Despite difficult access to financial back-up, the fast-food franchise industry remained one of the fastest growing and most attractive segments of the retail sector, the Franchising Association of SA (Fasa) said yesterday.
Fasa, which is hosting its International Franchise Expo this week, said that growth in this sector came from new concepts that were continually being developed in response to consumer demands and gaps in the market.
The association said this was the case with The Fish & Chip Co, a franchise brand of Taste Holdings, which has become popular among all sectors of the population.
The Fish & Chip Co says it plans to open at least one store every third day on average, while growing its black franchise ownership, which already sits at 76 percent. However, funding of such proposed growth remains difficult.
Fasa executive director Vera Valasis said one of the stumbling blocks to the advancement of franchising in the past five years had been access to funding, which was severely curtailed by the recession.
“Commercial and government institutions are finally looking at innovative ways to approach the financing needs of potential entrepreneurs in partnership with established and bona fide franchisors.”
Marcel Strauss, the managing executive of The Fish & Chip Co, said that, as in any business, constant cash flow was always a challenge.
“Many people have a misconception about franchising, thinking that it is a foolproof model that will ensure success, even without the franchisee putting in the needed extra effort,” he said.
He said the fact that the franchisee was buying into an established model and brand did not guarantee success, warning that if franchisees did not manage their resources well, their business would be under unnecessary pressure.
Strauss said as much as the location was important for a franchise, franchisees must be smart about the retail space and should consider factors such as high rental fees, and fuel and food price increases.
“In many cases the rent is unaffordable, making it hard for a store to thrive, even if they have the constant support from customers in the prime space. Add the unavoidable increases in fuel and food prices to the mix, and the pressure is on for any entrepreneur to attain meaningful growth.”
Valasis said Fasa was working with the government to develop some ground-breaking funding initiatives that would help solve the financing of franchise ventures.
Strauss said his company had gained a significant foothold in the market since being acquired in 2011 by Taste Holdings, which owns fast food brands Maxi’s and St Elmo’s.
The Fish & Chip Co, which commenced business in 2009, has 309 stores. Last year alone, the company opened 120 stores.
Strauss said The Fish & Chip Co’s franchising model was the ideal set-up to help aspiring local entrepreneurs realise their franchising dreams.
Valasis said although fast food and restaurants took up the biggest portion of the franchise pie, other sectors were growing exponentially.
“Considering that other countries like the US, Canada, the UK, Australia, Asia and Brazil boast about 25 franchised sectors, South Africa has a long way to go and this confirms the potential of franchising in the country,” she said.
In South Africa franchises were operating in only about 17 sectors, including beauty, financial services and education.
“Africa as a whole has lagged behind in franchise development,” Valasis added.