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Then and now…how has franchising fared in South Africa?

As the Franchise Association of South Africa, together with Absa, embarks on a definitive industry survey after a break of the past four gruelling years – that included the debilitating effects of the Covid-19 lockdown regulations, flooding and the July 2021 riots and looting, political turmoil and economic strain – it hopes to get a clear indication of the challenges franchisors and franchisees faced and more importantly what lies ahead for the future of this important sector.

Then… the 2019 FASA Franchise Survey showed that whilst the industry was taking strain due to the slowing economy, franchising contributed 13.9% to the country’s GDP (R734 billion) through its 813 franchise systems and its 47 923 outlets and employing, directly and indirectly, almost 500 000 people. It showed a solid performance despite tough economic conditions and was testament to the tenacity of this unique business format.

Now… there is no question that businesses across the board, big and small, including franchises were hit hard by the snowballing effect started by Covid-19 and affected by so many other socio-political and economic factors since then. By and large, the franchise sector has, through these trying times and in line with global trends, relied on the strength of the collective made up of franchisors and franchisees – all tackling problems and finding solutions together.

“FASA has, for the past 44 years, overseen the establishment and growth of this vital sector,” says Fred Makgato, FASA’s CEO. “We cannot allow growth in our sector to regress or slow down as the future of South Africa relies on a vibrant sector like ours that encourages entrepreneurship, plays a role in skills transfer and in job creation. Now, more than ever, franchising needs to hold its own, take the road to recovery and continue to play the important role it does in the country’s economy.”

Thanks to a sponsorship from Absa and the commitment of its franchise division, FASA has commissioned Research EQ to conduct the survey under the capable direction of Margaret Constantaras, Head: Quantitative Research & Governance. Margaret has a particular interest in franchising as she is completing her PhD in this field. “Since our involvement in FASA’s surveys of the sector since 2014, we will be devoting a good portion of the survey on how franchisors and franchisees coped during what was probably the most trying four years in business and identify their strengths and weaknesses.” The surveys will focus on:-

– The Franchisor Survey will track the franchise trajectory in South Africa over the past four years, whether it is upholding its contribution to GDP, assessing any losses it may have incurred during the past turbulent years in terms of drop in revenue, operating/closure of stores, creation of employment and clarification of key franchise practices.

– The Franchisee Satisfaction Survey will measure the temperature of the franchisees at the coalface of the economy and is critical to the health of small businesses within the economy. This includes an analysis of how franchisees coped in the difficult trading environment and whether they are getting the necessary support from their franchisors.

“Both these surveys are important,” says Margaret Constantaras of Research EQ, “not only within the context of where franchising sits in its contribution to GDP, but an analysis of how COVID-19 and the lockdown regulations – and other economic and political events impacted the sector. As franchising operates in the entrepreneurial space offering business opportunities, it is important to franchising and FASA’s long-term growth strategy.”

According to James Noble, Head of Wholesale, Retail & Franchise at Absa Relationship Banking, who has been involved in the franchise sector and FASA for over twenty years, playing a part in tracking franchising’s growth by sponsoring the surveys is crucial for the future of this vital sector. “Franchising is in the national interest as it is a business model that makes a meaningful contribution towards solving one of South Africa’s most pressing challenges – job creation. We recognise the vital role that the franchise sector plays in creating wealth and employment opportunities in South Africa. By sponsoring and facilitating this crucial survey, we will be in a better position to understand the market dynamics and the environment in which our clients operate. In addition, we will be able to identify the challenges that franchisors and franchisees face, offer innovative solutions and deliver competitive products that will meet their future needs and support their growth objectives.” As Absa, we want to empower Africa’s tomorrow, together… one story at a time.”

“FASA’s success on the world stage and as a long-time member of the World Franchise Council makes it all the more significant that we keep tabs on the growth of the franchise system within South Africa as it is the most significant franchise market in Africa,” says Maria D’Amico, Chair of the Franchise Association. “We hope the surveys will help identify growth areas in the many sectors of business that can be franchised – from mentoring fledgling township entrepreneurs to become established and ethical operators to encouraging large corporate brands to consider converting their company stores to franchised stores as a more economical and profitable option and encouraging other operations to consider going the franchise route if their business system is capable of being franchised. But we need government to also play their part and commit to facilitating the business environment, making sure that business is able to operate effectively and efficiently.”

FASA’s Franchise Surveys will be conducted from May to July this year with franchisors and franchisees across the fourteen different business sectors participating in one-on-one and online interviews. The results of the surveys will form part of FASA’s event calendar for the second half of 2023 – which includes a Franchise Expo in August and the FASA Conference in October. Research EQ invites all franchisors and franchisees, whether FASA members or not, to contact them if they would like to participate in the survey.


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