The Franchise Association of South Africa (FASA)’s third franchise survey has become the industry’s benchmark on franchising’s growth trajectory and tracks the trends, successes and challenges facing both the franchisor and franchisee.
“Despite the hard trading times over the past seven years, franchising has held its own year-on-year in every respect – from showing long-term sustainability to showing a high level of optimism for the future,” says Vera Valasis, Executive Director of FASA. “This is borne out by the fact that the sector, which covers a wide range of industries, contributes a healthy 12.5% to the country’s GDP.”
According to FASA’s Chairman, John Baladakis, the positive results of the survey over the past three years are testament to the strength of the franchise business model and the strong bond shown by franchisors in working with their franchisees to sustain profitability. “With government and particularly the Small Business Ministry putting their weight behind nurturing entrepreneurs, facilitating skills transfer and providing accessible funding specifically to franchise initiatives, we can look forward to even greater growth going forward.”
This is the third independent survey undertaken among franchisors in order to assess the contribution by the franchise sector to the South African economy in terms of GDP, business establishment, creation of employment and the identification of key franchise practices. Two hundred and fifty interviews were conducted with franchisors by telephone.
Some highlights of the survey include…
SIZE OF THE SECTOR AND BUSINESS CATEGORIES
- At an exchange rate of R10.65 to the US Dollar, South Africa’s GDP for 2014 was R3 727.5 billion Rand. The estimated turnover for the franchise market is R465.27 billion Rand, which is 12.5% of the South African GDP.
- South Africa has over 600 franchised systems, just over 39 000 franchise outlets and 17 franchise business sectors.
- The number of franchises has levelled out from 627 in 2013 to 625 in 2014.
- According to the findings of this study, there are 39 119 stores located in South Africa, most of which are owned by the franchisee. The large majority of these business units are to be found in Gauteng, more than twice as many as in the Western Cape and three and a half times as many as are in KwaZulu-Natal.
- According to the 2015 Franchise Directory, the largest franchise system is the Fast Foods and Restaurant category (24%). The Retailing (12%) and Building, Office, Home Services (11%) sectors are next biggest. Automotive Products and Services, Childcare, Education and Training and Business to Business occupy 24% of the franchise market (9%, 8% and 7% respectively). The other categories are 6% and smaller.
In forthcoming issues of the FASA newsletter we will unpack further revelations from the survey which include interesting facts such as:
- The potential for growth in the franchising industry is strong. Franchisors are optimistic and many are intending to expand their franchise system. Despite the recent economic downturn, this industry has continued growing.
- Potential franchisees ought to be entrepreneurial individuals who clearly understand the benefits of buying into a franchise system, however, given the number of franchisors who complained about the being able to find the ‘right’ franchisees, this is not always the case.
- It is up to the franchisor to provide their franchisees with the tools and training that they need to run the business successfully, but at the end of the day, the success or failure of the business unit rests on the shoulders of the franchisee, hence the concern about finding the right franchisee.