CASH IN ON FRANCHISING
FRANCHISING A BUSINESS OPPORTUNITY SET FOR SUCCESS
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