According to the Franchising Association of South Africa (FASA), 2019 annual franchise revenues were close to R750 billion and represented almost 14% of SA’s annual GDP. South Africa’s Franchise industry is ranked 5th (relative to GDP) in the world. The Franchise industry continues to grow in size and value to the economy, creating many small businesses and employment opportunities.
Franchising as a concept is an interesting partnership of Big Business and small business merged together as one business delivering products or services to the end-user. Big business represented by the Franchise/Franchisor and small business represented by the Franchisee. Both have very different roles in the process but are both critical to each other’s success.
Role and Value of Franchise /Franchisor – Brand/Concept Owner
- Brand/Concept creator, developer and innovator
- Brand building & communication
- Retail design & Sales tools
- Franchise System and process builder
- Supply Chain co-ordinator and manager
- Technical Trainer
- Recruitment and management of Franchisees
Role and Value of Franchisee – Brand/Concept user
- Main route to market and sales outlet for brand
- Final delivery of brand concept (product/service) to end user/consumer
- Investor in Capital, Working capital, lease commitment at point of sale
- Uniform and consistent presentation of brand and service levels to consumer
- Feedback/communication to brand owner from consumer
Both groups have a single goal in satisfying customer/consumer needs, but their roles are very different and require very clear communication of expectations of each other and responsiveness to consumer needs on a regular basis to be successful.
As Franchising grows worldwide and particularly in South Africa, competition is getting fiercer and options much wider, so the correct selection of a Franchise concept is critical to any prospective franchisee, just as selecting the right type of Franchisee is critical to the Franchise owner.
The benefits of a Franchise system are immense, usually strong brand recognition and consumer demand, a proven system (supply chain, marketing, sales training & support), a defined area to do business, a community and network of likeminded entrepreneurs for guidance and support when needed.
However, the investment required and running costs associated to leverage the brand should not be underestimated and should be clearly understood upfront.
As a Franchisee, you should always seek the help of a professional advisor or advisors. Each system has different cost/revenue generation structures, support, reputation etc and your investment often comes out of hard-earned life savings/retirement funds and/or loans of some type. In many cases your business will be new (a start-up), so the time factor to build the business needs to be factored in. There may be lease and other commitments to be made, including hiring and training employees, which are not short-term obligations and not easily switched off if things don’t go well.
Whilst the idea of being your own boss may be appealing, you cannot underestimate the corporate requirements of the Brand owner and other expectations of funders to the business. They will require constant feedback, communication and compliance with their systems and processes, so you need to be ready for a wider partnership.
How can we help you? (www.pathfinderssa.co.za)
Pathfinders is exceptionally qualified to advise Franchise Owners and Franchisees alike! Alongside our business advisory services and mentorship services, we focus on Franchise systems as we believe that we are uniquely experienced to understand the needs of both the corporate driven process from brand owners and the entrepreneurial customer service focus of entrepreneurs and to assist both to find the appropriate balance which creates the magical winning formula for success
Read more about Franchising in the Sunday Times
Contact us via info@pathfinderssa.co.za or via our website www.pathfinderssa.co.za to find out more.
