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Franchising Sector Records Positive Growth

21 Sep 2018 - Franchising continues to show growth and resilience despite challenging socioeconomic and political challenges in the country.

The industry had an estimated turnover of R721-billion in the last financial year, the Franchise Association of South Africa (Fasa) reported on Friday.

The number of franchise systems captured on Fasa’s database rose to 865 from 843 over the past year, continuing the growth trajectory with a total of 45 011 outlets, the majority of which are owned by franchisees (80%).

Sector transformation efforts have garnered improvements, with ownership by previously disadvantaged individuals increasing from 17% to 27% during the year. Similarly, ownership by women saw an increase of 39% from 25%.

The number of international brands in South Africa has more than doubled in the past year, from 12% to 27%.

The main challenge being experienced by franchisors is finding the right franchisees and staff with the necessary skills sets. Other challenges relate to finding finance to start a business, finding the correct location for outlets, and finding franchisees with sufficient capital and high rentals.

There has been an increase in the number of franchisors that expect a new franchise to take longer to break even than within the first year of operations.

About one in five franchises have rebranded or changed the image of their franchise within the last year, which is almost twice as many as the previous year.

FRANCHISEE SATISFACTION

The survey also polled 402 franchisees.

They highlighted the poor economy, creating good customer relationships, offering consistent good service, finding the right staff and growing the customer base as the main challenges experienced.

Eighty-four per cent of franchisees rated their relationship with the franchisor as very good or good, a significant improvement on last year’s ratings. The main reason behind a good relationship was attributed to mutual understanding between franchisor and franchisee.

There has also been a significant increase of existing franchisees recommending buying a franchise of the same brand, at 54% up from 45%. This is posited as a good indication of franchisee satisfaction, and the generally positive sentiment paints a good picture of the franchise sector.

Looking ahead to the coming year, the majority of franchisees remain optimistic for the future of their business, with 78% anticipating growth.

Fasa executive director Vera Valasis indicated that while the survey shows positive growth and a high level of franchisee satisfaction, it also indicated that participants are carefully and cautiously navigating the economic climate to safeguard their business, supporting their franchises while trying to grow their brand and contribute to the country’s gross domestic product.


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