Studies indicate that the informal sector holds potential for substantial enhancement and effective administration through a franchised network. This approach additionally provides a means for businesses to enter the informal market, which is expanding at a rate twice that of the formal sector. This is particularly noteworthy within the context of BEE (Black Economic Empowerment), as it promotes the ownership, management, and oversight of enterprises within the South African economy.
Franchising originates from small businesses rather than large corporations, yet accomplished franchisees evolve by adopting more corporate strategies as they grow. Numerous established and emerging businesses are unaware of the franchising potential within their operations. In the contemporary landscape, virtually every business sector holds the potential for prosperous franchising ventures.
For numerous companies aiming to enhance effectiveness and bolster profits, franchising represents the optimal pathway. Enabling businesses to be run by franchise operators offers the substantial benefit of decentralization. Especially within labour-intensive industries constrained by rigid labour regulations, such a transition could prove advantageous for numerous enterprises.
In its essence, franchising represents a business approach that facilitates an expanded distribution framework for a product, service, or business model. Through franchising, a franchisor can expand their network by leveraging the investment brought in by franchisees, who also undertake the responsibility of managing their individual outlets daily.
This arrangement empowers the franchisor to focus their energies and resources on advancing the product, service, and brand, while concurrently motivating franchisees within the network to optimize business outcomes at the local level, aligning with their own interests.
Franchising is frequently characterized as a mutually beneficial arrangement in which both the franchisor and their franchisees collaborate to achieve advantageous outcomes over the long term. It presents boundless opportunities for expansion to entrepreneurs possessing a solid idea and the resilience to nurture it from modest origins into a potentially nationwide, and even global, enterprise.
For existing organizations franchising offers exciting opportunities as a distribution mechanism. It can be a means of vertical integration that combines a high degree of control with a low degree of risk.
“The franchisor controls standards and procedures while the franchisee carries the operational and financial risk” explained Maria D’Amico, Chair of FASA.
Fred Makgato FASA’s CEO warns, however, that those entering the franchise realm must have high ethical standards and a genuine desire to help other people to be successful. “For a franchise to be successful, the prospective franchisor must be prepared to make a substantial investment upfront and take a long-term outlook on returns”, concluded.
Source: FASA.