🕒: Four minutes
The Franchise Association of South Africa's latest franchise survey, sponsored by Sanlam, shows that franchising, of all the business formats and across all sectors, continues to show growth and resilience despite unpredictable conditions, thanks to its unique business format.
The number of franchise systems in South Africa has risen to 865 from 843 in the last year, continuing the growth trajectory with a total of 45,011 outlets, most of which are owned by franchisees (80%). The number of outlets that were signed up in the last year is 2,602.
According to Vera Valasis, executive director of FASA, the survey, whilst still showing positive growth and a high level of franchisee satisfaction, shows that franchisees are carefully and cautiously navigating the economic storms to safeguard their businesses, supporting their franchisees whilst trying to grow their brand and contribute to the country's gross domestic product; "It is testament to the entrepreneurial strength of the franchising sector that there has been an increase in the total number of people employed in the franchise system – from 343,319 to 369,573."
On average, each franchisee employs 18 staff members in the business. There are 12 full-time and six part-time employees and in franchisee businesses, the average ratio between management and staff is 1: 8 (two management staff and 16 non-management staff).
In keeping with concerted efforts to transform the sector, the average percentage of ownership by previously disadvantaged individuals has improved significantly from 17% to 27%. Likewise, the average percentage of ownership by women has increased significantly from 25% to 39%.
According to FASA chairman, Tony Da Fonseca, "It's been a tough trading season for most, if not all, industries, so it is reassuring to see that our sector is weathering this tough economy better than most. The increase in GDP contribution is encouraging. Franchised business concepts remain a viable option due to the 'strength in numbers' benefits. I remain optimistic and encourage franchisors to stay focused on building their brands and do everything possible to guide and support their franchisees.”
Jannie Rossouw, head of Sanlam Business Market, says successful business ownership is critical to the South African economy and franchising is a massive contributor; "As sponsor of the annual FASA franchise survey, we are passionate about helping business people succeed on every level and we believe the knowledge gleaned from successful franchisors and franchisees offers valuable insights into the mix of factors that make up successful business ownership."
Survey Highlights
- One in three franchisors claimed that their annual turnover exceeded R20 million.
- Roughly one in five franchises have rebranded or changed the image of their franchise within the last year, which is twice as many as the year before.
- An estimated turnover of R721 billion for the franchising industry is equivalent to 15.7% of the total South African GDP, an increase on last year's figure of 13.3%.
- The number of franchise owners claiming to have some form of continuity planning remains consistent with 2017's findings at 28%, including surety protection, the financing of buy and sell agreements and financing for the replacement of key people.
- The number of international brands in South Africa has more than doubled in the last year – from 12% to 27%.
- 39% of franchisors claimed to have businesses in Africa, outside South African borders; approximately 1,775 stores. Most of these business units are found in the neighbouring countries of Namibia and Botswana, with growth noted in Mozambique, Kenya and Zambia.
- 12% of franchisors claim to have business outside African borders, approximately 1,036 stores.
- The average number of years franchisees are in business has remained consistent at 10 years, with 36% in business for more than 10 years and 67% for more than five years.
- 84% of franchisees rated their relationship with the franchisor as"very good", based on how helpful and supportive the franchisor is.
- 54% of existing franchisees would recommend buying a franchise of the same brand to prospective franchisees, an increase from 45% last year; reasons include the helpfulness and support received from their franchisors, involvement with a trusted, well-established brand with a good reputation and yielding high returns.
- 72% of the franchisees interviewed were very or extremely likely to consider the purchase of another store in the same network.
- Franchisees remain optimistic about the future of their businesses, with 78% expecting to see growth in the coming year.
- The median net profit for the last financial year was given as 10.4%.
"There is no question," concludes Vera Valasis, "That franchising as a business format not only offers viable business opportunities but ensures that the network of franchisees has the necessary support to weather the many economic onslaughts that are so prevalent today. The longevity of franchisees in business and their good working relationship with their franchisor proves that 'being in business for yourself but not by yourself' is what makes for a successful partnership."