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The Franchise Association of South Africa was formed in 1979 by a handful of forward-thinking franchisors who believed that franchising had a brilliant future both in South Africa and for the rest of Africa. Crucial to the success of franchising was adherence to the international principals and code of ethics set down by the international franchise community. For the past 33 years FASA has been operating as a voluntary organisation which has set the standards for ethical franchising and which has steered franchising to where it is today. In addition to being the longest established franchise association on the African continent, FASA has established a strong international network of contacts and today FASA is a full member of the World Franchise Council (WFC) – the international body that oversees franchising worldwide.
As franchising becomes saturated in developed countries, the emerging markets like the Far East, China, India, South America, Eastern Europe and Africa become fertile grounds for franchising to take root.
FASA has spent many years making sure that the international franchise community is cognisant of the potential that lies within South Africa. As the future frontier of franchising, Africa and in particular South Africa needs to stand up and be counted. It is a recognised fact that South Africa is the springboard for potentially explosive growth into Africa and the stark reality is that the broader African economies cannot grow in isolation as the continent's future is inextricably linked to South Africa and the example it sets.
The most important benefit for franchise companies who join the Franchise Association of South Africa (FASA) is that of being able to align themselves and their brands to an internationally recognised body that adheres not only to international best practices but to the sound business ethics established through the country's various legislative channels. Members can also network with other franchise owners in diverse sectors and have access to affiliate members such as suppliers, franchise consultants, financial institutions and attorneys.
South Africa's population of around 50 million people offers diverse opportunities for companies wishing to establish themselves in the country. Although the majority of the population fall into the lower end of the earning bracket, there is a growing middle class and, whilst luxury products cater to a more exclusive market segment, products and services appealing to the middle market are gaining popularity. There is room for growth for lower entry franchise opportunities especially in the services and recycling categories with social and tandem franchising a welcome solution to some of the country's service delivery challenges.
South Africa has a wide network of retail developments – from luxury urban to rural - throughout the country and FASA is happy to refer new entrants to the market to the Shopping Centre Council of South Africa for further information on sites and rentals.
Franchising in Africa as a whole has a long way to go to becoming a primary business format but South Africa has enjoyed franchise success since the early 1960's and leads the way in franchise development in Africa. FASA has represented the interests and growth of franchising in South Africa for the past 33 years in South Africa and plays an important role in fostering entrepreneurship, in the transfer of skills and in job creation. Many well-known South African franchise brands have established themselves in other countries in Africa and abroad.
FASA plays a guiding role in advising other African countries on the benefits of franchising and has advised countries wanting to establish associations. With a good number of franchise groups and retailers trading in other African countries, FASA has, among its membership, consultants that can assist companies with their foray into the rest of Africa.
As we climb out of the recession, franchising will continue to play an important role in the economic recovery through its tried and tested business format and FASA, through its commitment to promote franchising in line with government's mandate to encourage small business development, will continue to safeguard the environment for franchising to flourish.
Franchising in South Africa does not enjoy statutory status but the recently introduced Consumer Protection Act which was signed into law on 1st April 2011 reflects most of the principles contained in FASA's Code of Ethics and will apply to all franchisors doing business in South Africa.
Funding for franchise development in South Africa is provided by commercial banks and financial institutions, well established banks (the major ones being Absa, Standard Bank, First National Bank and Nedbank) that have established franchise divisions that assist both franchisors and franchisees with funding. These banks play an active role in the Franchise Association and encourage membership. Government has several small business agencies (eg. Seda, NYDA) and recently introduced a number of financial aid initiatives to assist previously disadvantaged persons access finance to start businesses. These bodies also work closely with FASA to grow franchising, and by extension, create jobs.
Foreign franchisors and franchisors that are not members of FASA would be well advised to consider becoming members and use the benefits and support of the association to establish themselves in South Africa. Although parent companies of brands that belong to the World Franchise Council will be acknowledged, there is no automatic membership of FASA and every franchisor will have to go through the application process. Membership forms are available on FASA's website at www.fasa.co.za or contact the FASA office in Johannesburg.
Benefits include the prestige of being associated with an internationally recognized franchise association, participating in the many networking events that FASA holds throughout the year, being informed of the many legislative changes that may affect franchising and benefiting from legal, industrial and labour advice. In addition, FASA has a basket of exclusive discount benefits – from signage to hotel accommodation and general business deals – that will benefit both franchisor and franchisee.
The Franchise Association of South Africa (FASA) publishes an annual Franchise Directory, which is a must-have for anyone wanting to acquire a franchise. An A – Z of Franchising section offers a complete analysis to owning your own business – from looking at whether you are cut out for self-employment to highlighting the pros and cons; from guiding you on the questions you need to ask to helping you understand the legal implications of franchising. The book explains the fundamentals of franchising and looks at what makes up a good franchise offer and gives guidance in areas such as financing, operations and viability.
More importantly, the FASA Directory lists all its members in their various categories, detailing their activities, their history, the opportunity they offer and the financial costs of the franchises. The members of FASA have all voluntarily submitted their credentials, in the form of their Disclosure Documents and franchise agreements for scrutiny and all have committed to adhering to FASA's strict Code of Ethics which is in line with the very best in the world.
Following a presidential summit on job creation between the South African government and Business Unity SA (BUSA) and taking into account Finance Minister Pravin Gordhan's reference in his 2011 budget speech to the fact that 68% of private-sector employment was provided by small business with less than 50 employees, FASA would like this vital area of business to be included in government's forward planning and given more support.
With only 17 business sectors benefiting from franchised systems in South Africa, compared to between 25 and 50 in countries like the USA, the UK, Australia and Brazil, there is ample room for expansion into other areas of business – including implementing both social and tandem franchise systems that could see government services franchised in a public/private partnership.
Franchising, despite the effects of the recent recession, showed an 11% increase in employment levels, according to an authoritative survey 'The Franchise Factor 2010', conducted by Franchize Directions.
• In 1994 there were 156 franchise systems – by 2010 there were 551 – with 112 new concepts alone coming into the sector in the period 2008 to 2010.
• The franchise sector has shown great resilience for the two years ending 28 February 2010 with a growth of 28 221 jobs, bringing the total number of jobs in the sector to 478 000.
• 2 286 new businesses brought the number of total franchise outlets to just under 30 000 outlets operating under the 551 franchised systems.
• The sector contributed R286-billion annually or 11.8% to GDP, with non-petroleum systems showing between 14 and 15% growth in turnover over the two-year period.
• South Africa is made up of 88% home-grown concepts.
Economists agree that if government is to achieve its target of 5 million jobs by 2020 it means that 495 000 new businesses have to be created to provide those 5 million jobs. Franchising has proved that it can fulfil all the criteria for small business expansion and FASA has already initiated a transformation project that will encourage entrepreneurship within the emerging sector.
For more information on FASA membership visit www.fasa.co.za or contact FASA on 011 615 0359.