With franchising becoming more accountable as it is covered by the Consumer Protection Act and in the interests of making an even bigger contribution to the country’s economy, FASA has embarked on an industry survey that gives an overview of the current state of franchising and will form the basis of more extensive surveys going forward.
Says Derek Smith, Chairman of FASA, “The past five years of recession have been unprecedented in FASA’s 34 year history and whilst we have followed the global franchise trend in having survived far better than independent businesses, we realise that the rules of the game have changed and that we needed to tap into the sector to monitor its current state of health in order to plan for its future growth.”
Partnering FASA as a sponsor is financial services group, Sanlam which offers a range of solutions to assist business owners. According to Kobus Engelbrecht, Head of Marketing of Sanlam’s Business Market, the Group has had a long association with the franchise sector and believes the SME sector is critical to South Africa’s economic growth. “In this context, franchising, with its lower risk profile, its entrepreneurial energy and business format that offers both skills transfer and job creation potential is an important business option for future growth.”
KEY FINDINGS ON FRANCHISING
- In South Africa, the 2012 combined turnover figure for the finance, real estate and business services and the wholesale, retail and motor trade, catering and accommodation industry came to R1,062 billion. The turnover from the franchise industry has been estimated at 28% of this turnover, significantly lower than elsewhere in the world. Significant potential for growth is, therefore, indicated.
- As of February 2013, South Africa’s GDP was ZAR 2,051,299 million. Franchising comprises an estimated 9.7% of South Africa’s GDP and is a substantial contributor to South Africa’s economy – exceeding that of most other sectors including mining (at 4.0%), the retail and wholesale sectors (at 3.6%), finance and real estate (at 3.3%), construction (2.5%), manufacturing (2.4%) and agriculture (2.3%).
- It is estimated that franchising has added approximately 3,700 new franchise businesses to the South African economy in the last financial year.
- Franchising in South Africa has generated a turnover of R302 billion and employs more than 300 000 people. While turnover has only grown by 5% in comparison to the growth in the number of franchising systems, it is in line with inflation and is slightly above the global trend of 3% to 5%.
- Approximately 90% of franchises in South Africa are developed locally.
- South Africa has 668 franchised systems, 30 206 franchise outlets and 17 franchise business sectors. Most of the 30 000 outlets are owned by franchisees (70%).
- The majority of these operations are in Gauteng (41%), nearly three times as many as are found in the Western Cape (15%) and more than four times as many as are in KwaZulu-Natal (12%).
- The two largest franchise systems in this burgeoning sector are the Fast Foods and Restaurant category (22%) and the Retail category (20%) in terms of actual numbers. Similar in size, the Business to Business category, Building, Office & Home Services and Automotive Products & Services occupy 27% of the franchise market (10%, 9% and 8% each). The other categories are 6% and smaller.
A copy of the FASA Franchise Survey results can be downloaded from the FASA website – www.fasa.co.za for a fee of R300.
Reference: The Franchise Association of South Africa – www.fasa.co.za.