The franchise industry’s contribution to gross domestic product (GDP) grew to an estimated R587-million, or 13.3% of the country’s GDP, in 2017, compared with 11.6% in 2016.
Presenting the Franchise Association of South Africa’s (Fasa’s) annual franchisor and franchisee survey results, in Johannesburg, on Tuesday, research firm Research IQ analyst Margaret Costantaras noted that the largest franchise sector was fast food and restaurants, representing 25% of the franchise market in 2017, up from 24% in 2016.
She added that, during the last year, an increasing number of franchisors believed that their businesses were at the success stage. “One in five describe themselves as being in the mature stage, consistent with a year ago,” she noted.
Further, there was a decrease in the number of franchises labelled as being in the ambitious stage with many franchises moving into the success phase.
However, although expectations about the success of businesses in the future remain positive, there was a significant increase among those who are uncertain about the future.
“Around 20% believe their turnover will not change, though, with a corresponding drop in the number who are expecting growth.”
Meanwhile, the sector employed some 343 319 people in 2017, compared with 329 245 in 2016.
“The average number of employees per system is 437 compared with 527 last year. Employment includes franchisor management and staff, franchisees and their staff and branch management and staff.”
“While the top challenges facing franchisors remains finding the right franchisees and staff with the necessary skills, there seems to be a shift in priorities and challenges with finding the right location, the poor economy, increasing costs and finding franchisees with the necessary finance taking on more importance,” Costantaras pointed out.
Other issues included high rentals, franchisees not meeting the standards of the business, the marketing of the business, lack of business and industry experience and staff training.