According to FASA Chairman and MD of the OBC Group, Tony Da Fonseca, “it’s been a tough trading season for most if not all industries so it is reassuring to see that our sector is weathering this tough economy better than most. The increase in GDP contribution is encouraging but has to be viewed against the contraction of our economy. Despite this, franchised business concepts remain a viable option due to its “strength in numbers” benefits. I remain (cautiously) optimistic and encourage Franchisors to stay focussed on building their brands and do everything possible to guide and support their franchisees.”
Highlights of the franchisor survey include:
- The main challenges facing franchisors are related to finding the right franchisees (an increasing need) and staff with the necessary skills sets. Other key challenges include finance for franchisees, finding the right location for outlets, finding franchisees with sufficient capital and high rentals.
- Other lesser issues are aspects such as franchisees not meeting the standards of the business, staff training, lack of business/industry experience and the marketing of both the business and its products and services.
- 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.
- Roughly one in five franchises have rebranded or changed the image of their franchise within the last year, which is twice as many as the year before.
- One in three franchisors claimed that their annual turnover exceeded R20 million.
- The estimated turnover generated for the previous financial year was R721 billion.
- An estimated turnover of R721 billion for the franchising industry is equivalent to 15,7% of the total South African GDP, which is an increase on last year’s figure of 13,3%.
- The number of franchise owners claiming to have some form of continuity planning remains consistent with 2017 findings at 28%, with surety protection, the financing of buy and sell agreements and financing for the replacement of key people.
- Selling intentions within the next 12 months are negligible.
- The number of international brands in South Africa has more than doubled in the last year – from 12% to 27%.
- 39% of franchisors claimed to have businesses in Africa, outside South African borders. This is equivalent of 1 775 stores in the franchise population. Most of these business units are found in the neighbouring countries of Namibia and Botswana, with growth noted in Mozambique, Kenya and Zambia.
- 12% of franchisors claim to have business outside African borders. This is equivalent to 1 036 stores in the franchise population.
You can view the full Survey Results here.