Rising from the ashes – the future of franchising
The origins of some of South Africa’s much loved franchised brands date back to the 1960’s. Six decades later, whilst franchising contributes substantially to the country’s GDP, it has been severely impacted by recent events and needs to redefine its future and rise like a phoenix from the ashes.
“Surviving the crisis and rebooting becomes a precarious balancing act for all franchises that requires team work and a focused business approach” says Pertunia Sibanyoni, Chairperson of FASA. “If there is one business sector that knows how to balance the scales of supply and demand, be innovative enough to change course and use its collective power to weather the storm, it’s franchising.”
According to James Noble, Head of Wholesale, Retail and Franchising for Absa Business Banking, that sponsored FASA’s recent conference, “In the midst of all the uncertainty of the past two years, it is important to recognise the vital role that entrepreneurs play in creating wealth and opportunities in our economy and as Absa, we are deeply committed to supporting them to foster growth and prosperity in South Africa and across the continent.”
The World at a Crossroads
Making sense of what has transpired in the world over the past two years is what Clem Sunter, scenario planner, and futurist, is a master of and his insights into what is happening around the world, and by extension, how it will affect us here in South Africa, are invaluable in not only making sense of it all, but in drawing the lessons to be learnt and acted upon.
“We are living in unprecedented times… we have never experienced the world as it is at the moment,” says Clem Sunter. “The sense of inequality, with the rich, become richer whilst the rest suffer has spawned an anti-establishment feeling around the world. The green flag of climate change is unprecedented and the most important threat to the world’s future is either in ‘paradise regained’ which puts action into saving the world – or the alternative is ‘pandemonium hell’ with huge numbers of climate refugees and uninhabitable zones that will forever change our world.”
Right now South Africa stands at an economic crossroads after years of corruption and state capture combined with the disruptive impact of COVID-19. With Treasury virtually empty and unlikely to change, the country is at a tipping point where the path it takes in the immediate future could define its future for decades. The two scenario choices that South Africa needs to consider couldn’t be more polarised. “If we establish a people’s economy, says Sunter, the aim must be to create a new generation of entrepreneurs that will in turn create new businesses that will ultimately create new jobs. Franchising is well positioned to do just that.”
Paradise regained or Pandemonium
Regaining paradise and avoiding further pandemonium is what several of the futurists and experts put forward at FASA’s franchise conference. Eric Parker, franchise stalwart and a founding member of FASA, gave an interesting “if only” scenario that seems easy enough to achieve.
If only….
- Corporates realised the potential and embraced franchising where owner/operators outperform employees by at least 20-30%.
- Government realised the potential of the mechanism for economic and BEE development.
- Business leaders were educated about franchising – suggest franchising as a 1-year subject in tertiary education.
- Even with the CPA there are unethical operators and some form of legislation or control needs to be put in place to stamp out unethical franchisors. President Cyril Ramaphosa was a major shareholder in an international master franchise so we have someone who knows and understands franchising.
- The unemployed could use franchising to buy employment with the right franchise through innovative mentoring/funding programmes.
- Tax incentives to international franchisors to invest in South Africa to set up their businesses; not to sell master franchises but invest themselves.
“South Africa has in its franchise sector a valuable diamond that has served the country well over the past 43 years, but to take it to the next level we need to polish that diamond to reveal new facets of growth that will re-ignite and re-launch franchising built around Clem Sunter’s People’s Economy theory,” explains Eric Parker.
A re-launch of franchising in South Africa needs to be built around education and awareness that will feed the potential for job creation, skills transfer and ultimately small business ownership. “Franchising, with its 800 franchise systems, and over 48 000 outlets is well-poised to give long-standing staff the opportunity to become franchisees in their own right on a share-basis”, says Parker. “Identifying key staff that are already familiar with the brand, can be given a 10% share in the business and with commitment and mentoring can increase their ownership percentage to eventually own their own franchise.”
Frans van der Colff, Consultant and Executive Fellow at the Henley Business School, Africa agrees as “franchising has the model of ownership but more importantly has the built in model of mentorship – all the right elements needed to give young people the skills and hands-on experience to running successful businesses. But to make Africa prosperous we need to get money through to the bottom levels of society and facilitate young people to own their own businesses.”
Business has to have a shared value approach – where all our stakeholders are important and make their businesses profitable while contributing to a healthy community, “A thriving business leads to a thriving community – it has a knock-on effect. Shared value is so important – supporting smaller suppliers, giving local people opportunities, working together, collaborating so that everyone can share in the wealth of the country and building sustainable communities.”
Finding the silver lining
Whilst the economic downturn was evident well before the pandemic, there may well be a positive effect on the franchise environment as individuals, entrepreneurs and business owners are now looking for opportunities to progress, develop and find new avenues to pursue. Some individuals have been forced to seek alternative employment solutions. Some feel insecure in their current positions or have changed their priorities in life. This has led to an increase of new entrepreneurs in the market or people seeking to buy employment opportunities.
Corporate companies are also starting to see the value of franchising but due to their rigorous structures and cultures, the transitioning to a franchise environment may seem to be more complex, but it achieves great results and gives corporate companies the opportunity to empower and develop individuals from within. In times like this, it is necessary to look beyond the current status quo and try to see the bigger picture.
All three strategists – Clem Sunter, Frans van der Colff and Eric Parker all agree that a ground up revolution needs to take place and an action council established to plot an entrepreneurial wave to look at how to weigh ‘paradise regained against pandemonium hell.’
Whether it’s establishing an e-stock exchange where businesses can offer shares in their business or crowd funding to launch new concepts; encouraging businesses to dedicate at least 20% or their supply chain to small businesses or encouraging buying local to reduce our carbon footprint; merge the township economy with the formal economy and encourage banks and government to create micro-lending institutions – all these will be solutions to unemployment, will encourage entrepreneurship, establish small businesses and be a catalyst for change.
Concludes Freddy Makgato, CEO of the Franchise Association of South Africa, “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.”
To protect, lobby, promote and develop ethical franchising across all sectors in South Africa with specific focus on transformation.
