FASA's franchise conference - strength of the franchise sector

“Be wise enough to learn from the past, shrewd enough to capitalize on the present, and clever enough to prepare for the future.”
In FASA’s almost 45 year history, the concern of the board made up of franchisors that have the best interests of the sector at heart, has been to nurture the entrepreneurial spirit that is at the heart of every franchisor and franchisee and to ensure that this phenomenal business system continues to enrich whilst contributing to job creation and to the economy of South Africa.

The Franchise Association of South Africa’s eighth independent survey, sponsored by Absa, undertaken among franchisors, after a hiatus of four years, 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, is a valuable tool for the sector to measure its performance, acknowledge its strengths and plan for the future.

Learning from the past

As a unique business system that relies on duplication of a concept, a brand, products and services through an ever-growing network of franchisees across fourteen different business sectors, getting an overview of how those franchises handled the strains and stresses of the past four years is invaluable, according to Fred Makgato, FASA’s CEO.

“No other industry or sector has such diversity of business segments within its operating spectrum. We represent businesses ranging from retail to real estate; from fast food to restaurants; from automotive products & services to building, office and home services; from education & training to health & beauty; from business-to-business to personal & professional services; from construction to digital and technology. To be able to extrapolate stats and figures and a sense of how they all fared over the past four years and get a sense of how they see the future is invaluable to both the industry and the country as a whole.”

Maria D’Amico, Chair of FASA believes that this year, after all the inevitable upheavals due to Covid-19 restrictions, the riots, floods and increased load-shedding, franchisors were keen to be part of the analysis that could give them a perspective of the past and strategies for mitigation for the future. “We appreciate the eagerness and transparency of franchisors and franchisees that opened up about their challenges but ultimately, as the survey results show, it has proved unequivocally that the franchise sector, through its business system of duplication and support, has all the makings to withstand even the most trying of times.”

Capitalize on the present

Getting the facts and figures on the ground of how the franchise sector has performed and being able to learn from the hard lessons of surviving the past can only stand every franchise in good stead. Whether it’s taking encouragement from the optimism about the success of their businesses (81% in 2018; 89% in 2019and 98% in 2023) to recognising that the drop in the number of franchise systems from 813 in 2019 to 727 in 2023 is a reality check – attributed to the disruptions of the past four years which put the break on new concepts coming on line and signals perhaps the closing of smaller fledgling concepts that could not get off the ground during the pandemic.
What remains indisputable is the power that is the franchise sector in South Africa and its relevance to the economy of the country. With an estimated turnover generated for 2023 of R999 billion, a 36% increase over the figure of R734 billion which is equivalent to 15, 0% of the total South African GCP of R6 660 billion in 2023, franchisors and franchisees can be proud of their tenacity and commitment to running profitable and ethical businesses and more so to be contributing to skills transfer and employment.

James Noble, Head: Wholesale, Retail & Franchise Business at Absa, the sponsors of the survey, agrees that the example that franchising has set on how to tackle the curveballs of the past four years is being reflected in the positive survey results. “As a bank with a dedicated franchise division, we have become part of the solution that franchisors and franchisees collectively identify – whether it’s in giving them stop-gap financing, advice on energy solutions or helping them cope with financial challenges.”

Prepare for the future

What the survey once again establishes without doubt is that franchising offers proven models, brand recognition and a lower-risk investment. Franchisors that strengthened their business systems and supply chains during the pandemic should be highlighting those strengths, elaborating on steps taken to mitigate the risks, introduce new strategies and publicise how franchisees were supported.

Planning the blueprint of how franchisors and franchisees see the future is what the franchise sector needs to spur them on to greater heights. Having learnt the hard lessons from the past four years, every franchise system needs to take on board the lessons learnt, harness the power of the collective that is made up of franchisor and its franchisees and face the future with a new determination to show that we can turn the tide.

FASA’s CEO Fred Makgato believes that the only way to avoid an impending disaster in South Africa is for the government to deal with load shedding and to recognize that it is the businesses, both large and especially small that are keeping the economy going. “On the back of such a strong survey of the franchising sector, that is prepared to safeguard its position as a significant contributor to the country’s economy and is willing to play its part to keep the wheels of business and entrepreneurship turning, we call on government to now do their part in rectifying the debilitating state of the country for the sake of the economy, its citizens and the future of South Africa.”

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