The Franchise Association of South Africa’s (FASA) fourth independent survey revealed an increase of 132 franchise systems from 625 to 757 (21% growth), an increase of franchise outlets from 31 050 to 35 111 (13% growth) and with turnover increasing by 6% from R465, 27 to R493, 19 billion rand.
The survey findings are testimony to a local franchise industry that is still thriving despite a downturn in the South African economy.
While the number of businesses classifying themselves as in the “turbulent” phase of operations had doubled, most franchisors (92%) were optimistic about future growth in their businesses. Four out of five franchisors had been in business for more than six years and 54% for more than 10 years, thereby demonstrating the sustainability of these businesses.
The poor economy, cash restraints and competitiveness were cited as the greatest concerns for franchisors in the 2016 survey.
The largest franchise system in SA is the fast food and restaurant category (27%), followed by the retail sector (15%), building, office and home services (12%) and childcare, education and training (11%).
About 57% of franchisors have business units or stores in shopping centres and 54% have them in high streets. A quarter of franchises are operated from a home base and only 17% are in industrial areas.
The survey respondents indicated that the average amount of working capital required when buying a franchise is about R634 000.
The World Economic Forum’s Global Competitiveness Index revealed that South Africa rose in the competitiveness index largely due to improvements in its internet, practices in combating corruption, innovation in business and efficient transport infrastructure.