Survey results showing promise for the future

FASA’s definitive surveys, one of the health of the franchise sector, the other a Franchisee satisfaction survey will be published in late September but early results show that, whilst taking strain as have most businesses over the past four years, franchising has shown great resilience and tenacity in confronting the challenges and the future. “Both these surveys are important”, says Margaret Constantaras of Research EQ, “not only within the context of where franchising sits in its contribution to GDP, but an analysis of how COVID-19 and the lockdown regulations – and other economic and political events impacted the sector. As franchising operates in the entrepreneurial space offering business opportunities, it is important to franchising and FASA’s long-term growth strategy.”

Preliminary findings on the interviews completed thus far with franchisors are demonstrating the franchise industry’s resilience. On average, four new franchise outlets were signed up in the previous year. Furthermore, there are strong indications of expanding into other countries in the upcoming financial year. The main challenges facing franchisors are perceived to be the impact of the rolling blackouts on profitability and productivity, along with inflation and ever-increasing costs.

To navigate the uncertain economic landscape, strategies such as finding innovative ways to remain relevant, providing extensive support to their franchisees, and exploring alternative power options like generators, inverters and solar energy to keep business running and costs manageable. The disruptive events of the past three years have had a profound effect on franchisors’ perceptions of their business status, with a noticeable increase in businesses considered to be in the turbulent stages of adjustment and change. Conversely, the stable stage of establishing and maintaining, the ambitious stage of expansion and risk-taking and the mature stage of control and profit have experienced decreases. There is a high level of optimism, however, regarding revenue growth in the next financial year for businesses.

Absa’s sponsorship of FASA’s survey into the state of franchising comes on the back of encouraging movements in the lending environment that point to new opportunities in the wholesale and retail sectors, along with interesting franchise entrants. James Noble, Head of Wholesale, Retail and Franchising – Absa Relationship Banking backs the initial survey findings and confirms that the bank has seen an uptick in finance applications. “You do go through cycles, where there are more and then again fewer applications, but in recent months we have seen a lot of new entrepreneurs applying for finance,” he says.

“Franchising is in the national interest as it is a business model that makes a meaningful contribution towards solving one of South Africa’s most pressing challenges – job creation. We recognise the vital role that the franchise sector plays in creating wealth and employment opportunities in South Africa. By sponsoring and facilitating this survey, we will be in a better position to understand the market dynamics and the environment in which our clients operate. We will also be able to identify the challenges that franchisors and franchisees face, offer innovative solutions and deliver competitive products that will meet their future needs and support their growth objectives.”