Franchising Doing Great Things in a Tight Economy

Franchising Doing Great Things in a Tight Economy

That was how Tony Da Fonseca, FASA’s Chairman described the franchise sector’s performance following the release of the association’s annual survey on franchising. Despite trying socio-economic conditions, political uncertainty and tough trading conditions, the franchise sector has held its own over the past four years growing its contribution to the country GDP from 9.7% in 2014 to its present figure of 13,3% and its estimated turnover from R465 billion in 2014 to R587 billion in 2017.

“Tracking our success and looking for areas that need improving is part of the entrepreneurial nature that sets us apart as franchisors and franchisees. This is borne out by the fact that 78% of the franchisors surveyed are optimistic about future growth in their businesses, although it dropped significantly in the last year from 92% – a signal that the country’s economic woes are affecting even the most resilient of business people. There is a concomitant increase in the number of franchisors and franchisees that are uncertain about the future, as well as those who believe their turnovers will not change.  This is linked to a new franchisee taking longer than previously suggested to break even.”

“Whilst we celebrate our tenacity in staying the course, with an increase in the number of franchised systems to 845, adding much needed small businesses (40 528 franchisees) and employing 343 319 people in our sector, we must be cognisant of subtle undercurrents of uncertainty that the survey has exposed which need to be addressed to make the industry even stronger.”

“As an industry association and given the higher risks in starting a business in such a tight economy,” says Da Fonseca, “we also have to protect prospective franchisee investors from unethical operators and caution them to do thorough investigations into the franchise companies they are considering buying into – and above all make sure that they are members of FASA which offers a certain measure of peace-of-mind given the strict scrutiny franchisors voluntarily submit themselves to.”

With two in three franchisors claiming to have been in business for more than ten years and a further 17% for between 6 and 10 years, the longevity of these businesses supports the success of franchising and supports the mitigation of risk when buying into a franchise.

To view the franchise surveys visit www.fasa.co.za

 

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