In our volatile environment that throws socio, economic and political curve balls on an almost daily basis, the Franchise Association of South Africa’s latest franchise survey, sponsored by Sanlam, shows that, of all the business formats and across all sectors, franchising, through its unique business format, continues to show growth and resilience despite challenging conditions – with a estimated turnover of R721 billion equivalent to 15,7% of the total South African GDP.
The number of franchise systems has risen from 843 to 865 in the last year continuing the growth trajectory with a total of 45 011 outlets, most of which are owned by the franchisees (80%). The nett number of outlets that were signed up in the last year is 2 602, which is the sum of 3 181 stores opened, less 579 closed.
According to Vera Valasis, FASA’s Executive Director, “the survey, whilst still showing positive growth and a high level of franchisee satisfaction, shows the sector is carefully and cautiously navigating the economic storms to safe-guard their businesses, supporting their franchisees whilst trying to grow their brand and contribute to the country’s GDP. It is testament to the entrepreneurial strength of the franchising sector that – in the face of increased unemployment to 27.2 percent in the second quarter of 2018 and with job losses of -35 000 in the formal sector and -73 000 in the informal sector – there has been an increase in the total number of people employed in the franchise system – from 343 319 to 369 573.”
Of those employed in the franchising systems, 292 480 are black staff; 13 563 are coloured staff; 13 822 are Indian staff and 49 708 are white staff.
On average, each franchisee employs 18 staff members in the business, including him/herself. There are 12 full time and 6 part-time employees and in franchisee businesses, the average ratio between management and staff is 1: 8 (2 management staff vs 16 non-management staff).
In line with concerted efforts to transform the sector the average percentage of ownership by previously disadvantaged individuals has improved significantly from 17 to 27 per cent. Likewise, the average percentage of ownership by women has increased significantly from 25 to 39 percent.
One of the main challenges facing franchisors is finding the right franchisees followed by the difficulty in getting finance to start a business. Reflecting on the difficult trading conditions, there is a significant increase in the number of franchisors that expect a new franchisee to take longer than a year to break even within the first year of operations, with a corresponding decrease in those who believe they will break even within the first year of operations.
You can get a copy of the full 2018 Franchise Survey results here.