Vera Valasis
DURBAN - Small business owners need to weigh up the pros, cons and costs of franchising before buying into an established brand or franchising their own business concept, says Vera Valasis, the Franchise Association of South Africa (Fasa) executive director.

Valasis, who has managed franchises for household brands Milky Lane and Juicy Lucy, said that while there were many advantages to franchising, small business owners needed to be aware of all the aspects before signing up.

There are more than 800 franchise businesses with 42000 outlets in South Africa, which contribute 15.3% to the gross domestic product.

“It is an important player in our economy but because it is so fragmented, it is often overlooked,” Valasis said. “Franchises employ 350000 to 400000 people in permanent jobs, excluding seasonal casual staff in fast food restaurants. Every franchise outlet employs between eight and 12 employees,” she said.

She said some of the advantages included the comfort of having the support of the franchisor and the benefit of being able to tap into the expertise of the rest of the team.

However, some small business owners might be reluctant to give up their independence when it comes to making major business decisions.

“They would not have the freedom to make decisions independently, such as setting menu prices, store location and marketing, which are done by the owner of the intellectual property that the franchisee has bought into. But that’s where the comfort comes from because the franchisor has a business model that is tried and tested, so the risk is lower.”

Valasis said the International Franchise and Entrepreneur Expo, taking place for the first time in KwaZulu-Natal at the Durban Exhibition Centre from March 8 to 9, would include free seminars.

“There will be a presentation on how to evaluate a franchise and to find the perfect match and talks on the legal aspects, financing and how to manage variable expenses.”

Potential franchisees should do their homework to avoid falling for fly-by-night operations. “There are unscrupulous franchisors that take franchisees’ money and disappear.”

Valasis said franchisees should deal only with Fasa members as it could step in to mediate during a dispute and to interview other franchisees to find out whether they would be prepared to buy another business from the seller.