Scott Lehr has been with the International Franchise Association since 1990. He is currently responsible for the recruitment and retention of franchisor, franchisee and supplier members of the IFA, and overseeing the Membership and Advertising departments of the IFA.
Burger King and Baskin-Robbins have recently arrived in South Africa. What other brands are expected to arrive?
These two brands are just the latest in international franchises to arrive in South Africa. Some brands like 7-11, Cartridge World, Cinnabon, Curves, Express Employment, KFC, Kumon, McDonald’s, Midas, Postnet, Re/Max, Sign-a-rama, Subway and Uniglobe Travel are already on the scene, showing that if the market is ready, so is an international franchise.
The IFA, Franchise Times magazine and the US Commercial Service led a delegation to South Africa, Kenya and Nigeria in September that included many other international brands like Hardees, Dairy Queen, Schlotzky’s Deli, Auntie Anne’s Pretzels, Moe’s Southwest Grill, Great American Cookies, Pretzelmaker, Marble Slab, Hertz Equipment Rental Corp, Cinelease, Johnny Rockets, Tutor Doctor Systems and WingZone.
These companies participated with the intent of meeting potential franchisee partners to open in SA in the future.
What are the risks of investing in a brand that’s popular overseas when it arrives in SA?
The only risk factor is that you must understand your local market. Just because it‘s popular internationally doesn’t mean it will work well in your market. This is where your local market intelligence is key to the success of implementing the brand in SA.
Understanding the local interest and passion for a brand is absolutely the responsibility of the prospective franchisee. Researching the competition – whether it‘s local businesses, an SA franchisor or another international franchisor that is coming to the market – has to be considered.
Utilising local demographic data, which includes household income, traffic and customer counts of competing businesses, has to be examined to ensure the market makes sense for the brand.
What are the advantages of being one of the first to invest in an international brand?
Because of the power of franchising through trademarks, branding, operating systems, training and local marketing support which are all part of a franchise programme, the franchisee in South Africa can open up with a much bigger impact and the added excitement of an international brand opening its doors in the market.
South African consumers who have been exposed to the brand from travelling in other parts of the world will also help build local support.
What research should a prospective franchisee do into the franchisor?
Make sure you conduct thorough due diligence. You can explore a number of international opportunities that may be expanding to South Africa on www.franchise.org that lists more than 1 200 brands.
Contact the franchisor to find out more about franchise development. In many cases you’d discuss either a master franchise agreement for rights to the entire country, or an area development agreement for a region of the country.
But if this is too big for you, then you might be a candidate to become a franchisee through the company that has already bought the franchise rights for South Africa or consider a local franchise instead.
What kind of local support should a franchisee expect of an international brand?
An international franchisor that is selling a master or area development agreement would provide initial local support for activities such as store openings, training and marketing. Ultimately though, the master franchisee would need to build the local infrastructure of field operations and training to support the local franchisees.
Are franchise agreements customised to meet the local environment?
All master and area development agreements have some standard language as the basis for the agreement but can be customised for a local market.
That is why it‘s essential that the franchisee engage an attorney to review the documents to ensure they understand all the provisions of the agreement before it is signed.