Franchising looks to the future – post Covid-19

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Franchising has at its heart the spirit of entrepreneurship but amidst the Covid-19 pandemic that has resulted in immeasurable destruction of small businesses, the question remains whether the entrepreneurial flame can be re-ignited for future growth.

The franchise sector, which in South Africa is represented in around 14 different business sectors, represents the highest and most diverse range of entrepreneurial endeavours and is the most suited to lead the post-Covid recovery.

Tapping into the wave of innovation that change will no doubt bring about – from on-line trading and innovative robotics to a new wave of ethical consumerism and global activism, mobilising creative and innovative responses, seeing the gaps in the market, re-designing and re-engineering for the future is what entrepreneurs all over the world will be focused on. And where there are entrepreneurs… there are franchisors and franchisees!

Despite the doom and gloom of our current health and economic situation, Vera Valasis, Executive Director of FASA, in her dealings with members of the association has come to this conclusion: “I wager that the franchise industry will make a faster and better recovery post-Covid than most other business categories.”

“Listening to franchisors and how they have quickly jumped in to assist their franchisees during the COVID-19 crisis, made me think again about the reasons for the success of franchising in general.”

  • Individual business owners simply do not have the network expertise that they can tap into like a franchised system. Nor do they have, for example, the marketing expertise, a wider business view and how others have tackled problems and found solutions;
  • The ability to quickly augment their business model, understand consumer behaviour, identify problems and recognise how to solve them.
  • Franchisors tap into technology and use the information that they glean from their systems about customer trends, growth spots, declining products and services, the possible reasons for the change in consumer behaviour and how to quickly adapt products and services to the ever changing needs of clients and customers – crucial for the survival of businesses today.
  • Even if individual or family owned business owners do belong to small business networks or other industry bodies, these organisations – although they offer help and assistance – will never have the intimate knowledge and understanding of their business model like a franchisor and fellow franchisees would have.
  • In addition, franchisors and franchisees not only have access to the business minds within their own brand, but also across similar business categories in the franchise business sector as well as the broader franchise industry.
  • Franchises in general therefore are much more nimble, adaptable and quick to market with clever and real solutions than individual or free standing business owners.

“This should instil confidence in the business sector for development funders, banks, landlords and other stakeholders,” says Vera Valasis, “but unfortunately no meaningful offers have been forthcoming from the banking sector, for example. Now more than ever before, there is a huge responsibility on the banking fraternity to acknowledge the unique benefits of franchising as well as the sector’s successful track record and the fact that they have benefited from this sector for over fifty years. They should step up to the plate now with funding solutions that are less risk averse with simple application processes that can stimulate growth for franchisors by way of rapid distribution growth which in turn would create jobs and stimulate disposable income; which in turn will stimulate the growth of further franchise brand growth as the industry depends largely on consumerism.”

“It boggles the mind that banks are quick to fund a vehicle for example, says Vera Valasis, “something which depreciates in value, doesn’t provide employment, doesn’t provide an income and eventually becomes worthless. When funding is required for a new franchised business for example, that – unlike a vehicle – employs people, provides an income and should appreciate in value, banks generally are quite risk averse, have a lengthy and complicated application process, take weeks to make a decision and often turn the application down. This is an unfortunate situation but perhaps now the time is right for a bold funder to turn the industry on its head with a quick and easy funding solution tailor-made for the unique qualities of franchised businesses.”

Franchises taking the lead to recovery and revival

FASA canvassed several member companies on their survival strategies and more importantly on their plans to move ahead post-Covid to growing their franchise network and their brand.

 

According to Natasha Bohmer of Car Service City, despite the group suffering losses under lockdown with business unlikely to return to normal this year, “we will have to find ways to work within our “new normal”. Despite the hardships felt by all, we have not lost one franchisee due to the pandemic, and we are assisting the franchisees with ways to keep their overheads as low as possible and to negotiate better rentals with their landlords and service providers until the economy has gained some traction again.”

On what the future holds, Natasha Bohmer had this to say: “As a franchise group we feel positive with regards to the selling of new franchises, as many people have received their retrenchment packages and are looking for new opportunities to work for themselves.”

Richard Mukheibir of Cash Converters believes their business model, which is made up of three distinct revenue streams has never been as well-positioned to recover post-Covid. “Second-hand goods will become an increasingly valued commodity – we have yet to see the impact of production slowdowns from key markets resulting in shortages of consumer goods; the devaluation of the Rand means good quality second-hand items will have more value than before and be ever more desirable; people will be conscious of where and how they spend their money so our retail offer is valuable. We are also launching our on-line strategy in the near future which will allow our customers to buy and sell remotely, from our website.”

Money lending will be in demand – the pawn broking side of Cash Converters is ideal for customers who need easy access to cash without going through piles of paperwork, long lead times and possible rejections from the banks or other financial institutions. We expect the demand for cash will increase into the future as the consequences of Covid begin to bite into the economy. We have implemented a facility that allows our franchisees to borrow wholesale cash from head office, automatically and on a loan by loan basis, so as to help them fund the expected growth of our loans books.

 

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Cash Converters is ideally positioned to take advantage of future growth in expanding its pool of franchisees as the proven business model that will be even more in demand post-Covid. As retrenchments increase amongst mid to senior managers – inevitable as businesses cut costs and as digital adoption drives efficiencies in the work place – more people will be looking for alternate business opportunities.
“Being your own boss, within the safety net of a global business with a proven business model has never been more desirable” concludes Mukheibir.

Whilst most franchise brands will concentrate on re-building their brand post Covid-19, there are those entrepreneurs who believe that there has never been a better time to launch and grow a new franchise concept.

 

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Tasty Gallos, already a fan-favourite South Africa chain in their pilot operations, known for its unique spin on classic chicken and beef dishes using their exclusive spice blend, is poised to take their fast food to a whole new level of deliciousness and is offering affordable franchise opportunities.

According to founder Muhammed Gutta, there has never been a better time to grow your career with an exciting new franchise food concept like Tasty Gallos that offers an extremely profitable structure with healthy returns on investment. In addition to being a safe investment for both the short and long term, joining the Tasty Gallos ownership team has a wide range of advantages including:

  • Low setup costs and a minimal upfront investment
  • Established presence on UberEats and Mr Delivery
  • Low operating costs with reasonably priced supplies
  • Marketing support and benefits from our corporate team
  • High profits and a significant return on investment

Featuring franchise opportunities throughout South Africa, Tasty Gallos is Halaal friendly and Sanha Certified offering investors from all walks of life the opportunity to to grow with this exciting new brand.

FASA Franchise Association South Africa
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