South Africa leads the way in franchising

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.

The Facts on Franchising

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.

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