Franchising Looks To The Future
Franchising has at its heart the spirit of entrepreneurship, but amid the COVID-19 pandemic, the question is if the entrepreneurial flame can be reignited for future growth.
The franchise sector, which in South Africa is represented in around 14 different business sectors, posted an estimated turnover of R734-billion in 2019, equivalent to 13 per cent of GDP. It has over 800 franchise systems operating through 48 000 outlets and employing close to 500 000 people – representing the highest and most diverse range of entrepreneurial endeavours. The sector is the most suited to lead the post-COVID recovery.
Tapping into the wave of innovation that change will no doubt bring about – from online trading and innovative robotics to a new wave of ethical consumerism and global activism, mobilising creative and innovative responses, seeing the gaps in the market, and redesigning and re-engineering for the future – is what entrepreneurs all over the world will focus on. And where there are entrepreneurs… there are franchisors and franchisees.
Despite the doom and gloom of our current health and economic situation, the board of the Franchise Association of South Africa (FASA), in its dealings with members of the association, has concluded that “we wager that the franchise industry will make a faster and better recovery post-COVID than most other business categories”.
Listening to franchisors and how they have quickly jumped in to assist their franchisees during the COVID-19 crisis can only stand the sector in good stead as it forges ahead to recover and rebuild.
The success of franchising is largely due to the following guiding principles.
Individual business owners simply do not have the network expertise that they can tap into like a franchised system. Nor do they have, for example, the marketing expertise, a wider business view and knowledge of how others have tackled problems and found solutions.
The ability to augment their business model quickly, interpret consumer behaviour, identify problems and recognise how to solve them.
Franchisors tap into technology and use the information they glean from their systems to benchmark the way forward for the business. They analyse customer trends, growth spots, declining products and services, reasons for the change in consumer behaviour, and how to adapt products and services to the ever-changing needs of their customers quickly – crucial for the survival of businesses today.
Even if individual- or family-owned business owners belong to small business networks or other industry bodies, these organisations –althoughthey offer help and assistance – will never have the intimate knowledge and understanding of their business models that a franchisor and fellow franchisees have.
Franchisors and franchisees not only have access to the business minds within their brand, but also across similar business categories in the franchise business sector as well as the broader franchise industry.
Franchises, in general, are far more nimble, adaptable and quick to market with clever and real solutions than individuals or freestanding business owners.
FASA hopes that franchising’s sound principles will instil confidence in the business sector for development funders, banks, landlords and other stakeholders to play their part in the sector’s recovery. The banking fraternity has a huge responsibility to acknowledge the unique benefits of franchising as well as the sector’s successful track record and how they have benefited from this sector over the years. Now they need to come up with funding solutions that are less risk-averse, with simple application processes that can stimulate growth for franchisors by way of rapid distribution growth. This, in turn, would create jobs and stimulate disposable income.
Never underestimate a tough and resilient franchise industry full of talented and highly motivated people who excel during times of extreme stress and undue pressure. Their innovative thinking and unrelenting desire for success will help kick-start the South African economy, and get the wheels of job creation and consumerism steaming ahead.