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FRANCHISING CAN HELP GOVERNMENT ACHIEVE 5 MILLION JOBS BY 2020

FASA, in a recent press statement appealed to government to consider the important role that this unique business system has played in fostering entrepreneurship, in the transfer of skills and in job creation and to partner with the sector to achieve their employment targets. Following a presidential summit on job creation between government and Business Unity SA (BUSA) and taking into account Finance Minister Pravin Gordhan’s reference in his budget speech to the fact that 68% of private-sector employment was provided by small business with less than 50 employees, FASA appealed for this vital area of business to be included in government’s forward planning and given more support.

Says Rasheed Kathrada, of Applebox Computers and Chairman of FASA, “Franchising in South Africa is under-utilized and is not given enough credit for the role it plays in the economy, in stimulating entrepreneurship, in establishing small businesses that make up the backbone of the economy and above all in job creation. FASA would like to see government give more support to the positive role that franchising can play in stimulating the small business sector and appeals to big business to look at the potential of using the franchise format as an expansion mechanism.” 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.

Jan Davel, of RealNet and FASA’s Chairman designate for 2012 believes the franchise sector can make a marked difference in driving the economy. “Franchising has the ability to stimulate the economy on so many different levels – from conceiving those brilliant ideas that translate into new franchise concepts to duplicating those business formats to allow entrepreneurs to invest in their own small businesses. Once established, a franchisors’ network of franchisees contribute extensively to skills transfer and in turn provide much needed jobs.”

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. According to Vera Valasis, Executive Director of FASA, 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 11.8% to GDP, with non-petroleum systems showing between 14 and 15% growth in turnover over the two-year period.

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. “Considering that franchising in South Africa is made up of 88% home-grown concepts, says Kathrada, “this important business sector should not be ignored by government tackling this enormous challenge.”

 
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HIGHLIGHTING ELEMENTS OF THE CPA
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