Getting small businesses back on track

getting business back on track

At FASA’s Franchising in Africa Conference, sponsored by Absa, speaker Jacki Mpondo-Hendricks, CEO of the SAUBC (South Africa United Business Confederation), a non-profit and non-racial, small businesses and economic confederation that works to expand international trade and investment, expanded on Africa Growth 2063, which includes identifying franchising as a catalyst for their Africa Continental Free Trade Agreement, unlocking Intra Regional Trade through supply chain optimization and Covid-19 Recovery Plan.

 

Why franchising for Africa?

According to Mpondo-Hendricks, “Franchising, in its fifty-year history, has shown remarkable resilience in weathering the economic ups and downs. In the face of the recent worldwide economic slow-down, the franchise sector has remained upbeat and a significant global force. As a business format that has no boundaries and no impediments to success, anyone from any walk of life can become an entrepreneur and enter a profitable business venture, and has a strong spin-off for job creation for skilled, semi-skilled and unskilled personnel and serves as an incubator for business and the economy at large.”

Ideally suited to small and medium-sized enterprises (SMEs), franchising encourages small business development in every imaginable business sector and is a great catalyst for job creation, skills transfer and wealth creation.

Franchising: Big possibilities for small businesses

With the SME market acknowledged worldwide as an economic power base to stimulate growth and to generate employment, franchising offers positive opportunities and options for both local and international concepts. South Africa has proved that franchising can and does work within the ‘African’ context for economic growth and development. With international franchises already in a myriad of business sectors, diverse franchise options are what Africa needs to inject new life and vigour into African economies. In this regard, South Africa can play a pivotal role in steering franchising opportunities into the direction of success and prosperity for Africa.

Franchising: Hope to youth and women just starting out in business

What alternative is there for those wanting to step into a whole new world of business?

Those who leave university in debt suddenly face an uphill challenge to be paid what they’re worth. While there is a growing number of ‘mumpreneurs’ who have discovered the benefits of franchising, there is a place for both youth and women in many of the franchises operating today.

Benefits of owning a franchise are many and include:

  • You own it.
  • You set your own wage, and those of your staff, as you grow a profitable business.
  • The structure of the business has been created for you by the franchisor.
  • This alleviates the pressure to come up with the next big idea.
  • There is a strong support network to inspire and encourage.
  • Have access to expert training, giving access to any business in any industry.

Breaking down barriers

Despite the success that can potentially be enjoyed from owning a well-founded business, many are afraid to take the leap because of lack of funds, financial risk and a lack of experience. Again, this is where franchising nails it. Banks, on the whole, are more likely to grant loans to someone looking to invest in a franchise because they know the franchise and have seen the success it has generated for other franchisees. Not having experience in a particular sector is not always a pre-requisite to a franchisor who is ready and willing to share their expert knowledge and experience to those ready and willing to learn. As they have already developed and fine-tuned a successful business model, they’re confident in the opportunity they offer.

Africa expansion considerations

  1. Understanding local customers – Franchisors with an eye on African expansion must ensure that they understand the values, needs and behaviour patterns of local customers. Some consumers prefer to purchase smaller quantities while others prefer extra-large sizes when they have the funds, to avoid costly travel expenses. For the fast-food sector, local tastes may vary hugely, choosing cassava over potatoes or preferring a specific cut of steak.
  2. Costs, costs, costs – African expansion is costly. Local product, including beef and chicken, can be significantly more expensive than in South Africa. Kitchen equipment and shop-fitting often comes with a hefty price-tag compared to other parts of the world. The high price of entry combined with a higher risk profile has mean that many of the world’s established brands have given African expansion a wide berth.
  3. The distance – Africa is the planet’s second largest continent. Support and ongoing training is critical to ensure that franchisees succeed. This becomes challenging when providing support is many air miles away. Then there’s the time and regulatory challenges involved with moving goods across borders. This means that franchisors need to have a strong logistics thinker on their franchise expansion team.
  4. Financial market dynamics and support – This translates into available funding resources, payment instruments, terms of payment and banking system.
  5. Regulatory & compliance issues – This can vary from one country to another including legislative policy frameworks.
  6. Support infra-structure – This includes basic requirements including water, electricity, roads, ICT and other.

The Solution

  • Creating franchise awareness and practical entry points.
  • Promoting the understanding and knowledge of franchising. Understanding the dynamics that make up franchising is crucial to its long-term success.
  • Involving governments and the private sector from African countries in acknowledging the unlimited potential of franchising.
  • Drawing international attention to what Africa has to offer. Emerging markets play a critical role in the worldwide expansion of franchising.
  • Stimulate the international franchise community to invest in Africa.
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