Field guide
Working capital and float
Working capital is the reserve cash that keeps a franchise trading when revenue is slow or bills land early. A float has to be planned before opening and then protected once you trade.
Why working capital is often misunderstood
Many new franchise buyers focus on the start-up fee, equipment and fit-out, but overlook the vital reserve needed to keep the doors open after launch. Working capital is an ongoing cost. It is the cash you’ll need to cover stock, wages, rent and bills before incoming revenue can reliably pay for them. A low float leaves you exposed if sales are slow, vendors want payment upfront or a large bill lands unexpectedly.
In tight trading conditions, a well-sized working capital reserve often separates a franchise that survives from one that stalls. Your first year is likely to bring unexpected expenses, delayed stock, slow-paying customers, seasonal dips, or even council rates increases. If your cash runs out, your options narrow quickly, and the best franchise support won’t rescue a cash-starved outlet.
Lessons from field reviews across sectors
The margin for error is often smaller than buyers expect. Food outlets must pay staff at least the national minimum wage of R30.23 per ordinary hour and follow the ordinary hour limits set by the Basic Conditions of Employment Act. This makes payroll a fixed cost that grows quickly if shifts run long. Retail and service franchises face regular stock or parts orders on set cycles, often before old stock has turned.
If you operate in a mall or shopping centre, landlords may require rent upfront, annual increases, and a deposit that sits outside your working capital. Some categories, like food, require a backup power solution for cold storage or kitchens, which adds a regular cost. Regulatory costs can also surprise: food premises need a Certificate of Acceptability, and early childhood development centres must clear zoning, health and registration hurdles before opening. Each of these eats into working capital before revenue stabilises.
A buyer’s story from last quarter
One buyer using our Food Service Path planned a working capital amount they believed would cover their first few months. Within two months, lower winter sales and unexpected equipment repairs reduced their working capital to a much lower level than planned. Payroll and rent were due soon, and stock partners still required payment before delivery.
They used our Numbers & Notes session to break down their fixed costs and sales cycles. By spotting the cash gaps early, they renegotiated stock terms and set up a reserve for emergencies. Their float now sits closer to a full month of fixed costs, and stress levels have dropped.
Steps to size and protect your float
You can size working capital in a few clear steps. Follow these steps for a clear and practical cash buffer.
- List every fixed cost: rent, wages, insurance, rates, service contracts
- Add variable costs: stock top-ups, repairs, cleaning, marketing
- Check payroll against national minimum wage and capped hours
- Include a cost line for backup power if your operation requires cold rooms or kitchen equipment
- Allow for regulatory, licence and compliance costs due before and after opening
- Stress test: can your float cover these for at least 2 to 3 months with slow sales?
When to get a working capital review
If you are unsure your numbers are realistic, or your capital plan feels thin after adding in payroll and landlord costs, reach out before you sign. Many buyers also ask for a review after seeing the disclosure document, once the fees and cost cycles are clearer.
Our Numbers & Notes session can pin down the real buffer you need. If you want a second set of eyes, or need category-specific experience, send us a message. We can review your calculations and help you ask the right questions before you commit.
Get help with your working capital plan
Send us a message about your franchise type, opening budget and float worries. We can review your figures, spot hidden cost lines and help you stress-test your working capital plan.