Franchising gets international interest

"Whilst there certainly was strain on the franchise sector over the past two years, the hosting of the World Cup gave a much-needed boost to franchise brands that were able to capitalise on the increase in visitor numbers and showcase their brands, many of them proudly home-grown," says Vera Valasis, FASA's executive director.

Benefiting the most from the buzz of the World Cup were the restaurants and fast-food franchises. Most brands reported between an 11% and 24% increases in sales compared with the same month last year with most franchise groups planning ahead of time to ensure that their franchisees were well prepared in terms of stock, deliveries and specials. Even franchises in the non-food sectors were able to capitalize on the goodwill of the World Cup, if not catering directly to the visitors they got into the spirit of the World Cup and reaped the benefits.

Brazil takes note

On the back of South Africa's successful hosting of the World Cup, a Brazilian trade and investment delegation, organized by the Brazilian Franchise Association, visited South Africa on a fact-finding mission at the end of July. FASA hosted a workshop, sponsored by Standard Bank, giving an overview of the local franchise sector, in respect to the economy, new laws that may affect new entrants into the market and the challenges that go with establishing a footprint in Africa.

"It was interesting to see the many parallels between South Africa and Brazil," adds Valasis. "We're both fortunate enough to be the powerhouses of our respective continents with franchising contributing around 12% of GDP and both boasting a high percentage of home-grown concepts - South Africa sits at 88% and Brazil at 89%. Brazil currently has 65 franchise brands with operations on all continents and is planning a concerted effort to promote its brands abroad ahead of its hosting of the World Cup in 2014 and the Olympics in 2016."

Cautiously positive

According to Valasis, the outlook for franchising going forward, whilst cautious, continues to be positive. "This has been a trying time for all franchisors and franchisees but most were able to weather the storm with careful cost cutting and increased franchisee support. Typically franchising, by its very nature, is structured on very stringent business principles to maximise efficiencies and this stood them in good stead during the tough times.

"Whilst some franchise sectors suffered losses, others like those in the food sector, drew on their innovative resources to re-price, re-position and adapt to the changing climate. Others, like those in the automotive services saw their businesses flourish as people chose to repair rather than replace and retailers in the basic commodity market and second-hand market saw increased sales. Sectors in education and surprisingly in the beauty and health sector continue to show good growth."

Thulani Cele, chairperson of FASA, is positive that franchising will continue to play a crucial role in stimulating the economy for many years to come. "Franchising in South Africa is underutilised and is not given enough credit for the role it plays in the economy, in stimulating entrepreneurship, in establishing small businesses that make up the backbone of the economy and above all in providing close to 500 000 jobs. FASA would like to see government give more attention to the positive role that franchising can play in stimulating the small business sector and consider both social and tandem franchising as infrastructural options. Particularly in these tough economic trading conditions, big business is also urged to look at the potential of using the franchise format as an alternate expansion mechanism."