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Rising interest rates and other pressures: Can franchisees cope?The recent decision by the South African Reserve Bank to increase the interest rate to 6% has had an impact on all sectors of the economy, from consumers, big conglomerates to franchisees. As with all business enterprises, the economic conditions of the day have a direct and indirect impact on the operations of franchises - their production, management, pricing - and so must be analysed carefully and managed strategically. ![]() Ethel Nyembe.Image credit: Standard Bank Ethel Nyembe, Head of Small Enterprise of Standard Bank said: "The recent interest rate hike, combined with a myriad other economic challenges, certainly puts franchisees under pressure, and so, with the rate only expected to rise, they must plan carefully to mitigate the foreseen side effects for future success. Fortunately, there are a number of strategies that can help franchise owners weather this economic storm."
South Africa's economic problems are set to persist for the foreseeable future; load shedding is estimated to continue for at least five more years. For this reason, franchisees need to modify and streamline their business models to make them more efficient and cost effective, or, in some cases, alter them completely in order to survive. "For example," said Nyembe, "changing a struggling business to one that takes care of an age-old and ubiquitous consumer need - such as entertainment - can improve profits, but even this cannot act as a buffer against economic hardship. And there is definitely no substitute for thorough planning and meticulous financial management." |