Famous global franchises, like Starbucks Café Rouge, Paul and Las Iguanas, are coming to South Africa and seeking to spread across to the West Africa region also and it is as good for our taste buds, as it is for local entrepreneurs seeking new business ventures during turbulent economic climes.
With franchising accounting for 30,000 businesses in South Africa and comprising over 10 percent of the GDP, this business model could hold the key to improved future employment and economic growth scenarios.
Jannie Rossouw, head of Sanlam’s Business Market, the main sponsor of the Franchise Association of South Africa’s (FASA) Awards of Excellence says, ‘’There has never been a better time for the proven blueprint concept of franchising to provide new business ventures with a greater chance of success, with South Africa officially in recession and with unemployment at a 14-year high of 27 percent’’
Studies show that franchises have an 80 percent chance of survival versus the 20-30 percent attributed to other independent business models.
“Multiple contributing factors can make a franchise more likely to succeed than startup entrepreneurship options. For one thing, franchisees are provided with an operating manual, giving them a recipe for success, and this is complemented by rigorous training and access to experienced resources for support.”
The operations manual provides a proven ‘how to’ guide that outlines a standard code of conduct and fixed procedures to follow. This sets a business up to succeed, meaning it does not have to start from scratch.
Franchisees pay for training as part of the franchise fee.
This training, coupled with the operating manual, means less experienced, first-time business owners have an increased chance of success.
The bulk purchase ability a franchise model provides means established national deals with suppliers and high volumes of purchase that equate to better prices and approved payment terms.
When multiple businesses are shouldering the same cost, there is an inevitable decrease in costs for all parties involved.
This makes it easier for franchises to retain a marketing budget in turbulent financial times.
A brand’s visibility is especially important during a recession.
People will spend the little money they have available on brands that are top of mind.
This is where franchisees have an added advantage, given that the franchise is often already a well-established household name.
The brand has already proven itself to deliver on consumer promise.
Being part of a franchise gives a franchisee access to a ready pool of support, with fellow franchisees that have faced and resolved similar challenges.
People are increasingly being retrenched, as companies downsize and job opportunities become scarce.
Franchises provide viable self-employment opportunities with a blue print that gives individuals a strong arsenal of tools and skills.
However, Rossouw warns of the realities and potential pitfalls to be taken seriously.