FRANCHISING THE BACKBONE OF THE COUNTRY’S ECONOMY

  • April 28, 2015 8:25 am
  • News

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To Sanlam, the proud sponsor of the 2014 Franchise Association of South Africa (FASA) survey, the result is clear. The South African franchise sector is a vital part of the backbone to our country’s economy.

After all, with more than 320 000 people employed in 600 franchised brands across more than 31 000 franchise outlets, the spin offs in a country with an employment rate hovering at 25%, are legion. Think of skills development, on-going job creation and sustainable income generation.

Notwithstanding the statistics, franchising is under-utilised in our economy and does not receive sufficient acknowledgement for its role in stimulating economic recovery through a tried and tested business format. But, this reality has not deterred optimism amongst franchisors. In fact, the 2014 FASA survey indicates that 90% of franchisors are highly optimistic about the future growth of the businesses.

Today, 26% of South African franchise outlets are owned by previously disadvantaged individuals operating across a wide range of business sectors. Moreover, franchise outlets on average employ about 14 people per business, of which 10 are black.

The FASA survey further indicates that 75% franchise owners have been in business for more than six years, and 44% for longer than 12 years – testimony of the sustainability of the franchise model and evidence of the fact that people perceive franchising as an easier and less risky route to self-employment than starting a business from scratch.

The realities of the challenges faced by franchise owners are food for thought. The nature of their relationship with franchisors, franchise fees, rentals and landlord challenges. But, survey insights into concerns around product knowledge, training and marketing are also beneficial to note.

Of serious concern, is the indication a serious lack of holistic and integrated financial planning among South African franchisors. The survey found that just more than half of franchisors have some form of business continuity planning. Just a quarter of all franchisors claimed to be able to finance a buy-and-sell agreement and only 18% indicated that they would be able to finance the replacement of key people.

Reference: The Franchise Association of South Africa – www.fasa.co.za.

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