Trends Shaping SA Franchising

A look at the current trends in franchising in South Africa and what’s driving them.

Trends Shaping SA Franchising

According to Bendeta Gordon of Franchize Directions, who conducted the Standard Bank Franchise Factor 2008 survey, there are 531 franchised systems operating in the local market with close to 30 000 franchised outlets serving the public in over 17 different business sectors and employing over half a million people.

The sector contributed 12,5% of GDP for the year ended 28 February 2008, with a R258 billion turnover which is a 37% increase over the previous year. 67 000 new jobs were created and the sustainability rate of the business was 96%.

The factors that are driving these trends seem to be the abundance of natural resources, an excellent transport and logistics infrastructure, a world class financial system, a well developed information and communications technology environment and a relatively large labour force.

These factors have a positive influence on the speed with which entrants can enter the market. There is no restriction on the location of the various franchised businesses. A large number of franchised businesses are run from home due to the availability of information and communication technology resources.

Retail and fast food franchises have grown in leaps and bounds. This was highlighted at the International Franchise Expo held in May2008. At this expo food and restaurant systems drew over 45% of visitors looking to buy into the franchise sector.

A combined 41% of visitors to the Expo were interested in systems related to either retail or entertainment and leisure. The reason for the high interest seems to be that these types of businesses do not require a high level of technical expertise. Many potential franchisees seem to come from the corporate sector and do not possess the skills needed to start a business in a specialised field.

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