The recent 2023 franchise survey by FASA details findings and insights from in-depth interviews with seven franchisors, secondary research and 304 franchisor interviews.
According to FASA, what the survey once again establishes without doubt is that franchising offers proven models, brand recognition and a lower-risk investment. Franchisors that strengthened their business systems and supply chains during the pandemic should be highlighting those strengths, elaborating on steps taken to mitigate the risks, introduce new strategies and publicise how franchisees were supported.
Desk research with franchisors across the board highlighted the need to put strategies and plans in place to ensure future sustainability. These include:
– Capitalise on the brand’s stability
Do not be afraid to divulge the steps taken to mitigate the challenges the brand suffered, how franchisees were support and, by extension, how customers were serviced. A strong brand that conveys resilience, consideration and care will win the day.
“The fact that we were able to recover quite a few key stores quickly is testament to the brand and the dedication of all the staff because everyone’s ‘all hands- on-deck’ working together.” – Comment from a Retail franchisor.
– Have a strong base of existing franchisees
The key to future success also lies in having a strong base of existing franchisees that are well-equipped and supported to handle any future challenges. Equally important is to have a head office that has learnt the hard lessons from this trying time, and has put in place ‘intensive care’ contingency plans. Only then can a franchisor confidently welcome new franchisees into the fold, confident in the knowledge that his/ her organisation has weathered the storm and can look to future growth and success.
– Expand with flexible franchise options
With fewer potential franchisees, a poor economy and rising expenses (including load-shedding), franchisors have to look to offer more flexible investment options in the form of smaller footprint models whose operating costs such as overheads and labour could be somewhat contained.
– Diversity
This trend as a broader cultural consciousness is evolving through all business sectors, as lessons were learnt that having all one’s eggs in one basket was often a risk. People finally recognise that multicultural markets are largely untapped.
– New consumer habits
Against the backdrop of incessant loadshedding, the challenge is to track consumers’ next moves. Whilst price and quality remain a top priority, consumers still value the experience of their favourite brand, and this should be top of the list for every franchise business. Analyse your business model and see if there is scope to broaden your offerings to include as many options as possible to make life easier for your customers.
“Love your customer. Make their life easy. Have happy staff. Just keep people happy.” – Comment from a Franchisor in the Fast Food/QSR sector.
– Recognise market disruptors and act accordingly
The pandemic, the riots, floods, loadshedding and general political chaos have been the most negative disruptors South Africa has ever seen. Technological innovations such as the metaverse should not be seen as a passing fad, but be investigated as potential ways to expand market share.
– Online retail
According to WorldWide Worx, online retail has hit a major milestone in South Africa, eclipsing R50 billion in annual sales during 2022, recording a 40% increase in the total number of South Africans shopping online since the onset of the pandemic in 2020. Yet many businesses are struggling to turn this trend to their advantage because of poor online customer experiences. Online and social media presence, whether for deliveries or customer interaction, is a must if franchises are to thrive into the future.
– Technology
It may seem that the world has regressed following the pandemic, its associated value and supply chain challenges, and other political and social challenges. But it must be recognised that all this upheaval spurred on new technological breakthroughs that ultimately will benefit businesses through increased efficiencies that will result in reducing costs and margins.
– Consolidating before expansion
It would be wise for a franchisor to step back and attend to existing franchisees rather than embarking on any aggressive expansion plans. The goal should be to create a strong bond with all franchisees and work out a plan that will attend to those struggling to ultimately bring them back in line with consistent growth and profitability.
The lessons learnt and the solutions formulated to counteract the challenges will stand the franchisor and his/ her franchisees in good stead to pre-empt any future curveballs. By getting the buy-in from everyone in the franchise network to be part of the recovery and rebooting of the brand, the brand’s true potential will be unleashed.
“The key to getting through this is to do a lot of education with all franchisees- keeping them updated, compliant and delivering high standards.” – comment from a Business-to-Business Franchisor.
– Put a short term plan in place
In the short term, franchisors must attend to their existing franchisees before expanding. New franchisees will want to know how existing franchisees are doing, and being transparent and honest is key to being an ethical franchisor. Franchising seems to have fared better than independent businesses and there are signs of a strong rebound. If most of a brand’s franchisees are in the ‘soaring’ phase then, go ahead with expansion plans, secure in the knowledge that the worst has been overcome.
– Put a long-term plan in place
For the long term, planning expansion goals must consider challenges such as cash flow, a struggling economy and other pitfalls. If Covid and the past four years have taught us anything, it’s to be prepared for any eventuality and always have a strong financial strategy in place.
Almost all respondents, and especially those in the food sector, expressed concern that the country was facing a deepening crisis that is impacting all areas of the economy – due to the ongoing and escalating load shedding which has a snowball effect on everything from food security to logistics to service delivery – with very little done by the government to mitigate this.
Says one franchisor in the Fast Food/QSR sector: “Load shedding has been financially devastating and brands are having to deal more and more with distressed units in their business model, and having to work harder to maintain viable businesses and keep them open across their network.”
FASA’s CEO Fred Makgato believes that the only way to avoid an impending disaster in South Africa is for the government to deal with load shedding and to recognize that it is the businesses, both large and especially that are keeping the economy going. “On the back of such a strong survey of the franchising sector, that is prepared to safeguard its position as a significant contributor to the country’s economy and is willing to play its part to keep the wheels of business and entrepreneurship turning, we call on government to now do their part in rectifying the debilitating state of the country for the sake of the economy, its citizens and the future of South Africa.”
