Franchising is a growing industry that generates a lot of interest from potential investors. According to an article published by the South African government, “[f]ranchising contributes around 12.5% to South Africa’s GDP and is an important driver in the country’s economy, in addition to having one of the highest business success rates.” As an accredited franchisor, Infinity Brands would like to share some of our findings.
Franchising in the South African economic context
Nedbank Franchising asserts that the “South African franchising sector continues to grow and attract new entrepreneurs despite the difficult economic environment in the country.” This does mean, however, that franchisors need to be aware of the way in which they conduct business in a potentially fraught economy. Marc Muskin (VP of Sales and Development, CKE Restaurants) maintains that: “Smart, well-established franchisors can get through 2020 as long as they keep a steady hand on the fundamentals: open and transparent relations with franchisees; consistent, positive brand management; and sticking to the fundamentals of healthy franchising; rigorous selection criteria for new franchisees; and prudent deal points reflecting these uncertain times.”
Worthwhile franchise investment opportunities
As the Franchising Association of South Africa (FASA) calls for the professionalisation of the sector, the franchise industry becomes an increasingly viable business venture. Despite positive growth, it does not necessarily follow that franchising in the country is a risk-free endeavour.
In South Africa, there are still businesses posing as franchises, leading to dishonest business dealings. This poses a threat to franchises who think they are buying into a franchise, only to have their businesses collapse when proper support structures fail to materialise.
What does professionalisation mean?
Once the industry is professionalised, the standards and criteria for franchises become more defined. This means that not only are franchisees awarded more legal protection, but that franchisors are held accountable. Such a move would also limit the number of fake franchises.
A further consequence of such a move would mean that South African franchising potentially serves as the standard for the industry. If used as an example of a successful business model, funding and sites or locations become easier to secure. This, in turn, would pave the way for further economic growth and development within the country, and lead to potential decrease in unemployment rates