When the Franchise Association of South Africa’s (FASA’s) latest franchise survey results were published the other week, they made quite an impact. Why? Because while the country’s economy as a whole has been weakened by the West’s recession, the South African franchise industry most certainly has not. Not only is it increasing, it’s blooming, growing at a rate of 21% last year. “Franchising has continued to grow year on year throughout the recession,” says Giuli Osso with FASA. “There is a failure rate of less than 10% compared to the 90% failure rate of independent start-up businesses.” 38% of UK franchisors currently wish to expand abroad (NatWest bfa Franchise Survey 2012). Read about South Africa’s potential for the franchisors and franchisees considering setting up there.
Advantages of South Africa to UK Franchises
The results of the FASA survey were numerous and impressive, showing that for every franchising unit that was closed last year, three were opened. The franchise industry now employs more than 300,000 people, and 46% of franchises have been open for more than 14 years. But statistics aside, South Africa has many other features that are of value to UK franchises:
Similarities – thanks to the history between the two countries, South Africa and the UK share many characteristics. Financial and legal systems, businesses and much of the culture are all run in a similar manner. Throw in a lack of language barriers and only a small difference in time zone and you have a winner.
African base – many cautious entrepreneurs have stayed away from the African continent thus far, despite its providing 15% of the world’s population. South Africa is seen as being more advanced than its neighbouring countries, making it an ideal gateway through which to tap into and trade with a large continent that holds over 1 billion people.
Emerging market – South Africa is now part of the BRICS economic association. A country of rich resources such as diamonds and gold, with strong legal rights and banking, it is seen by investors as having strong potential for growth.
State encouragement – the South African and UK governments made agreements in 2011 to try and increase trade between the two countries, and the South African Jobs Fund appreciates franchising’s potential to improve unemployment. “It is encouraging that the government’s Jobs Fund and many of the development and commercial banks recognise that many of the franchise systems are in a position to address the country’s unemployment problem, especially amongst the youths,” says Giuli Osso. “Resources are presently being implemented to enable this.”
Why Franchising Suits
For the average British entrepreneur, South Africa is so far away that managing the business from home is not an option. Much time and money would need to be dedicated to general research and to finding a loyal business partner who is familiar with the local market and culture. Franchising does of course skip this researching step and provides immediate access to local, potential franchisees eager to get franchising in a country where the method of business is so successful.
The FASA is confident that franchising in South Africa will continue to flourish: “Despite and in spite of the recession, franchising continues to grow year on year at a faster rate than the GDP,” Giuli Osso points out. “And FASA sees no reason why this trend cannot continue.” Have a look at the best franchises currently on sale in South Africa, through the Franchise Direct South African directory.