DURBAN – The franchising sector has shown steady growth over the past four years, in a tough economy from contributing an estimated 9.7 percent to the country’s gross domestic product (GDP) in 2014 to its recent figure of more than 15 percent, according to the Franchising Association South Africa (Fasa) 2018 survey.
Around 30 percent of franchises are now owned by previously disadvantaged South Africans, with one in three franchises turning over more than R20m per annum.
With the FNB Franchise Leadership Summit theme this year "the future of the franchising sector", Michael Vacy-Lyle, chief executive FNB Business has noticed key trends in the franchise space.
Here are the trends:
1. More Multi-Unit Owners, and franchisees owning multiple concepts
What happens once you have mastered the tried and true formula franchises have designed for their franchisees? If you’re like many franchise owners, you start opening another location. And then another. By recreating your success in multiple locations, you can quickly grow your revenues and increase your business’ sustainability.
Many franchisee owners are also opening other, non-competing franchise offerings as they grow their businesses in an effort to diversify earnings.
2. Smaller, more cost-effective franchise models
Many brands – including Steers, Debonairs and Mugg & Bean On-the-Go outlets – are co-locating with major fuel retailers to create fully-integrated accessible centres. Looking at new, less expensive alternate locations beyond the shopping malls and strip malls to expand into stand-alone kiosks, food trucks, corporate catering, campuses, sporting events, craft markets, is a major trend.
3. Niche markets
Consumers increasingly prefer local businesses over national brands. Some of the bigger brands are looking for creative ways to tackle this situation by tagging with local businesses and this trend is on the rise. Niche markets are gaining traction. Whether it’s in offering a unique ‘gourmet’ food experience, craft beer or whether it’s in the environmental space of energy saving technology or recycling, these are where many new opportunities are to be found.
4. Increased customization/ personalisation
In a world of increased consumer choice, it is no longer about what you have on the menu, it is now about how your product or service can be tailormade to what a customer really wants. The success of RocoMamas speaks to this - with 61 franchise outlets their business model clearly responds to the essence of this trend by allowing consumers to create their own burgers, and increasingly consumers want the ability to create their own dining experience.
5. On-demand products/ services
Amazon is a great example of this – same day delivery is becoming the norm in the age of instant gratification – I want it now! Differentiation through delivery remains a big opportunity.
6. The significance of online and social media
Social media is how your customers chose to interact with brands. It is no longer about the question of should a business use social media or not, it is now more about how a business uses social media. Today’s digital-savvy customers are highly choosy about online buying.