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South Africa’s franchise industry succeeded in improving its turnover by 12% over the difficult period between 2008 and 2010 and the success rate of new franchises remains excellent – much better than for new businesses in general. Bendeta Gordon, of Franchize Directions, says 2 286 new franchise businesses started over the previous two years and R287,15bn was contributed to SA’s economy.
“Franchisors are constantly improving their systems and business models to make up for the uncertainty in the market. If these enterprising people see only a little growth potential you can be sure new business opportunities will come from it,” Gordon says.
In its latest economic preview for franchises, PwC also stressed it’s a growing, successful sector. SA’s franchising industry – it currently contributes around 11,8% to GDP – still has a lot of expansion potential, bearing in mind in the United States it contributes an estimated 50% to its economy and 25% in Australia.
Vera Valasis, CEO of the Franchise Association of SA (Fasa), confirms a franchise picked and tackled correctly can be very rewarding. “However, for some it can be very stressful if they haven’t researched the industry properly before investing in it.”
Fasa therefore recommends that prospective franchisees should investigate the industry very thoroughly before making a decision. Especially don’t eliminate certain sectors in advance – you may just overlook a hidden profit-maker.
It’s also recommended investors should adopt a long-term approach, which includes research into the particular franchise’s chances of succeeding financially, how long it could take before turning a profit and whether it’s in line with your own plans to be involved with an own business for several years.
4 Steps before you enter the franchise industry
1 Compare the different franchise options, even within a sector. You could perhaps feel more at home with one franchisor than another and perhaps discover problems with others. Liaise with Fasa about a franchise group’s status.
2 Let an accountant look at the figures before you go to all the trouble of drawing up a business plan. Look realistically at turnover potential, training and other costs and even hidden expenses. Can you survive until it becomes profitable?
3 Make sure you understand exactly what the legal aspects of the business involve. Get guidance from lawyers with specialist knowledge of the field.
4 Most importantly: does your personality suit this rather rigid industry?
Source: Fasa
“Franchisors are constantly improving their systems and business models to make up for the uncertainty in the market. If these enterprising people see only a little growth potential you can be sure new business opportunities will come from it,” Gordon says.
In its latest economic preview for franchises, PwC also stressed it’s a growing, successful sector. SA’s franchising industry – it currently contributes around 11,8% to GDP – still has a lot of expansion potential, bearing in mind in the United States it contributes an estimated 50% to its economy and 25% in Australia.
Vera Valasis, CEO of the Franchise Association of SA (Fasa), confirms a franchise picked and tackled correctly can be very rewarding. “However, for some it can be very stressful if they haven’t researched the industry properly before investing in it.”
Fasa therefore recommends that prospective franchisees should investigate the industry very thoroughly before making a decision. Especially don’t eliminate certain sectors in advance – you may just overlook a hidden profit-maker.
It’s also recommended investors should adopt a long-term approach, which includes research into the particular franchise’s chances of succeeding financially, how long it could take before turning a profit and whether it’s in line with your own plans to be involved with an own business for several years.
4 Steps before you enter the franchise industry
1 Compare the different franchise options, even within a sector. You could perhaps feel more at home with one franchisor than another and perhaps discover problems with others. Liaise with Fasa about a franchise group’s status.
2 Let an accountant look at the figures before you go to all the trouble of drawing up a business plan. Look realistically at turnover potential, training and other costs and even hidden expenses. Can you survive until it becomes profitable?
3 Make sure you understand exactly what the legal aspects of the business involve. Get guidance from lawyers with specialist knowledge of the field.
4 Most importantly: does your personality suit this rather rigid industry?
Source: Fasa
