Is a franchise the right model for your business?

13 November 2019 | Business

Mbo Luvindao
Namibia’s Small Medium Enterprise (SME) sector is reported to contribute more than 10% to the gross domestic product (GDP) and 20% to employment creation. These figures indicate that the sector is vitally important to the country’s economic growth.
Franchising in Namibia, as a means to get into business, has increased in significance in recent years and it is a relatively quick way to start a business.
A franchise is a type of license that a franchisee acquires to allow them to have access to a business’ (franchisor) proprietary knowledge, processes and trademarks in order to enable the franchisee to sell a product or provide a service under the business’ name. In exchange for gaining the franchise, the franchisee usually pays the franchisor an initial start-up and annual licensing fees.
Franchises have the benefit of providing the franchisee with access to business experience through the franchisor which they would otherwise not have. This experience can assist in mitigating risk when approaching lenders for start-up capital. Franchisors also provide support in the way of business systems, name recognition, training and numerous other forms of assistance.
Due to brand name association, licensing fees and royalties, the franchisor has a vested interest in the success of the franchisee. This ensures additional ongoing support.
While starting one’s own business may have its benefits such as personal goal fulfilment, it comes with risks. Some of these risks include going to market with an untested product or service and having to build your own brand. Choosing a franchise business model has the following benefits:
• Standardised and tested goods and services.
• A national, regional and sometimes global advertising platform.
• Reliable suppliers.
Franchises are especially popular in the restaurant, fast food and clothing industries. Several South African fast foods and supermarket franchises such as Game, Pick n Pay and Woolworths currently operate in Namibia.

Though franchising may be a viable option when considering starting one’s own business, it has some challenges. For example, the licensing fees and royalties charged by the franchisor can be exorbitant. This forces the franchisee to part with significant portions of their capital and profits.
Many owners also find the lack of autonomy over their own business frustrating. The franchisor may be in a different country, and their standard operating procedures may not be relevant. Franchisees are however, legally required to adhere to these requirements.
Entrepreneurs looking to start their own business often consider franchising as an option. While you get the benefit of a proven product and support, it is critical to choose the right franchise partner that aligns with your passion and skill set.
Here are a few pointers one needs to consider when deciding on a franchise partner:

• Strong support system
When buying into a franchise, it is essential to ponder the support that will be provided by the franchisor. Ensure that ample support is provided during each phase of your business and that it is readily available.

• An understanding of the local business environment
Businesses do not operate in a vacuum; it is therefore necessary to choose a franchise partner with a good understanding of the dynamics of the local business environment. This will influence how the business will operate and whether it will succeed.

• Review the Franchise Agreement
It is vital that before any agreement is signed, the entrepreneur and his/her legal representative review the franchise agreement. This document will provide insight into; the percentage due for royalties, revenue models and licensing fees.
Franchisors are not required by law to register their licenses with the Ministry of Trade, Industrialization and SME Development. It is critical to ensure that the license is being issued by a mandated franchisor. Only master franchisors have the right to approve licenses to multiple franchisees.
As Namibians, we firmly believe that entrepreneurship is the right route to grow our economy. For this reason, I urge all entrepreneurs to carefully consider their options before deciding on the right model for their businesses.
*Mbo Luvindao is Bank Windhoek’s ESME Branch Manager.

Similar News


Leonie takes the lead at Namibia Dairies

5 days ago - 07 July 2020 | Business

Since the beginning of the month, Leonie Prinsloo has taken over the position of managing director (MD) of Namibia Dairies, a subsidiary of the Ohlthaver...

Meet Hartlief’s new MD

6 days ago - 06 July 2020 | Business

Hartlief welcomed Gunther Ling as its new Managing Director (MD) on 1 March 2020 after having served in the same capacity at Namibia Dairies for...

Sweet sugar deal signed

1 week ago - 03 July 2020 | Business

Bokomo Namibia has completed the acquisition of the sugar packaging and distribution business of Tongaat Hulett Namibia (THN), following approval by the Namibian Competition Commission...

Don’t let fear destroy small businesses innovation

1 week ago - 01 July 2020 | Business

Innovation is the development and application of ideas that improve the way things are done or what can be achieved. It can help your business...

Rental reduction for informal traders

1 week ago - 30 June 2020 | Business

The City of Windhoek’s strategic executive for economic development and community services, Fillemon Hambuda, said his department has submitted a proposal to council to consider...

No increases but no retrenchments - NBL

1 week ago - 30 June 2020 | Business

With retrenchments being an absolute last resort for Namibia Breweries Limited (NBL), the impact of Covid-19 on business operations and sales resulted in no wage...

NCCI shouts hurray

2 weeks ago - 24 June 2020 | Business

The Namibia Chamber of Commerce and Industry (NCCI) welcomed the decision by government to move to Stage 4 of lockdown next week.“It is with great...

Shout out to all GIPF members

2 weeks ago - 24 June 2020 | Business

The Government Institutions Pension Fund (GIPF) will be embarking on a media campaign aimed at informing, educating and sensitizing members about their benefits and rules...

Tips for first-time property investors

2 weeks ago - 23 June 2020 | Business

With current market conditions being favourable to buyers, some Namibians might find themselves in the fortunate position to be able to purchase their first property.When...

Celebrating dairy – in spite of crisis

2 weeks ago - 22 June 2020 | Business

Every year, June is celebrated as “Milk Month” around the world – a month that promotes the health benefits of milk consumption and also provides...

Latest News

Huis Maerua kort jou hulp

2 days ago - 10 July 2020 | Local News

Windhoek [email protected] 22 kinders in hulle sorg wat wissel van 2 jaar tot 20, het Huis Maerua jou hulp nodig om te verseker hierdie kinders...

The future of work

2 days ago - 10 July 2020 | Opinion

Windhoek • Sergio de SousaAs the world of work changes, we look at what you can do to survive and thrive. Here are my predictions...

Finances handicap 2018 CoW housing...

2 days ago - 10 July 2020 | Local News

Windhoek • [email protected] City of Windhoek (CoW) housing initiative of two years ago is yet to materialise, with themunicipality laying the blame on financial constraints.This...

Ndove heads environmental fund

2 days ago - 10 July 2020 | Environment

Environment minister Pohamba Shifeta appointed five members to serve as the board of directors of the Environmental Investment Fund of Namibia (EIF) for a period...

NN eyes premier league

2 days ago - 10 July 2020 | Sports

Netball Namibia (NN) is working hard on creating a first-of-its-kind Namibia Netball Premier League.The league, to be sponsored by MTC, will consist of 12 teams...

Finding symmetry in chaos

3 days ago - 09 July 2020 | Art and Entertainment

Windhoek • Nina van Zyl The group exhibition While In Quarantine opens at the Namibian Arts Association Gallery in the capital next week.Artists are the...

Simply You announces nominees

3 days ago - 09 July 2020 | Art and Entertainment

The fourth Simply You Magazine Lifestyle and Fashion Awards are slated for September, celebrating the arts, entertainment and fashion industry's achievements and growth.As has always...

Virtual replaces real-life relay

3 days ago - 09 July 2020 | Sports

The Bank Windhoek Relay has been relaunched and is now scheduled to take place virtually on 1 and 2 August.The original relay that was scheduled...

Say cheese, pooch!

3 days ago - 09 July 2020 | Local News

Windhoek • [email protected] you have a pet that is always photo ready, then you shouldn’t miss out on perhaps having themfeatured in the 2021 SPCA...

Load More