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The power of franchising … to introduce new franchise concepts to market

The power of franchising … to introduce new franchise concepts to market

As a unique business system that relies on duplication of a concept, a brand, products and services through an ever-growing network of franchisees across fourteen different business sectors, getting an overview of how those franchises handled the strains and stresses of the past four years is invaluable.

No other industry or sector has such diversity of business segments within its operating spectrum. Franchising represents businesses ranging from retail to real estate; from fast food to restaurants; from automotive products & services to building, office and home services; from education & training to health & beauty; from business-to-business to personal & professional services; from construction to digital and technology. To be able to extrapolate stats and figures and a sense of how they all fared over the past four years and get a sense of how they see the future is invaluable to both the industry and the country as a whole.

The phenomenon of franchising starts with the very first idea that germinates in the mind of an entrepreneur who then goes on to make his dream come true by nurturing and developing that dream into a bankable business. Once he has piloted the concept, refined the business strategy, set out a blue-print for duplication, he is ready to franchise it and offer opportunities to other entrepreneurs. The proliferation of franchise systems globally relies on those maverick entrepreneurs to continually come up with new concepts and a slowdown can result in a domino effect that will affect the setup of franchisees, which in turn impacts on job creation. Despite the drop in franchise systems, the existing franchisors show very strong resilience and longevity.

  • According to the FASA 2023 database, there are 727 franchise systems in South Africa. This sample was grossed up to represent 68 463 franchisees, a 43% increase since 2019. The increase in the number of large franchise systems in the 2023 survey accounts for this marked increase.
  • The fact that the number of franchise systems dropped from 813 in 2019 to 727 in 2023 can be clearly attributed to the disruptions of the past four years which put the break on new concepts coming online and perhaps in the closing of smaller fledgling concepts that could not get off the ground during the pandemic.
  • The franchise sector is a stable and robust segment of the South African business market, as is noted in the longevity of the businesses – 77% of franchisors and 53% of franchisees have been in business for more than 10 years. The average number of years in business for franchisors was 21 years and from franchisees 12 years.
  • Franchisors’ expectations that a new franchise would break even within the first year of operations grew significantly, from 76% in 2019 to 89% in 2023. A similar picture is seen among franchisees that experienced break-even within the first year of operation growing from 69% in 2019 to 89% in 2023.

With franchising making such a valuable contribution to the country’s economy, it is important that a greater effort is made by government, its stakeholders and the private sector to explore the many facets of franchising – that include social, tandem and micro franchising – that can be duplicated in all corners of the country to provide much need training and jobs.

 

 

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