CASH IN ON FRANCHISING

FRANCHISING A BUSI­NESS OP­POR­TU­NITY SET FOR SUC­CESS

Finweek English Edition - - FRONTPAGE -

South Africa stands proudly along­side lead­ing coun­tries in the US, Europe and Aus­trala­sia as a pi­o­neer in eth­i­cal and suc­cess­ful fran­chise de­vel­op­ment. The fran­chise in­dus­try sur­vey car­ried out by the Franchising As­so­ci­a­tion of South Africa (FASA) re­veals that franchising com­prises an es­ti­mated 9.7% of South Africa’s GDP – mak­ing the sec­tor a sub­stan­tial con­trib­u­tor to the South African econ­omy.

And even dur­ing the re­ces­sion franchising held its own, con­tribut­ing 11.8% to­wards the econ­omy over the 2008 to 2010 pe­riod, out­per­form­ing some of the coun­try’s other dom­i­nant sec­tors. It’s a re­silient busi­ness model and con­tin­ues to have a fail­ure rate of less than 10%, com­pared to the 90% fail­ure rate of in­de­pen­dent start-ups.

AN AP­PETITE FOR THE FAST FOOD SEC­TOR – WHAT’S ON THE MENU?

The fast-food sec­tor has been, and con­tin­ues to stay, at the top of the fran­chise pop­u­lar­ity chart – both lo­cally and in­ter­na­tion­ally. The ris­ing aff lu­ence among SA’s mid­dle class has led to quick ser­vice restau­rants (QSRs) be­ing pre­ferred over for­mal eater­ies, and the cash-rich and time-poor phe­nom­e­non con­tin­ues to spur growth. Al­though dis­pos­able in­comes have come un­der pres­sure, those in the QSR sec­tor are less af­fected as con­sumers favour con­ve­nience and value over cost. Given the strong per­for­mance of QSR fran­chise mod­els, the fol­low­ing fran­chises are a pretty safe in­vest­ment bet. In a com­par­i­son of the pre­dom­i­nantly ham­burger ori­en­tated c om­pet­ing br a nds, Keit h McLach­lan, se­nior re­search an­a­lyst at Thebe Stock­broking, iden­ti­fies those of­fer­ing a com­pelling in­vest­ment case in their cat­e­gory: Steers and Wimpy (owned by Fa­mous Brands), Maxi’s (Taste Hold­ings), Spur (Spur Cor­po­ra­tion), Burger King (part-owned by Grand Pa­rade In­vest­ments) and McDon­ald’s (owned pri­vately by Shan­duka).

Look­ing at McLach­lan’s f in­d­ings, Steers is rel­a­tively the cheap­est to setup – the Steers QSR store for­mat is the small­est but of­ten has limited to no seat­ing avail­able. While Spur’s of­fer­ing can be the most ex­pen­sive, its store size is the

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