Franchising To Open Up Transformation Opportunities

“What is needed is collaboration from both the private and public sectors to make it happen. The franchise business model gives the skills training and knowledge as well a tried and tested model to facilitate transformation. The guidance and mentorship that is inherent in the duplication system of franchising makes it much easier to establish new businesses and it is a global fact that franchises succeed far better than independent businesses.

Anita du Toit, founder of Franchise Fundi and one of the country’s foremost experts on transformational franchising will be presenting at the Indaba on the potential of micro and social franchising to create entrepreneurship, skills transfer and job creation. With South Africa’s unemployment rate continually soaring due to the compounding effects of Covid-19, global upheaval, political unrest and a lack of economic growth, government and the private sector need to urgently look at new and innovative ways to create opportunities.

“Franchising can provide these opportunities, says Anita du Toit but most commercial franchises are out of reach for this demographic due to lack of finance and collateral. What is needed are franchise models that are in demand and create jobs at the bottom of the pyramid – the overlap lies in the business structure, with the benefits of franchising like training, mentoring and ongoing support playing a key role. With the franchise system there is the replication of a proven formula/format, the collective power of purchasing and marketing and a greater likelihood to secure funding.”

In SA there are many more social impact organizations going the social franchise route – in child advocacy, youth leadership & sports programmes and in the tourism industry. The ideal franchise mechanisms include:

Social franchising uses the structure or distribution mechanism of commercial franchising to achieve social goals. This concept is beneficial as a mechanism for social programmes since it has inherent benefits that contribute to the sustainability of an entity, being skills transfer and consistency. The income that is generated by the business is used to sustain and grow the business and to address identified social goals. This is the franchise system that government should be looking at to roll out efficient service delivery in everything from health, waste to education and infrastructure.

Tandem franchising, an innovative franchise model unique to South Africa, offers franchisors the opportunity to grow their brand, retain initial majority control of the new franchise and shares in its profits, all while working to empower communities in need of economic development. Tandem franchising is an effective tool for the implementation of black economic empowerment (BEE) initiatives in that country. The basic structure involves a joint venture arrangement between a franchisor, which acts as an appointed mentor, and a new franchisee that may lack the business management experience to operate the business alone, operates the business in “tandem” with the experienced franchisor and mentor.

Micro franchising adapts the franchise principles of business efficiency and duplication into a ‘business-in-a-box’ format, basically providing a proven system opportunity to individuals, to run a small business with substantial supervision and mentoring, whilst earning an income. With financial assistance from donors or financial institutions in the microfinance space, the franchisee purchases a minority stake in the business and can, over time, purchase additional shares and eventually can become the sole owner of the business and convert to a standard franchise arrangement.

“What is needed, concludes Anita, “is to formalise businesses like backyard mechanics to make them more sustainable through an enabling environment, FASA support, funding to develop more concepts, micro franchisee funding and the strong education and training of potential franchisees. We know franchising can work in many spheres and government has to partner with us in developing social and micro franchising.  It gives opportunities to all and can change the landscape of Africa.”

Automotive sector set for renewed growth  

When man does extraordinary things – good or bad – such as space exploration, pandemics or even going to war –  they often create astonishing scientific discoveries but also down-to-earth ‘spin offs’ that affect us in our daily lives. Alan Turing’s Nazi code breaker in World War II paved the way for digital computers in the decades that followed. Microwave ovens emerged from post-World War II military radar technology and man landing on the moon brought us everything from solar power, thermal material, foil blankets, scratch-resistant glasses, digital cameras & cordless tools, memory foam, vac-pack food and baby formula. Taking lessons from the 1912 pandemic which, whilst devastating the global economy, gave birth to the Industrial Revolution of that era, it seems that recent global events are set to fast-track us into the new technological age.

Taking mobility to new heights

Mobility is undergoing one of the most transformational shifts of a generation, with far-reaching implications for the way we live our lives. The eco-system of the future includes electric vehicles, autonomous vehicles and mobility as a service. The value chain will also be affected and the key driver is customer convenience – from the buying of EV cars to the insurance needed to cover this specific sector, the charging areas required and the aftercare requirements.

How far South Africa lags behind the rest of the world depends on a number of factors, including socio-economic and political stability, but the African market at large is not expected to embrace electric vehicles in the medium term, according to Dex Machida of KPMG. “This is due to several factors including the affordability of electric vehicles, unreliable electricity generation as well as a lack of supporting infrastructure. However, the rest of Africa could be an alternative market for the export of South African ICE vehicles in the medium term, while they transition to participating in the electric vehicle production value chain.”

Envision a mobility future where transport seamlessly connects peoples’ lives, where consumers are able to get from point A to point B in a way which is cheaper, cleaner, safer; and our journeys become productive and entertaining extensions of our day-to-day routines.

Dex Machida advises: “Understand the nature, timing and potential exposure of disruption. Understand the future customer and decide your relationship with them. Repurpose or pivot your current business model and assets.

Automotive Aftermarket to keep ahead of the curve

According to Hedley Judd, the national director of the Tyre, Equipment, Parts Association (Tepa) the following are trends and innovations that the franchise automotive aftermarket sector has to invest in to keep up with the global changes in mobility. “Smart data solutions are the next big steps for franchising in this sector, as it will streamline and create a more efficient workplace but must always have customer experience and business intelligence at its core. This refers to the internal data of a business itself that needs to be interrogated effectively in order to optimise business decisions,” according to Judd.

The industry stalwart outlined the different types of franchising in the automotive aftermarket.

• The business format franchise:  As the most common of all franchise models in the aftermarket sector, in this model, the relationship between the franchisor and franchisee is stronger than compared to other models. The format is more advantageous to a franchisee as it provides a wide range of services from the franchisor perspective. The franchisee gets marketing, training, operation, production, advertising, strategic planning, and quality control guidance support from the franchisor. The format also includes assistance in the appointment of staff and the organisation of day-to-day operations.
• The product distribution franchise: This type of business is not necessarily a full franchise model and is one of the oldest forms of franchising. Under this model, the franchisee has the right to distribute the products provided by the manufacturer. The franchisee needs to pay franchise fees for using the trademark products of the franchisor or the manufacturer. The franchisor does not offer continuous support to the franchisee like in traditional business franchise models.
• The manufacturing model:  This is the least common form of franchising in the automotive aftermarket sector, but that it can be the largest financially. Generally, the franchisor is a manufacturing company that gives the right to the franchisee or the dealer to manufacture and distribute its products in a well-defined area.