South Africa’s franchising businesses are adapting to life during Covid-19

  • August 24, 2020 5:36 pm
  • News

 

 

Franchising has at its heart the spirit of entrepreneurship but amidst the Covid-19 pandemic that has resulted in immeasurable destruction of small businesses, the question remains whether the entrepreneurial flame can be re-ignited for future growth, says the Franchise Association of South Africa (FASA).

The franchise sector, which in South Africa is represented in around 14 different business sectors, represents the highest and most diverse range of entrepreneurial endeavours and is the most suited to lead the post-Covid recovery, it said.

FASA’s 2019 survey showed a sector that contributed R734 billion (almost 13.9%) to the country’s GDP through its over 800 franchise systems, its 48,000 outlets employing close to a million people.

“Tapping into the wave of innovation that change will no doubt bring about – from on-line trading, mobilising creative and innovative responses, seeing the gaps in the market; re-designing and re-engineering for the future – is what entrepreneurs all over the world will be focused on,” FASA said.

Franchises taking the lead to recovery and revival

With seemingly no end to the ravages of the coronavirus, businesses across the globe are fighting for their survival and are shifting operations to accommodate an unknown landscape.

The virus has forced many businesses to rethink their strategies going forward and change the way they operate and interact with consumers.

“For franchise brands in particular, success will require franchisors to support franchisees and customers by pivoting their business models to better suit the changing marketplace,” said FASA.

Already many of FASA’s members are re-strategizing and re-shaping their business formats to incorporate smaller stores, ‘dark kitchens’ and on-line trading.

FASA canvassed several member companies on their survival strategies and more importantly on their plans to move ahead post-Covid.

According to Natasha Bohmer of Car Service City, despite the group suffering losses under lockdown with business unlikely to return to normal this year, “we will have to find ways to work within our new normal”.

“Despite the hardships felt by all, we have not lost one franchisee due to the pandemic, and we are assisting the franchisees with ways to keep their overheads as low as possible and to negotiate better rentals with their landlords and service providers until the economy has gained some traction again.”

Bohmer said that many people have received their retrenchment packages and are looking for new opportunities to work for themselves.

Richard Mukheibir of Cash Converters said the group’s business model, which is made up of three distinct revenue streams is well-positioned to recover post-Covid.

“Second-hand goods will become an increasingly valued commodity – we have yet to see the impact of production slowdowns from key markets resulting in shortages of consumer goods; the devaluation of the rand means good quality second-hand items will have more value than before and be ever more desirable; people will be conscious of where and how they spend their money so our retail offer is valuable.

“We are also launching our on-line strategy in the near future which will allow our customers to buy and sell remotely, from our website,” he said.

Money lending will be in demand – the pawn broking side of Cash Converters is ideal for customers who need easy access to cash without going through piles of paperwork, long lead times and possible rejections from the banks or other financial institutions, he added.

As retrenchments increase among mid to senior managers – inevitable as businesses cut costs and as digital adoption drives efficiencies in the workplace – more people will be looking for alternate business opportunities, said Mukheibir.

Franchise group Real Foods is diversifying its business. The company – which lists Kauai, Nü Health Food Café, Highveld Honey and other food brands in its portfolio – is growing its footprint abroad and has launched two new brands and acquired a food manufacturing business.

Locally, Real Foods launched Free Bird, a free-range crispy chicken burger concept.

Free Bird is initially trading as a virtual brand in dark kitchens around Cape Town, Sandton and Pretoria, available via UberEats and Mr D, with plans for physical retail locations over the coming months.

“It’s been a challenging few months, but we have reacted quickly and in step with government’s guidelines, to find new routes to market to serve our customers, and have launched exciting new products and brands that have been well received.

The various teams have also continued to work throughout lockdown on building a pipeline of projects that will be rolling out in the second half of the year,” said chief executive officer, Dean Kowarski.

Vera Valasis, executive director of FASA, said: “I wager that the franchise industry will make a faster and better recovery post-Covid than most other business categories.”

Valasis called on the banking fraternity to step up in their support of the industry.

“They should step up to the plate now with funding solutions that are less risk averse with simple application processes that can stimulate growth for franchisors by way of rapid distribution growth which in turn would create jobs and stimulate disposable income; which in turn will stimulate the growth of further franchise brand growth as the industry depends largely on consumerism.”

Source: BusinessTech – https://businesstech.co.za/

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