Franchising to open up transformation opportunities

Franchising to open up transformation opportunities

The future of the automotive sector also lies in transformation opportunities, according to Frans van der Colff, Faculty and Executive Fellow at Henley Business School and a speaker at the Eastern Cape Auto Franchise Indaba, and franchising should be at the heart of it. “What is needed is collaboration from both the private and public sectors to make it happen. The franchise business model gives the skills training and knowledge as well a tried and tested model to facilitate transformation. The guidance and mentorship that is inherent in the duplication system of franchising makes it much easier to establish new businesses and it is a global fact that franchises succeed far better than independent businesses.”

Anita du Toit, founder of Franchise Fundi and one of the country’s foremost experts on transformational franchising will be presenting at the Indaba on the potential of micro and social franchising to create entrepreneurship, skills transfer and job creation. With South Africa’s unemployment rate continually soaring due to the compounding effects of Covid-19, global upheaval, political unrest and a lack of economic growth, government and the private sector need to urgently look at new and innovative ways to create opportunities.

“Franchising can provide these opportunities, says Anita du Toit but most commercial franchises are out of reach for this demographic due to lack of finance and collateral. What is needed are franchise models that are in demand and create jobs at the bottom of the pyramid – the overlap lies in the business structure, with the benefits of franchising like training, mentoring and ongoing support playing a key role. With the franchise system there is the replication of a proven formula/format, the collective power of purchasing and marketing and a greater likelihood to secure funding.”

In SA there are many more social impact organizations going the social franchise route – in child advocacy, youth leadership & sports programmes and in the tourism industry. The ideal franchise mechanisms include:

Social franchising uses the structure or distribution mechanism of commercial franchising to achieve social goals. This concept is beneficial as a mechanism for social programmes since it has inherent benefits that contribute to the sustainability of an entity, being skills transfer and consistency. The income that is generated by the business is used to sustain and grow the business and to address identified social goals. This is the franchise system that government should be looking at to roll out efficient service delivery in everything from health, waste to education and infrastructure.

Tandem franchising, an innovative franchise model unique to South Africa, offers franchisors the opportunity to grow their brand, retain initial majority control of the new franchise and shares in its profits, all while working to empower communities in need of economic development. Tandem franchising is an effective tool for the implementation of black economic empowerment (BEE) initiatives in that country. The basic structure involves a joint venture arrangement between a franchisor, which acts as an appointed mentor, and a new franchisee that may lack the business management experience to operate the business alone, operates the business in “tandem” with the experienced franchisor and mentor.

Micro franchising adapts the franchise principles of business efficiency and duplication into a ‘business-in-a-box’ format, basically providing a proven system opportunity to individuals, to run a small business with substantial supervision and mentoring, whilst earning an income. With financial assistance from donors or financial institutions in the microfinance space, the franchisee purchases a minority stake in the business and can, over time, purchase additional shares and eventually can become the sole owner of the business and convert to a standard franchise arrangement.

What is needed, concludes Anita, “is to formalise businesses like backyard mechanics to make them more sustainable through an enabling environment, FASA support, funding to develop more concepts, micro franchisee funding and the strong education and training of potential franchisees. We know franchising can work in many spheres and government has to partner with us in developing social and micro franchising. It gives opportunities to all and can change the landscape of Africa.”