2017 was a positive year for franchising in South Africa and as 2018 progresses it is the perfect time to analyse how the industry has developed and how it is advancing.
The Franchise Business Model
The franchise sector in South Africa employs approximately 400,000 people through 757 franchise systems and their 35,111 franchise outlets. The sector contributes 13.3% to South Africa’s overall gross domestic product. The franchise industry’s turnover was estimated at R587 billion in 2017, compared to 2014’s R465 billion. This demonstrates the positive growth that the sector has experienced over the last number of years. South Africa is among the top ten countries worldwide that is projected to have the greatest average annual GDP growth from 2016 to 2050; in 2050 the country’s GDP is predicted to have increased by 3.7%.
"The franchising industry continues to make a healthy contribution to the South African GDP," stated Vera Valasis, Executive Director of FASA, the Franchise Association of South Africa. "Benchmarking where we stand on the world franchise stage puts South Africa 36th in a list of 181 countries – between Singapore, Malaysia, Ireland and Pakistan in 34th, 35th, 37th and 38th place respectively – a position we can be greatly proud of."
The franchise industry in South Africa has shown itself to be very resilient, particularly given the economic downturn of the last ten years. Two in three South African franchisors have been in business for more than a decade and this longevity demonstrates that franchising is a successful and viable business model. This success has demonstrated to international investors and franchisors that the South African market is flourishing and open to expansion. Franchising is a popular pursuit in Africa as a whole and 31% of franchisors interviewed by FASA reported that they had stores outside of South Africa.
Chairman of the Franchise Association of South Africa, Tony Da Fonseca, has expressed his optimism towards the sector’s continued growth in the coming years: "As a sector, we are doing great things in a tight economy. Tracking our success and looking for areas that need improving is part of the entrepreneurial nature that sets us apart as franchisors and franchisees." Da Fonseca was also proud to report that 78% of the franchisors surveyed by FASA are confident about the future growth of their businesses.
Franchise Options
The franchise industry in South Africa is robust and shows no signs of slowing down. Unsurprisingly, South Africa’s largest franchise sector is fast food and restaurants, making up a quarter of the overall industry. The retail sector follows closely behind at 15%. Education has become a very popular choice for franchisees in South Africa, and makes up 9% of the sector. It is a very viable and durable business, as the need for education is inevitable in today’s society. Education has become a priority in South Africa as a whole, so it is natural that the franchise industry should benefit from this. Franchises associated with health and wellbeing are also growing rapidly as society becomes more informed and health conscious.
Franchise Opinions
In our 2017 survey, the majority of visitors to FranchiseDirect.co.za expressed that the primary reason they are considering franchising is because they want to be their own boss, but they do not want to have to come up with their own business idea. This is a universally popular reason for franchising, as the franchise model cuts out the arduous and challenging process of designing a business model. The majority of visitors also revealed that they have been considering engaging in the franchising process for three to four years. This demonstrates the commitment individuals maintain towards the industry, as they may take a considerable amount of time to research their interests and different franchise opportunities before settling on the right franchise for them. Almost 60% of prospective franchisees had already been in contact with a franchisor about buying a franchise.
Recent political developments have also influenced the franchise sector. Newly elected President Cyril Ramaphosa has committed to support small businesses and entrepreneurship, a move which could have a highly positive impact on growth and innovation within franchising.
2018 Franchise Events
FASA organises a number of events throughout the year. The key events for the 2018 franchise calendar include the Franchise Expo, June 29th to July 1st and the Franchise Convention, taking place June 28th. This year’s convention will host over 45 speakers and is sure to be a standout event, focusing on marketing and technology, growth and international expansion, franchise operations and legal assistance.
FASA’s 2018 Annual General Meeting took place on February 27th and was a fantastic opportunity for the franchise community to congregate, looking forward to the year ahead and celebrating the successes of 2017.
Conclusion
Franchise Direct felt that 2017 was a very positive year for the South African franchise industry. 2018 is proving to be similarly positive; we have experienced a 5% increase in interest and applications to open new franchises in January and February of this year, compared to the same period in 2018. This is a very promising start to the year, and we look forward to the rest of 2018!
The franchise sector in South Africa is primed for great success this year. Invest in your future in 2018 and find the perfect franchise for you today.