The Resilience of the Franchise Model
Franchising as an industry in South Africa is flourishing. Despite the pressures of the 2008 economic downturn and recession, franchising has shown its resilience as a business model. With a growing middle class who have disposable income to spend and invest, South Africa has come to be regarded as a country with a strong economy in the post-recession era. The success of the franchise model during the recession, demonstrating its resilience, has led franchisors to consider South Africa as a market ripe for expansion.
There are a number of ways in which franchising is regarded as a resilient business model. Franchising eliminates the risk and uncertainty in setting up your own business; you are buying into an established brand, with an established reputation and ready-made target market. Franchises also allow investors to benefit from proven methods and a record of success. It is likely that franchising works particularly well as a business model in South Africa because South Africans are brand conscious and appreciate the stability and reliable quality that franchises can offer. Franchises are often considered a mature business by economic institutions, and this may give them the edge on fledgling companies when applying for financial aid. A proven operating system, valuable trade contacts and ongoing franchisor support are important advantages that are considered by financial institutions and potential franchisees alike when a new business venture is proposed.
Certain industries within South Africa’s franchise sector have been considered particularly recession-proof throughout the last decade. The South African fuel retail industry has enjoyed considerable growth in recent years, and the healthy profits the fuel retail sector has demonstrated, even during the slow growth period in the wake of the recession, highlight its viability . Fuel retailers can also increase their profitability by incorporating additional elements such as convenience stores, quick-serve restaurants and carwash services into their franchise model.
Events such as First National Bank’s annual Franchise Leadership Summit demonstrate that, not only is franchising regarded as a popular local concept in South Africa, but it is being recognised as such on a national level. The 2017 Summit will be the sixth annual event, and is consistently well attended by premium franchisors, those interested in franchising, and companies offering additional franchising expansion services. The theme of the Summit for 2017 is Exponential growth through entrepreneurship. The Summit’s popularity emphasises the resilient nature of franchising, and the powerful way in which the franchise industry in South Africa has the ability to stimulate job creation and entrepreneurship.
It is clear that, despite periods of economic turbulence, franchising in South Africa has remained a viable and popular business model.