In every crises there are opportunities, having 25 years’ experience in the franchise and fuel industry sector, when it comes to future trends what do you anticipate? What trends do you see coming and what opportunities are there for people can explore?
Looking back in history, we have experienced 5 devastating world financial crisis namely:
- 1972 credit crises,
- the great depression of 1929,
- the Opec oil crises of 1973,
- the Asian crises in 1997
- and the most familiar one of 2008.
- With the lockdowns, pandemic and everything shutting down, some are saying that this current economy could be the worst ever. Other economists are saying they are already seeing a turnaround and it’s recovering.
From and economic perspective…
I would say that we need to be cautious because a lot of businesses have been negatively impacted. If you listen to what ABSA’s own economists are saying, this crises will be 3 to 4 times bigger than 2008. This will give you an indication of what we are expecting. If you look at the 2008 financial crises, it took 5 years to recover. The current forecast is that it will take longer than this. Saying this, there are definitely pockets of excellence and there are areas of growth as well.
In our area of business, we are fortunate because we are not only concentrating on the franchise industry, but also retail. The 4 areas that we focus on is the restaurant business, which we all know has been severely impacted due to the lockdowns and the restrictions on the trade of alcohol. However, the fast food industries have done quite well. In our engagement with all these franchise brands their strip malls have been performing well because people are avoiding shopping centres.
Then if you look at your food and beverage market and grocery market, they were open for most of the lockdown, however they were limited in the sale of non-essential items. Despite this they are still showing some growth. Some, if you look at their profit margins, they have been effected by round about 30% so this will impact on their profit margins.
A lot of business that chose to work from home have been saving on rentals and other office expenses. Funeral businesses have also done quite well and have come up with innovative ideas because numbers were restricted at funerals, so they came up with online funerals.
Another focus for us is the automotive industry. This has been very mixed. Dealerships have been hit quite hard as new vehicles sales have been very slow and this will continue for the rest of the year, due to many losing their disposable income. After market service and spare parts have been moving quite well.
The 3rd focus is the fuel industry, which has been hit hard even though this was an essential service. The recovery has been good but they are still down by about 10% on previous years. That is going to be the status quo going forward as many people now are working from home. However, a lot of service station convenience stores have been doing quite well as people choose to buy goods there as opposed to shopping or having to queue supermarkets.
In every crises there will always be businesses that thrive and what we have experienced in the past is that there are a lot of opportunities. Are people willing to explore these opportunities and look at what is out there.
What are your thoughts James, on future trends and what opportunities are there that people can engage in over the next time period that could possibly prevent them from going bankrupt?
That is one of the positive outcomes of Covid and that’s the digital transformation that we’ve gone through. Everyone is now onto the digital bandwagon. We look at banking in terms of payment options and we’ve seen the reduction in cash being used as the main form of payment.
More people opting to use cards, your tap-and-go increased limits. From ABSA we have seen a lot more people opting for online products. People purchasing their groceries online and businesses launching their delivery services where you can order online. There is a lot of opportunity here from this perspective. For example, a lot of restaurants are still not making use of delivery and here is a huge opportunity for courier and delivery type services. Speaking to a franchise who own a lot of delivery vans and scooters, they are battling to get drivers for their vehicles.
Out of hardship often innovation happens. A year ago we battled to get audiences onto webinars and platforms like this. Now this has become the new normal. People are now hungry for information.
What I have noticed over the past year and what businesses should be looking at is service delivery. Service delivery is still very poor in South Africa. Businesses need to focus on these small things. Provide their customers with good quality products and service. More businesses are implementing loyalty programmes to keep their customers coming back
What are other new long term opportunities that Covid created and will remain even after the Pandemic?
Mainly, the digital transformation and going forward conferences. Before you were limited in terms of having it online and it is more cost effective to run it online. Also, as we mentioned, online trading is going to become much bigger and the impact of that is that retail outlets will become smaller because they will need less space, with more warehouse type storage.
There is also the ‘black kitchen’ concept where you might have a couple of brands in one location, using the same kitchen to for instance, deliver a Steers product, a Nando’s and so on. You might not know the location it’s coming from but it’s coming from where all these stakeholders get together to save on costs. The delivery service is an added cost and could have a negative impact on the cost of the product that gets delivered to you.
Working from home is also going to be a big change and trend that will probably continue as well as people becoming self employed because there are lots of opportunities if people have access to the internet.
At ABSA we are revisiting all our policies. I can sit anywhere in the world and do my job because it doesn’t require me going into an office everyday. This will open up employment opportunities. However, a teller has to be in a branch, so it will not apply to everyone. Some have found it is more productive working from home where others who have small children and need to do home schooling might find that a challenge. The number of meetings online, since Covid, has more than doubled. However a lot of people are now suffering from technology fatigue so we need to be careful of that.
Another trend I’ve picked up on is the pet care industry. A lot of people working from home now have acquired pets and so this has opened up a lot of avenues for the pet care business.
Another opportunity is the roll out of the solar industry especially with the current power crises it’s becoming more cost effective so there are more opportunities for solar franchises. Plus the rise of electricity costs, solar becomes more feasible. A lot more homeowners are looking to install solar. We have seen with a lot of our business customers they have installed solar and within 2 to 3 years they have recovered that cost. We are also going to need solar to power electric cars. The car manufacturers have plans to roll out 2 million electric cars by 2028. These will also require many solar charging places. Start to combine fuel with electric charging points.
What are you thoughts on why it’s beneficial for a franchise to be a FASA member?
The main reason is FASA is looking after ethical franchising in the country. We know that there are close to 800 franchise brands in the country and they are not all running ethical business practises.
From a consumer perspective, if you are someone who is looking to buy a franchise, I think it’s important to look at whether that franchisor is a member of FASA or not, because FASA is promoting ethical franchising and make sure that all their members are running ethical business practises. Especially in these times you already have so many challenges and you don’t want to end up buying the wrong franchise and end up fighting continuous legal battles with your franchisor.
This will also have a negative impact on your business. Especially from an ethical perspective, it’s important to become a member of FASA and to run your business according to those ethics that the franchise association of South Africa is standing for. The consumer act and competitions commission look after some of the legal things that need to be covered but when it comes to the ethical side it’s very important that you associate yourself with brands that are members of FASA.
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