What You Need To Know To Start a Business in the Beauty and Wellness Franchise Sector


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The Health, Beauty and Body Culture is one of the top ten franchises in South Africa, according to Franchise Association of South Africa (Fasa). Fasa’s latest survey said that the Health, Beauty and Body Culture market contributes to 6% of the franchising industry.

The survey also said that it is one of the popular sectors where women dominate, with 74% of the franchises owned by women.

If you are considering doing franchising in the health and beauty sector, here’s what you should consider:

Industry insights

According to Sybrand Bezuidenhout, Business Development Manager Franchise: Services, Absa Africa Group, this industry continues to see positive growth.

“The beauty industry presents an interesting paradox: even though consumers tend to cut down on so-called ‘luxuries’ when they have less disposable income, people still strive to spoil and pamper themselves. The change is seen in what their hard-earned money is spent on. For instance, rather than going to a spa, a woman will choose to get her nails done,” he explained.

“That way, she still feels she is treating herself, but at a fraction of the cost.”

Research and Markets site reported that the total revenue in the South African health and beauty spa industry is estimated to have reached R1,54-bn in 2016. The industry employed approximately 5,500 people.

Sectors to specialise in

The health and beauty market covers a number of different franchises to choose from, which includes:

  • Hairdressing
  • Cosmetics
  • Permanent Intradermal Cosmetics that provides permanent or professional make up done, paramedical procedures
  • Slimming and health clinics that gives slimming and weight loss treatments
  • Fitness centres which include women’s gyms
  • Aesthetic clinics that provides aesthetic and beauty treatments
  • Skincare clinics
  • Nail and beauty bars
  • Spa’s
  • Adventure Boot Camps

Popular franchises include Sorbet, which offers beauty salons or nail bars, for example, and Camelot Spa that specialises in massage therapy, skin treatments, beauty treatments.

Set-up costs

Here are several franchises and its cost (a full list can be found on the SA Franchise Brands or Franchise Association of South Africa site):

Mommy Wellness Day Spa, which has a primary focus on the wellbeing of pregnant women, asks for a total Investment R630,000 excluding VAT. There are additional premises conversion cost such as ceilings, flooring, electrical, plumbing, and painting. You should make provision for trading shortfalls and other contingencies. The deposit is R40,000.

Camelot Wellness Spa has a franchise fee of R150,000; Spa sale price of approximately R750,000; and set-up cost of R100,000.

SkinPhD Aesthetic Hair & Beauty Salons have an estimated establishment cost of R1,5-million (excluding VAT) which includes the shop fitting, computer equipment, furniture, signage, stationery, products and uniforms required to open the franchise. The owner’s cash contribution requirement is 50% of the set-up cost. The initial franchise fee of R200,000 (excl. VAT) is payable on signing of the franchise agreement.

Sorbet’s latest franchising costs can buy you a 60 sqm nailbar for around R1-million, while a Sorbet salon and Candi franchise will cost you slightly more with a total cash requirement of between R1.6 million – R1.7 million. Sorbet says that the exact amount of your investment will depend entirely on the size and condition of your selected store and varies from site to site. A total of 50% of this amount should be available upfront.

Equipment

While some franchises include the store resources, an establishment like Sorbet says that the resources (cost) are excluded from the set-up costs. Sorbet’s store resources are air-conditioning & extraction, sprinklers, shop fronts, CCTV, and alarm systems. The stock, for example, is included in the investment fee depending on which store type you want to buy.

Funding

According to Fasa, most franchisors will insist that you fund between 30 –50% of the complete investment from your own resources. Fasa warns that if repayments are big, it would place strain on your new business’ cash flow.

Legalities

Things you have to apply for include a business bank account, SARS Tax and business insurance.

Laurette Pienaar, Nedbank’s national franchise manager, said to Moneyweb that similar to the franchise agreement, franchisees are encouraged to seek legal advice prior to entering into a lease agreement and supplier agreements.

Documentation

  • Disclosure profile document: It gives you the background of the franchise. “You’ll also get a list of franchisees who part of the franchise and you can call them up,” explained Riaan Fouche, the Chief Operations Officer at FNB Business. With this document you can do the necessary research about the franchise.
  • A non disclosure document: This will be forwarded to all interested parties to ensure confidentiality.
  • Franchise agreement: This document tells you what you are getting yourself into.
  • Approval letter from the franchisor: It will be needed for when you apply for a loan at the bank.
  • Personal details (for the bank loan application): This includes your personal details like the statement of assets and liabilities (or balance sheets), a business plan from their side, curriculum vitae of the individual (short), a comprehensive set up cost, and a cash flow projection for at least three years. The franchisor assists the franchisee with all of this.

Support and training available

Training is available at all franchisors, but not all are specific on how long the training will be. Franchising establishments like Sorbet, for example, said on their website that they offer extensive business and franchise training, with no time-frame of how long.

However, SkinPhD said that their franchisees and their employees will undergo initial as well as ongoing training.

Source: SME South Africa – www.smesouthafrica.co.za

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