank Business Banking.

Related Q&As

© Franchise Zone / Entrepreneur Media SA (Pty) Ltd. All rights reserved.

Disclaimer: Reliance on the information this site contains is at your own risk. Readers are advised to consult their attorney and/or financial advisor prior to pursuing any investment. Please read our Editorial Disclaimer and Terms & Conditions of Use.

Is this information out of date or incorrect? Report it to our webmaster.