South African companies are increasingly seeking growth opportunities north of the border as a hedge against lacklustre domestic prospects.
Highlighting the divergence of opportunity, the International Monetary Fund (IMF) forecasts a 6.5% domestic product growth for sub-Saharan Africa in 2015, with less than 3% forecast for South Africa.
Importantly for the franchise sector, FNB head of franchising Morne Cronje said at the FNB Franchise Leadership Summit, held in Johannesburg earlier this month, African growth was significantly less reliant on mineral extraction. Being innovative, adaptable and flexible, franchisors and franchisees were, therefore, ideally positioned to capitalise on the rise of the African consumer.
“The franchise industry has evolved, owing to global influence and trends. “While the industry is expanding locally and internationally, we find there is an increasing need to keep abreast of the latest trends, but simultaneously maintain brand presence in the market. “With reliable support systems and ongoing research, franchising is regarded as an industry with no boundaries and, if successful, could be a profitable business venture in any industry,” Cronje said.
He added that Africa had untapped markets that catered to all sectors of the market and that the ‘one size fits all’ concept did not necessarily apply to the continent as a whole.
For example, in the hospitality sector, he explained, preferences for the way food was seasoned, prepared and consumed differed between East and West Africa – with many countries having established chains that deal better with these nuances – and should not be underestimated.
“Despite the abundant potential, there are many critical considerations when venturing into new markets, chief among them the suitability of the offering,” said FNB economics and industry analyst Jason Muscat.
He added that, too often, Africa was considered a single homogenous country, where brands that have thrived in South Africa could easily be introduced to new countries and enjoy the same success.
Muscat stated that franchisors and franchisees would have to contend with varying levels of infrastructure development, including electricity, water, roads, real estate, the supply chain and different regulatory and tax regimes, as well as the impact of foreign exchange movements.
“Having a banking partner that can help navigate these challenges is as important as knowing what your customers prefer, and could ultimately be the differentiator between success and failure,” he said, adding that the current franchise landscape is and will be competitive.
The rise of innovation and technology helped to build an environment that has contributed to the enhancement of the current economic landscape. It not only helps in creating better working processes but also adds key insights and trends to the industry.
“Franchisees need to ensure that they have enough passion and commitment to make their brand work in foreign countries. “This can be achieved if we work together and find innovative solutions that will ensure that there is greater diversification and growth in the business sector,” Cronje said.