Last week, the Franchise Association of South Africa (FASA) published the results of the latest survey that it carried out on the country’s franchises. The results were seriously encouraging for the industry, estimating that in 2012, franchising expanded at a rate of 21%.* Such a number is incredible, particularly when considering that the economy as a whole is predicted to grow at about 3% this year, an amount that is too small to have any real impact on the country’s high unemployment rate. These opposites reflect the strength of franchising and show that it can succeed even in times of economic slowdown.
Franchise Association of South Africa’s Positive Results
The results were based on answers from 217 franchisors – a 32% response rate from those listed in the 2012 FASA Franchise Directory, all of whom were contacted. Results show that the franchise industry is not just growing, it’s thriving, with roughly 3,700 new franchises being set up last year; franchises expanding to cover other countries in Africa, Australia, the US, the Middle East and Europe; and the industry currently employing more than 300,000 people.
It is split into the following categories:
South Africa’s Economy
The latest World Economic Forum’s (WEF) Global Competitiveness list was also released last week (3rd September), and it showed that South Africa’s global ranking is a cause for concern. Happily we are ahead of Brazil, Russia and India, second in the Sub-Saharan gang, and have only lowered one place from last year, moving from 52nd to 53rd (out of 148). However, it was just a few years ago that we were ranking much higher at 35th, and our economy is actually growing at its lowest rate in four years – like most countries, it has been hit by the global recession. Labour unrest is also a major factor, with strikes from construction, factory, public sector and mine workers who are demanding an increase in wages. Such actions cause unpredictability and cost the economy millions each day they occur. A lack of skills amongst workers is also a problem, particularly in the IT department.
Why is Franchising Thriving?
So why is franchising doing so well during this slump? Well we still have many positive features to lure foreign investment, ranking highly in the Global Competitiveness list on our legal rights, our securities exchanges and our auditing. We are a strong country on this continent for foreign firms to base themselves in and trade from.
Of course, franchising appeals to the average worker as well as to international companies. The success rate for franchising is much higher than for private startup companies – in May 2013 Trade and Industry Minister Rob Davies said that five out of seven small businesses in South Africa close down within their first year of opening. Furthermore, a franchisee is not employed in the same way as discontented factory workers; rather, he or she is their own boss.
Then there are all the features of franchising that make it strong in any economy or context. Running a system that has already been proven to be successful; on-going support all the way from launching and startup to the end of contract; a recognised brand that customers already trust, and so on.
When asked in the FASA survey what was the biggest challenge to running a franchise was, the franchisors’ highest answer was “finding the right franchisee.” That’s where Franchise Direct comes in.
*http://bit.ly/14q7H84