Fast food for thought

Finweek English Edition - - BUSINESSTRENDS CALL CENTRES - JO­HANN VAN ZYL jo­hannv@finweek.co.za

SOUTH AFRICA’S fran­chise in­dus­try suc­ceeded in im­prov­ing its turnover by 12% over the dif­fi­cult pe­riod be­tween 2008 and 2010 and the suc­cess rate of new fran­chises re­mains ex­cel­lent – much bet­ter than for new busi­nesses in gen­eral. Ben­deta Gor­don, of Franchize Di­rec­tions, says 2 286 new fran­chise busi­nesses started over the pre­vi­ous two years and R287,15bn was con­trib­uted to SA’s econ­omy.

“Fran­chisors are con­stantly im­prov­ing their sys­tems and busi­ness mod­els to make up for the un­cer­tainty in the mar­ket. If these en­ter­pris­ing peo­ple see only a lit­tle growth po­ten­tial you can be sure new busi­ness op­por­tu­ni­ties will come from it,” Gor­don says.

In its lat­est eco­nomic pre­view for fran­chises, PwC also stressed it’s a grow­ing, suc­cess­ful sec­tor. SA’s fran­chis­ing in­dus­try – it cur­rently con­trib­utes around 11,8% to GDP – still has a lot of ex­pan­sion po­ten­tial, bear­ing in mind in the United States it con­trib­utes an es­ti­mated 50% to its econ­omy and 25% in Aus­tralia.

Vera Vala­sis, CEO of the Fran­chise As­so­ci­a­tion of SA (Fasa), con­firms a fran­chise picked and tack­led cor­rectly can be very re­ward­ing. “How­ever, for some it can be very stress­ful if they haven’t re­searched the in­dus­try prop­erly be­fore in­vest­ing in it.”

Fasa there­fore rec­om­mends that prospec­tive fran­chisees should in­ves­ti­gate the in­dus­try very thor­oughly be­fore mak­ing a de­ci­sion. Es­pe­cially don’t elim­i­nate cer­tain sec­tors in ad­vance – you may just over­look a hid­den profit-maker. It’s also rec­om­mended in­vestors should adopt a long-term ap­proach, which in­cludes re­search into the par­tic­u­lar fran­chise’s chances of suc­ceed­ing fi­nan­cially, how long it could take be­fore turn­ing a profit and whether it’s in line with your own plans to be in­volved with an own busi­ness for sev­eral years.

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