Why Should You Care About Franchising?

Franchising has come a long way in South Africa since Steers opened its first franchise in 1965

Why Should You Care About Franchising?

Franchising has enabled entrepreneurs to expand their businesses at a much faster rate than would otherwise have been possible. It has also created a good number of highly successful individuals. According to the FNB Franchise Think Tank, franchising today has the potential to achieve many more successes in South Africa, including:

  • Create new enterprises. Franchising is an ideal vehicle for start-ups because of its significantly reduced failure rates. It is often described as entrepreneurship with a safety net, and rightly so.
  • Accelerate the creation of employment opportunities. Almost every franchised outlet employs staff. The number of employees a typical franchise will absorb can vary from two to three in the instance of a small service franchise to 100 or more employed by a Pick n Pay Family Store or a Dis-Chem Pharmacy.
  • Improve levels of statutory compliance. Experience has shown that on the whole, formalised businesses tend to be more compliant when it comes to statutory returns and payments, they understand the need to pay taxes and they tend to create better working conditions for their staff.
  • Offer consumers certainty. To remain competitive, known brands are practically forced to offer their customers a pleasant shopping experience, value for money and fair product guarantees. As part of any such network, franchisees are compelled to comply.
  • Encourage big players to enter this field. Franchising is an ideal vehicle for the revitalisation of tired branch networks. Many large companies would like to avail themselves of this but are concerned that the perceived complexities and legal uncertainties that currently exist in franchising outweigh the franchise concept’s proven advantages.
  • Create realistic and sustainable BEE schemes. Instead of closing a loss-making branch, it can be offered to a deserving member of staff, possibly initially within the framework of a joint venture. This would have to be structured in such a way that the staffer would ultimately own the business outright but continue to operate it under franchise.
  • Results-oriented owner-managers. Strong anecdotal evidence suggests that “placing the owner behind the counter” can have a dramatic impact on the profitability of a store. Instead of being left with the aftermath of a store closure, namely loss of footprint and market share for the company, an empty shop for the landlord and perhaps 20-50 people joining the unemployment queue, you end up with a thriving business.
Monique Verduyn
About the Author
Monique Verdyun is a regular contributor to Franchise Zone. Franchise Zone is published by Entrepreneur Media SA. It offers advice and franchising opportunities in South Africa.

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