As the Franchise Association of South Africa (FASA) celebrates 40 years of representing what is considered one of the biggest business sectors in South Africa
- contributing over 15% to the country’s GDP, we reflect on the decade that not only saw the birth of our democracy but a surge in franchise activity.
With franchise fast food and restaurants cementing their popularity in the 1970’s, other business sectors started to look at the franchise model as a way to expand their businesses. With Pick n Pay introducing the convenience store concept, others soon followed and the first Shoprite was founded in 1979 in Cape Town and the retail side of franchising starting gaining momentum.
What is known to have been the first overview of franchising in South Africa was published in November 1978 by Sandor Donner, an MBA student at the Graduate School of Business at the University of Cape Town. Kurt Illetschko, co-author of Franchising in South Africa – The Real Story analysed Donner’s research and whilst noting some omissions in his reflection of brands operating at the time, revealed some interesting trends that reflected the socio-political climate of the 70’s.
- The majority of franchisors were active in the restaurant sector with as many as one-third of concepts originating in the USA. By 2006, foreign franchises accounted for a mere 10% of the total expressed in purely numerical terms.
- Interestingly, only eight of the eighteen networks continue to operate as franchisors today. This high rate of attrition may be the result of pressures experienced during the sanctions era. Several foreign systems decided to withdraw rather than risk the wrath of anti-apartheid pressure groups in their home markets, notably the US and the UK. Kentucky Fried Chicken, as it was known then, which opened its first franchise in South Africa in 1971, was forced to later divest its 60 company-owned outlets and trademarks to a South African holding company called Devco after the US Congress passed a law forbidding American companies from owning South African assets.
- In reply to the question ‘why did you choose franchising as the preferred vehicle for expansion?’ most franchisors disclosed that they were ready to expand but lacked the necessary capital and/or manpower to do so.
- In those early days, the sight of a franchise brand caused great excitement and everyone wanted to climb onto the franchise bandwagon as franchisees. Donner observed that franchisors did very little advertising to promote the franchise as ‘the franchise was promoted through the success of existing franchisees whose example was passed on by word of mouth.’
His list of franchisors, active at the time, shows the majority of brands were in the food space but we also started to see interesting trends emerged that reflected the trends of the time.
- In the Fast Food and Restaurant sector, besides the early pioneers such as Steers, Wimpy and Spur, steakhouses such as Squire’s Loft, Longhorn and MacMunch started franchising. Captain Dorego’s, established in 1974 in the Free State became a favorite and built a strong brand in that region. In the ice-cream parlor space Milky Lane was a pioneer with the first ice-cream parlor a popular hang-out in Hillbrow since 1958 but only franchising from the late 70’s. Juicy Lucy was the precursor to the health food craze, opening its first outlet in 1973.
- Kentucky Fried Chicken, as KFC was known then, opened its doors in 1971 in South Africa – an unusual move as at the time KFC had only ventured into a few developed markets. The story goes that the CEO of KFC’s holding company visited South Africa on safari and was surprised to find a much more developed country than he imagined.
- Mike’s Kitchen, the brainchild of founder Mike Illion, was opened in Greenside, Johannesburg in September 1972. Since then, Mike’s Kitchen has become a trusted ‘go-to’ restaurant for families all over the country and a South African household name. Mike’s Kitchen has stood the test of time through their core values of generosity, quality and family which they carry through every part of Mike’s experience. A global leader in the franchise private equity space, NRD Capital, acquired Mike’s Kitchen in 2017 with plans to build the brand to its former glory.
- In the Entertainment & Leisure space, video rentals were starting to become popular with Videorent and Video Town two of the early entrants into the market, with Sweets from Heaven and Brittan’s Sweets catering to the popular movie-going market. Holiday Inn was another US brand that made its appearance in South Africa as an international brand. For those old enough to remember, Putt-Putt entered the market and became a popular entertainment option.
- The Automotive Service Industry also started to franchise with Exhaust Shop, Mr. X-haust Mr. Tyre, Supa Quick and Silverton Radiator Services being some of the first to franchise. Econowash offered the first laundrette services and Mend-a-Bath was a pioneer in the Home Improvements sector. Multiserv originally launched under the store name of Cuthberts, a well known shoe chain, pioneered the ‘store within a store’ concept with its branches in most OK Bazaars stores.
- In the Building, Office & Home Services sector brands Timbercity was established in 1971 by two independent entrepreneurs and in 1979 the first franchise was launched. Acquired initially by PG Wood, it is now a subsidiary of Steinbuild, a member of the JD Group. Wilcote was another brand that starting franchising in the building maintenance industry offering waterproofing, roofing and painting services.
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