What makes South African townships such an exciting business opportunity?
Because there are few shopping centres in townships there are numerous business opportunities in this untapped market.
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The social and economic struggles townships have had to face throughout the decades have created a need for development and a platform which will present opportunities that are crucial for social and economic growth in these areas. As such, the government has also made undertakings to facilitate future developments.
What are the challenges associated with operating a franchise in a township?
One of the main challenges that we have come across in Soweto, is that rentals are higher than other areas because retail premises are scarce. Brand association can also be challenging.
If your brand is virtually unknown in the townships you have to create brand awareness for your franchisees.
We also need to change the perception that townships are just a reservoir for labour, by establishing township franchises as a vibrant social and economic contributor.
Provided you are an established franchisor and are prepared to provide extra support to township franchisees, there should not be too many hiccups in the operation.
What are the opportunities associated with operating a franchise in a township?
There is a myriad of opportunities available. The limited number of businesses in townships, in comparison to other areas, provides townships with many business opportunities. Development projects, driven by large corporates and the government, are key to reviving township economies.
As a new brand entering a fiercely loyal market, how should a franchisor go about gaining trust and support?
Loyalty and trust are generally gained from consistent and reliable relationships that are established through formal channels. The franchisee’s involvement in the community is also important and should not be ignored.
Most of the traditional township businesses are largely run on an informal basis and succeed because of relationships established with their consumers.
Lower LSMs are not necessarily price sensitive. However quality and customer service standards are crucial. Community building initiatives and projects always attract lower LSM groups.
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When our franchisees identify the need to lower some costs on the menu to attract customers, we always stress the importance to perform this exercise cautiously to ensure franchisee profitability.
What should franchisees and franchisors take into consideration with marketing to township consumers?
An effort should be made by the franchisee to get involved in the community, especially if it is a virtually unrecognised brand, like ours, in the townships.
Word-of-mouth is always a great marketing tactic, especially in close-knit communities. The franchisee should also take a different marketing approach. Sensitivity towards cultural norms will have to be closely observed.
Are there additional checkpoints one should consider when looking for a location?
Competition in the neighbourhood, success stories, social status of the location as well as its dynamics, and the potential landlord’s background, are just some of the crucial checkpoints that must be considered before selecting a location.
Should a franchisor have prior experience opening and developing stores in townships for successful brand expansion?
No, franchisors don’t need prior experience in townships. What is critical however, is conducting a comprehensive analysis on the township’s social and economic fabric.
The findings will give the franchisee an insight to consumer behaviour, disposable incomes, dynamics, growth potential, demographics, development opportunities, and other businesses’ success and failures in the area.