Franchises plough on…regardless
“There are decades where nothing happens; and there are weeks where decades happen”
Vladimir Lenin, Russian revolutionary & politician
Those prophetic words by none other than Russian revolutionary and politician Vladimir Lenin, perfectly describes what the world is going through. The intensity of change has been akin to a tornado that everyone, globally, has had to go through – in varying degrees. As we grapple with ongoing power shedding, the key to recovery, as shown by the FASA members we canvassed below, is to capture the spirit of perspective and position change by focusing on the horizon and the vision for the future. The consensus from members we spoke to is that the silver lining is to commit to action, have a target and the motivation to pull through the storms and set one’s sights for future growth.
Creating an early warning system is the biggest lesson that has come out of the pandemic and the second is recognising that as a collective, franchising is a lot stronger. Traditionally, the franchise industry has successfully weathered difficult economic times with adaptability as a primary aspect of its DNA. When a crisis occurs, the franchisor is already looking at how he can adapt so his franchisees can keep moving forward. That is the beauty of the ‘collective’ made up of franchisors and franchisees, who, in times of crisis, come together to tackle the challenges, find solutions and forge a new path.
The franchise sector, not only in South Africa but all over the world has proved, through the pandemic and other hardships, that underpinning its success is a business system that works within the framework of ethical business practices. Franchising has all the checks and balances in place to take some of the risk out of people starting and running businesses and more importantly surviving many challenges, like the pandemic and other economic challenges.
Following FASA’s Conference in 2021 which brought together franchisors and stakeholders from a range of business sectors that franchise, the consensus was that what the pandemic and other curveballs of the past two years taught franchisors is that they can’t solve the world’s problems but that they can tackle the future in bite size chunks, commit to making positive changes, do scenario planning and set long-term goals for their businesses and be prepared for any eventuality. Many brands surprised themselves with how quickly they and their franchisees have adapted to the new normal, were able to pivot quickly, and giving the necessary cushioning and support to overcome the obstacles.
FASA asked some of its members, over various sectors they operate in, to share how they are coping in the current situation of load-shedding and economic uncertainty.
“Continual load-shedding is not sustainable, it increases costs and reduces profits, resulting in job losses and reduced opportunities. If living through a pandemic for over two years has taught us anything, it is that it’s imperative to have a recession-proof business, one that will make it through the good and bad economic cycles. We have continued to thrive through these challenges, becoming more streamlined and efficient – and demonstrated how resilient our model is.”
Richard Mukheibir, MD, Cash Converters
“OBC Better Butchery, as a franchise supermarket group that trades mostly at the country’s coalface – in the township, city centres and taxi ranks – was adversely affected by both the pandemic and more so with the rioting and looting of 2021. Whilst we need to hold our leadership accountable for not protecting businesses through the riots, unfortunately as the business community we have come to realise that the future is in our own hands. OBC’s store sales, since then have increased significantly, achieving sales in most stores that are well above average growth and inflation.”
Tony da Fonseca, CEO, OBC Better Butchery
“The impact of the pandemic, coupled with other economic hardships has taken its toll on industry as a whole. During lock down our supply chain was marginally impacted, with many of our chosen suppliers either manufacturing locally or in Europe, with more of an impact from suppliers from the Asian regions. During 2021 On Tap saw some great growth figures with some stores even breaking previous sales records. This was due to smart planning and financial decisions made prior to 2020 which resulted in us offering our franchisees provisions or reductions in their franchise fees – giving them some extra breathing space to save on operating costs. More stores are in the pipeline for Gauteng and coastal regions.”
Johan Van Wyk, Managing Director, On Tap
“2020 was extremely difficult for Bootleggers, as it was for most. We spent a good amount of time and effort on testing different applications, refining the franchise model as well as the market that we serve – be it our franchisees, suppliers, landlords & employees – never losing site of our core focus & our franchising model. Demand for our brand continues to be strong and in addition to the 37 we currently have in the Cape and in Johannesburg, we are busy opening two new stores with another 12 stores in the pipeline for this year. Our goal is to push above fifteen stores annually, focusing on the Johannesburg and Pretoria areas.”
Ricky Ruthenberg, COO, Bootlegger Coffee Company
“Apart from the continuing COVID-19 lockdowns since 2020, the latter part of 2021 was extremely challenging due to supply chain disruptions. The looting turmoil followed by the Transnet cyber-attack in July had further repercussions on our supply chains, adding fuel to an already constraint service. Thanks to our great business model, InXpress franchisees have been able to not only survive, but thrive through international recessions, pandemics, natural disasters and supply chain difficulties, thanks to world-class partners – recording record breaking revenue growth of 48% in 2020 and a growth of 76% in 2021 year-to-date (October 2021) – proving our resilience in tough circumstances.”
Tersia Visagie, Country Manager, InXpress South Africa
“The emotional and social impact on babies and toddlers of the Covid pandemic was something that was only perceived and noticed as the impact of the pandemic unfolded. Being in touch with so many schools, teachers, parents, children and babies, Monkeynastix as a group had a unique birds-eye view of the emotional impact on children from ages 3 months to 12 years. All of a sudden, the landscape of the approach to movement education had to be re-adjusted to constantly re-developing new ideas to combat childhood anxiety.”
Dirk Cilliers, CEO, Monkeynastix
“The Covid-19 pandemic and unrest threw quite a few curveballs in the business environment that raised legal, tax and administrative questions – from the human resources side to the fine print in insurance claims or in rental leases – to the impact of delivery service charges on franchise/royalties/management service fees. Many of these issues impacted on the franchise agreements as they stood prior to Covid-19 and franchisors had to address the legal landscape changes that have affected them.”
Maria D’Amico, Founder, D’Amico Incorporated Attorneys
“Industry challenges brought on by the pandemic and economic restraints forced businesses to think outside the box and to become smarter at delivering their products and services with some subsectors of wholesale, retail and franchise showing strong recovery, recording sales on the same levels and better as pre-COVID-19. Franchising, in particular is still a safer way of getting into business and becoming financially independent with the support of a franchisor and value of brand recognition still outweighing the risk of starting a business on your own. With a specialist franchise division, we continue to support these sectors with the best solutions to contribute to business success.”
James Noble, Head, Wholesale, Retail & Franchise Banking, Absa
Concludes Freddy Makgato, CEO of the Franchise Association, “Franchising is successful because it works as a collective and FASA has a crucial role to play by facilitating the creation of more franchises to add to those already successful ones that contribute almost 14% to the country’s GDP. Businesses and especially franchises that have sound business ethics can create jobs and should be prioritized and government must free up all legislative obstacles for those businesses to create opportunities that will contribute to skills transfer and job creation. We therefore need to strengthen our collaborative and co-operative efforts with other stakeholders and to get government to partner with us in finding new avenues for growth. With franchising covering fourteen different business sectors, and with more that have the potential to be franchised, there is an important role for FASA and the franchise community to play in the country’s future.”
To protect, lobby, promote and develop ethical franchising across all sectors in South Africa with specific focus on transformation.