DURBAN - The franchising sector in South Africa contributes around R721 billion to the country’s GDP and there are still many businesses masquerading as franchises when in fact their business models are far from that of a franchise.
Now the Franchising Association of South Africa is calling for the sector to be professionalised.
"Being involved in franchising for most of my working life I have had the privilege and opportunity to experience the concept of franchising in South Africa in every form and fashion over the years. So when the public hears the word ‘franchising’ my opinion is that they associate the concept, in most instances, with very well known brands and category market leaders and by extension assume that it means financial freedom for the owners for these franchised businesses. Therefore many aspiring franchisees are keen and eager to own a franchise in the belief that franchising is going to make them financially independent," said Vera Valasis, Executive Director of the Franchise Association of South Africa (FASA).
Despite the Franchise Association promoting the concept of ethical franchising for no less than 40 years, sadly, some potential franchisees assume that because a new business opportunity is being advertised as a franchise, everything about the business model therefore has been well developed with a proven track record and is seen as a safe investment.
According to Valasis, nothing can be further from the truth.
In order to protect the public, the Franchise Association has always cautioned that there should be strict requirements, checks and balances in place before a business can be marketed and sold as a franchise.
"The industry should be professionalised where a board or council accredits, adjudicates and oversees franchising similar to the roles of the Health Professions Council of South Africa or the Law Society of South Africa," said Valasis.
The Franchise Association is perfectly poised to assume this responsibility and it has been lobbying government to set down its Code of Ethics as an industry code for many years.
The definition of a franchise according to the Consumer Protection Act is very wide and provides a gap for unscrupulous business owners to present or sell themselves as franchises when in fact they are not.
Unlike the medical or legal profession, if things go wrong, complainants can’t lodge a complaint with the overseeing industry body.
Currently the Association accepts complaints only against its own members but in fact almost all complaints received are levied against non-accredited franchises.
In order to assist the public, the Association introduced a voluntary dispute resolution service by way of mediation in respect of non-member or non-accredited franchises for a fee but ideally the Code of Ethics should be accepted by government as the industry’s gold standard.
According to FASA, these are the benefits of making the franchising industry professional:
1. Unsuspecting franchisees would be protected from possibly being ripped off by unscrupulous business owners masquerading as franchises
2. Complaints handling or dispute management could be streamlined through a professional industry body equipped to deal with complaints based on experience and expertise
3. The standards and status of franchising could be raised as a successful business model thus possibly paving the way for securing funding and sites or locations without the current endless red-tape and stringent surety requirements i.e. reducing the perceived risk profile of franchises
4. Professionalising franchising could set an industry standard for franchising in South Africa without exception thus levelling the playing field for all franchise stakeholder