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Mission Accomplished: The US Franchise Trade Mission in South Africa

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The Franchise Trade Mission Briefing

On 26 September, delegates representing 13 US franchise brands embraced Johannesburg. They were there as part of the US Franchise Trade Mission to Sub-Saharan Africa, an event hosted and conducted by the US Embassy’s Commercial Service and sponsored by the International Franchise Association and the Franchise Times. The franchisors stayed for three days before moving on to visit Kenya and Nigeria, aiming to leave the continent by 4 October.

The South African franchise sectors considered most suitable for US franchises include retail, business to business, automotive and above all, food (fast food, casual/full service restaurants, home delivery, etc.), a sector which accounts for 22% of the South African franchising industry. Franchisors participating in the mission – International Franchise Association members – were mainly from the US food industry and included Moe’s Southwest Grill, Great American Cookies, and

US Food Industry Franchises

Dairy Queen (a chain of treat stores and the fast food restaurant Grill & Chill), as well as representatives from other sectors including education services ( Tutor Doctor) and construction equipment (Hertz Equipment Rental).

The main aim of the South African section of the Sun-Saharan mission was for these franchisors to conduct one-on-one meetings with potential business partners in order to explore partnership prospects with qualified area developers and masters who could help them grow and gain franchising success in the South African market, as did the US companies Subway and Snap Fitness before them. The franchisors also attended presentations from local franchise experts on essential business matters such as how consumer needs in South Africa are changing and how the legal framework for franchising works. This helped them to learn more about these topics and to understand the market from a demographic, legal and growth perspective.

Carrying Out the Franchise Trade Mission*

Much of this country’s population is migrating to the larger cities, and it is reckoned that 40% of the GDP comes from Johannesburg, a city where the middle class is growing rapidly. This made it the ideal location of opportunity for the franchisors to visit. The three days they spent there were jam-packed with meetings and events, including (but not limited to) the following:

Day one – the enthusiastic delegates were welcomed to the country by the Deputy Senior Commercial Officer of the US Commercial Service South Africa, Brent Omdahl, and his team. The president of the Franchise Association of South Africa (FASA), Derek Smith, gave the group statistics of the franchising market in this country, most of which were positive and showed that the industry has been strong for the past decade and that 88% of FASA’s members are expecting growth next year. One-on-one business meetings with prospective masters and area developers were carried out in the early afternoon, while later on a panel of local franchisors experienced at working in South Africa discussed the best practices for running a franchise in the country.

Day two – this started with a presentation from Eugene Honey, partner with one of the leading South African law firms Adams & Adams Attorneys, about the legal aspects of managing a franchise. He also gave advice on master and ordinary franchise agreements, funding and the time frame for setting it all up. The afternoon began with a McKinsey South Africa consultant and the CEO of Urban Studies talking about the trends of consumer behaviour, particularly in the expanding urban regions which provide good retail locations thanks to the shopping centres. They also warned against severe competition from local – and more experienced – companies.  The end of the day saw a press conference with reps from The Wall Street Journal, among other media, asking the franchisors questions about their plans for setting up their brands in the country.

Day three – the urban shopping centres referred to during the previous day were visited on 28 September in a trip referred to as the ‘Urban Safari’. Three Johannesburg
Shopping in a mall franchise

malls were toured, each covering different social classes, and the safari finished at Sandton City, which contains an incredible five stories and over 320 shops. The day also included a trip to The Mandela House and to the Lion Park; the chance to step away from the business world for a short time and end on a high.

*A more detailed report on the three days in Johannesburg can be found on the International Franchise Association’s blog page: http://bit.ly/lzLPbI

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