OPINION: The power of franchises in South Africa’s economy
JOHANNESBURG - This past weekend we were part of the 2018 Franchise Business Expo, an initiative of the Franchise Association of South Africa (FASA) with whom we have worked closely over the last few years. Along with the expo of many different available franchises, FASA ran a series of seminars at their Franchise convention on related issues, so this was really a one stop shop for anyone interested in looking for a new business opportunity and from the attendance over the three days it is clear that many people are.
According to 2017 FASA research, South Africa has 845 franchise systems which together contributed R587 billion or 13.3% to the country’s overall GDP.
That is a staggering amount, the largest part of which came from the fast food and restaurant sector. Franchising in South Africa covers just about every single sector including fast food and restaurants which contributed 25% to that R587bn.
Education and learning, automotive products and services, health and fitness, retail and direct marketing are amongst the other significant sectors. Surprisingly, only one in eight franchises is an international brand – perhaps surprisingly because of the high visibility and popularity of outlets such as Burger King, Krispy Kreme Donuts, Starbucks and others, but our own local brands including Food Lover’s Market, Kauai, and Chicken Licken are also popular – and a good investment.
Franchises employ some 343 000 people, of which 20 000 work for the franchisors and the balance in the individual branches. There has been a call for greater diversity in the ownership of franchise outlets and we hope that after this Expo there will be more uptake by black South Africans.
Something to bear in mind is that whilst there is an element of entrepreneurship in the establishment of a franchise, prescribed fixtures, fittings, processes and procedures might stymie some people’s business spirit, but the 2017 research mentioned earlier shows that two out of every five franchisees has been in business for over 10 years, and that 79% own more than one franchise, the majority within the same brand. This longevity suggests a relative lack of risk, compared to brand new business start-ups, provided a franchise is well located and well run. And don’t underestimate the hard work required, either.
So, whilst there are many opportunities for more business and jobs that will emanate simply from opening a franchise, the collective purchasing power of the entire franchise sector and its potential to have even more impact on the economy is enormous.
Choosing to buy raw materials and ingredients, shop fittings, furniture, packaging, uniforms, printed material and even menu designs from local suppliers, can translate into more business and job creation opportunities for product- and service providers. In cases where international brands specify an imported item for the franchise, eventual import replacement suppliers should be sourced and developed locally, removing the reliance on imports.
Proudly SA has a full database of member companies offering as wide a range of products and services as there are franchises - you name it and we probably have it. Any new business, including the franchise sector, can access the database on our website and find what they are looking for.
As is done every week in this column, we look at where more can be done to increase levels of local procurement and what role local suppliers need to play in encouraging uptake of their own products and services. This week, we ask all franchisors and franchisees to start procuring from fellow local businesses and in so doing, preserve and create jobs, as they themselves won’t thrive, if the majority of South Africans remain unemployed and are subjected to poverty As Sabelo Mthembu says in his song “Angiphili Mawungekho,” which loosely translated, means “I can’t live without you.”
Albeit in a different context, the title is very relevant – franchisors and franchisees need the consumer and therefore they must play their part in contributing to growing the country’s economy, through supporting local producers and service providers, especially SMMEs. After all, without job opportunities and disposable income, the South African consumer will not be in a position to support and buy from them.
Eustace Mashimbye is chief executive of Proudly South African.
The views expressed here are not necessarily those of Independent Media.
- BUSINESS REPORT