SA Franchise Warehouse funding solutions

SA Franchise Warehouse is a specialist funding facilitator within the franchise sector in cooperation with various funding partners.

Every franchise funding application is unique in terms of:

• Experience, age, profile, BEE status, gender and brand preference of the applicant,
• Shareholder structure,
• Own cash contribution and security available from the franchisee,
• Brand, location and industry of the franchised business, and
• Existing or start-up business.

All funders participating in the franchise sector differ in their policies, mandates, preferences and per se exclusions relating to the nature of a specific application. SA Franchise Warehouse makes it their business to stay informed on the criteria and policies of the various funders so that applicants can be steered towards the most appropriate funder based on the nature of the application.

The focus of SA Franchise Warehouse as far as the facilitation of funding is concerned, is on assisting suitable entrepreneurs who do not have sufficient own cash contribution to meet the requirements of the four commercial banks.

Funding is facilitated through various Development Funding Institutions (DFIs) who base their lending on the viability of a franchised business and the suitability of the applicant rather than the availability of own cash and security from the franchisee applicant.

The DFIs naturally assume more risk when compared to commercial banks. SA Franchise Warehouse assist funders by performing an initial applicant evaluation, conducting business management training and managing their risk after the business commences trading through a process of mentoring and monitoring.

While DFIs differ in their views on the level of own contribution required from the franchisees, generally, a minimum contribution of 15% is required.

It must be noted that the profile of the applicant, specifically relating to his/her small business management background, experience and past trading exposure is deemed far more significant than the level of own cash contribution available.

The brand related to any funding application is of obvious importance, but there is never an absolute list indicating which brands would qualify and which would not. The background and experience of the operator is often deemed of greater importance than the reputation of the brand.

How does it work?

Funding applicants can either be referred to SA Franchise Warehouse by a franchisor after gaining approval in terms of the franchisor’s own non-funding related criteria, or would-be franchisees can approach SA Franchise Warehouse directly for an introduction to a suitable franchisor. In the latter instance, SA Franchise Warehouse will evaluate the candidate to determine the industry and/or brand best suited to the applicant.

The type and size of business will impact the requirement for the applicant to demonstrate past experience. Simpler business models with set-up below R1,5-million generally don’t require prior experience. Above this number the applicant should be able to demonstrate past experience and trade exposure within the industry he/she wishes to venture into.

Based on the type of business and the experience of the applicant business coaching, in addition to the technical and operational support a franchisor would render, is also an important consideration.

For young and/or inexperienced applicants wishing to enter the mainstream franchise industry, the principle of devising a ‘career path’ within a certain industry or franchised network, is a very popular approach amongst funders and franchisors.

For more information on these workshops, please contact us on 012 460 2345 or email Debbie le Roux.