Franchising is one of the juggernauts of South Africa’s business landscape as it has braved a tough economy and grown its contribution to the country’s GDP from an estimated 9,7% in 2014 to 15% today, according to the Franchising Association South Africa 2018 survey.
Confidence in the continued growth of the sector among franchisors is strong, with 78% of those surveyed saying they are optimistic about future growth in their businesses – not surprising as the survey also highlights that one in three franchises generate annual revenue of over R20 million and the sector currently employs more than 370 000 people. Furthermore, franchises are proving to be one of the engines of economic transformation, with around 30% of them now owned by previously disadvantaged South Africans.
Speaking at the FNB Franchise Leadership Summit, FNB Business CEO Michael Vacy-Lyle highlighted key trends he’s picked up during the year that he expects to continue into 2019:
More multi-unit owners, and franchisees owning multiple concepts
What happens once you have mastered the tried-and-true formula franchises have designed for their franchisees?
If you’re like many franchise owners, you start opening another franchise in another location. And then another. By recreating your success in multiple locations, you can quickly grow your revenues and increase your business’s sustainability, Vacy-Lyle said.
Many franchisee owners are also opening other, non-competing franchise offerings as they grow their businesses in an effort to diversify earnings.
Smaller, more cost-effective franchise models
Among the new frontiers in franchising is the food court losing its legacy as the preferred setting for food franchises, as service stations increase in popularity in the industry. Many brands – including Steers, Debonairs and Mugg & Bean On-the-Go outlets – are co-locating with major fuel retailers to create fully-integrated accessible centres, FNB said.
Looking at new, less expensive alternative locations beyond the shopping malls and strip malls to expand into stand-alone kiosks, food trucks, corporate catering, campuses, sporting events and craft markets is a major trend, Vacy-Lyle said.
He said that consumers increasingly prefer local businesses over national brands. Some of the bigger brands are looking for creative ways to tackle this situation by tagging with local businesses, and this trend is on the rise.
Niche markets are gaining traction. Whether it’s in offering a unique “gourmet” food experience, craft beer or whether it’s in the environmental space of energy-saving technology or recycling, these are where many new opportunities are to be found.
With the increase in social awareness, social responsibility is a part of any business, small or big. The current generation of consumers is challenging the role that business plays in society and franchises have wonderful platforms from which to play a positive role and, in so doing, win customers.
In a world of increased consumer choice, it is no longer about what you have on the menu, it is now about how your product or service can be tailor-made to what a customer really wants.
The success of RocoMamas speaks to this. With 61 franchise outlets, their business model clearly responds to the essence of this trend by allowing consumers to create their own burgers and, increasingly, consumers want the ability to create their own dining experience, said Vacy-Lyle.
He said that Amazon is a great example of this – same-day delivery is becoming the norm in the age of instant gratification – I want it now.
Differentiation through delivery remains a big opportunity, he said.
The significance of online and social media
Social media is how your customers chose to interact with brands, whether to express anger, make an enquiry or show appreciation.
“It is no longer about the question of should a business use social media or not, it is now more about how a business uses social media,” Vacy-Lyle said. Today’s digital-savvy customers are highly choosy about online buying.
“There is no doubt that franchising not only offers viable business opportunities, but also ensures that franchisees are better equipped to weather the tough economic environment,” Vacy-Lyle said.
Additional Source: BusinessTech