Re­tir­ing, or not, with a fran­chise

RISKY, HARD WORK - NOT FOR EV­ERY­ONE Should you cash in your pen­sion to in­vest in a fran­chise? It de­pends. Do you have the stom­ach for the risk and long hours?

The Citizen (KZN) - - BUSINESS - Alex J Coyne Part­ner in hard work No quick fix

Buy­ing a fran­chise means hav­ing the weight of a big­ger brand be­hind your busi­ness, but should you cash in your pen­sion to buy a fran­chise? Will Keevy, head fi­nan­cial ad­vi­sor at DebtBuster­s, says the risk seems just too high in terms of in­vest­ment. “By putting your nest egg into a busi­ness, you risk cut­ting off your cash flow, which means you could end up tak­ing cash from the busi­ness to sup­port your life­style.” John Ni­co­lakakis, CEO of Ro­man’s Pizza, says one way to min­imise this risk is to find an op­er­a­tor who can run the busi­ness for you. “If the fran­chise has suc­cess, a proven track record, all sys­tems in place and there’s an owner/op­er­a­tor, it can work. Find a phys­i­cal part­ner with some ex­pe­ri­ence in the game with at least a min­i­mum of a 30% equity stake who can man­age your busi­ness on your be­half.”

What do you look for in a part­ner? “First, they have to have cap­i­tal.” Niko­lakakis says this has to be cap­i­tal that they’ve earned them­selves, not in­her­ited, so you know they can han­dle cash flow.

If you’re go­ing to take on a fran­chise af­ter re­tire­ment, as­sum­ing 65, Ni­co­lakakis says stamina and ded­i­ca­tion are the big­gest fac­tors.

“Don’t put all of your eggs in one bas­ket, just in case you have other as­sets that you might need.” He also ad­vises po­ten­tial fran­chisees not to rely on div­i­dends in the first 12 months.

Eric Parker, from the Which­Fran­ ex­pert team, rec­om­mends in­tense re­search be­fore in­vest­ing in a fran­chise.

While peo­ple ap­proach­ing re­tire­ment are look­ing to sup­ple­ment or grow their re­tire­ment in­come, fran­chis­ing is not for ev­ery­one. “Fran­chisees should con­sider whether the type of busi­ness suits their field of ex­per­tise and in­ter­est, and whether they are buy­ing the busi­ness be­cause they are pas­sion­ate about it or be­cause they want a way out of their cur­rent dilemma,” says John Bal­adakis, The Fran­chis­ing As­so­ci­a­tion of South Africa’s chair­per­son for 2015 and a fran­chise owner him­self.

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