Fran­chis­ing ‘has abil­ity to grow in tough con­di­tions’

Business Day - - BUSINESS & ECONOMY - Bekezela Phakathi Par­lia­men­tary Writer phakathib@busi­nesslive.co.za

Fran­chis­ing con­tin­ues to show strong signs of growth de­spite SA’s gen­eral poor eco­nomic per­for­mance in re­cent years.

Ac­cord­ing to fig­ures from the Fran­chise As­so­ci­a­tion of SA, the sec­tor’s share of the coun­try’s GDP in 2017 stands at R587bn, or 13.3%, an in­crease from the 11.6% of GDP recorded in 2016.

The num­ber of out­lets (fran­chisees) rose from 31,111 to 40,528 and the num­ber of fran­chise groups (fran­chisors) grew from 757 to 845 in 2017.

The sec­tor now em­ploys 343,319 peo­ple, an in­crease of 14,074 jobs from 2016.

Ac­cord­ing to Jeremy Lang, re­gional GM at Busi­ness Part­ners, a spe­cial­ist risk fi­nance com­pany for for­mal small and medium en­ter­prises, the fran­chis­ing sec­tor is grow­ing on all fronts, and is in­creas­ingly of­fer­ing op­por­tu­ni­ties for lo­cal en­trepreneurs and en­abling the creation of em­ploy­ment op­por­tu­ni­ties — some­thing SA des­per­ately needs as the econ­omy con­tin­ues to shed jobs.

Lang said the fran­chise sec­tor’s ap­par­ent abil­ity to con­tinue to per­form in a weak eco­nomic cli­mate could be linked to its “tried-and-tested” busi­ness ap­proach. “The fact that a fran­chised busi­ness has a proven busi­ness model gives it a rel­a­tive ad­van­tage over in­de­pen­dent busi­nesses, which may still be find­ing their feet through trial and er­ror. Sim­i­larly, while an in­de­pen­dent busi­ness has to dou­ble down on mar­ket­ing to draw in re­luc­tant cus­tomers, fran­chised out­lets have the added ad­van­tage of brand strength and mar­ket ac­cep­tance,” he said.

The con­tin­ued en­try into SA of global fran­chise sys­tems look­ing for ex­pan­sion was also driv­ing the sec­tor’s growth and cre­at­ing op­por­tu­ni­ties for lo­cal fran­chisees, Lang said.

Since the launch of Busi­ness Part­ners’ R150m Brands and Fran­chise Fund in 2014, the com­pany had no­ticed higher in­ter­est from lo­cal ex­ist­ing and as­pir­ing en­trepreneurs seek­ing to own and ex­pand their own fran­chises through fi­nance and men­tor­ship “in or­der to cap­i­talise on fran­chis­ing’s re­mark­able abil­ity to grow in tough mar­ket con­di­tions”.

The sec­tor will con­tinue to grow in fast food ser­vices, au­to­mo­tive ser­vices, child en­ter­tain­ment and ed­u­ca­tion.

“In the fore­see­able fu­ture, the dom­i­nant trend for fran­chise out­lets across all in­dus­tries will be a con­tin­ued and even more in­tense search for ef­fi­cien­cies, at least for as long as bot­tom lines re­main un­der pres­sure.

“As such, fran­chisors and fran­chisees should con­sider how they can do things bet­ter, more cost ef­fec­tively and timeously, with­out sac­ri­fic­ing the qual­ity of their prod­uct or ser­vice of­fer­ing,” said Lang.

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