Sanlam, the sponsor of the FASA Franchise Surveys, Jannie Rossouw, Head of Sanlam Business Market says:
“Successful business ownership is critical to the South African economy and franchising is a massive contributor. As sponsor of the annual FASA franchise survey, we are passionate about helping business people succeed on every level and we believe the knowledge gleaned from successful franchisors and franchisees offers valuable insights into the mix of factors that make up successful business ownership.”
Highlights of the franchisee survey include:
- With most independent businesses having a 90% failure rate in the first two years of being in business, the average number of years franchisees are in business has remained consistent at 10 years – with 36% in business for more than 10 years and 67% for more than 5 years.
- Franchisees experience five main challenges; i.e. the poor economy, creating good customer relationships, offering consistent good service, finding the right staff and growing the customer base.
- Eighty-four percent (84%) of franchisees rated their relationship with the franchisor as very good or good which is a significant improvement in ratings in the last year.
- Reasons for a good working relationship include the franchisor being helpful and supportive. A poor relationship with the franchisor is characterised by a lack of support from the franchisor and the need for better advertising/marketing.
- With the litmus test being whether an existing franchisee would recommend buying a franchise of the same brand to prospective franchisees, this has significantly increased from 45% to 54%, seemingly moving up from those who were previously lukewarm about recommending such a purchase.
- Reasons for recommending their franchise brand to others include the helpfulness and support received from their franchisors to it being a trusted, well-established brand with a good reputation. They also thought it a good business, yielding high returns.
- Interestingly, seventy-two percent (72%) of the franchisees interviewed were very or extremely likely to consider the purchase of another store in the same network, a significant drop from last year’s percentage of 80%, while the number who would be unlikely to buy another store in the same network has doubled from 9 to 19%. This is probably due to the unfavourable and trying trading environment.
- Franchisees remain optimistic about the future of their businesses, with 78% expecting to see growth in the coming year.
- The median nett profit for the last financial year was given as 10,4% (9,5%).
- Within the first year of operations, it is expected that 47% (46%) of new franchises will break even.
“There is no question,” concludes Vera Valasis, “that franchising as a business format not only offers viable business opportunities but ensures that the network of franchisees has the necessary support to weather the many economic onslaughts that are so prevalent today. The longevity of franchisees in business and their good working relationship with their franchisor proves that ‘being in business for yourself but not by yourself’ is what makes for a successful partnership.”
You can get a copy of the 2018 Survey Results here.