Franchising a hot topic in entrepreneurial circles this week
Almost 500 franchised systems currently operate in South Africa. They produce 12.5% of GDP and 87% of them represent local brands. Surprisingly, a third of SA's franchises are non-foods systems, with the biggest growth areas being service-based and mobile or “man-in-a-van” concepts.
Speaking at a First National Bank (FNB) Kaya FM Franchising seminar in Johannesburg, franchise trainer and consultant Annie Baptiste said the high upfront cost of buying a franchise, R840,000 on average plus a 30% minimum cash deposit, is offset by the franchisor's marketing of the brand, superior fittings, support on-call and tested administrative systems.
“South Africa has around 26 000 franchised outlets, providing jobs to more than 375 000 people,” says Anita du Toit of the bank's franchising division. “There is room for many more franchise systems to be developed, especially in niche areas, such as specialised home retail concepts or personal services.”
Being able to spot opportunities to leverage the growing need for convenient products and services, which free up precious time for consumers to spend with their families, promises to be a winning recipe for success in this industry.
The fallout from the US economic downswing could also impact positively on SA's franchising industry this year, as large American franchise brands – suffering from reduced consumer spending – look to diversify their income sources in emerging markets.
The BizOpps Expo takes place at the Cape Town International Convention Centre this week (March 13-15) and the bank encourages entrepreneurs seeking new business opportunities in the franchise arena to visit the expo and make sure they get the correct information while they are there.
“Seek out opportunities in large and growing markets with the promise of sustainable growth, concepts that are rather unique and cannot be copied easily,” says Du Toit. “Investigate the franchisor and speak to the brand's franchisees, evaluate with second opinions and pull in the advice of your business banking franchise manager.”
The bank remains positive about the future of small businesses in South Africa, despite high inflation and intermittent power failures. “We believe continued economic growth, stable rates and the 2010 opportunity will outshine the negatives,” says Mike Vacy-Lyle, Head of Sales and Client Relations at FNB Commercial.
Vacy-Lyle says that, although a 14% increase in the price of electricity will challenge small business over the coming months, he has been impressed with the resourcefulness of the bank's SME clients in dealing with the electricity issues.
He adds that a recent announcement by the Finance Minister Trevor Manuel to increase the VAT threshold from R300 000 to R1m is a positive step in reducing the administrative burden facing small, medium and micro businesses in the country.
Entrepreneurs on the lookout for franchise opportunities and not able to attend BizOpps this week, can contact the Franchising Association of SA, look out for the Franchise Expo in May or find opportunities in local SME publications, such as Succeed and Entrepreneur. Alternatively, direct any franchising queries to the FNB Franchise Desk on (011) 371-6878.
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