SOUTH AFRICA – The franchise sector’s turnover has reached R300bn and it is contributing significantly to the country’s gross domestic product GDP, says the Franchise Association of SA.

The sector’s good performance is reflected in the industry’s high number of 627 different franchised systems.

SA has slightly more than 31,050 franchise outlets, which service 17 business sectors, including fast food and retail.

Franchising contributes nearly 10% to the country’s GDP, generates a turnover of R302bn and employs more than 323,519 people throughout SA, according to the association.

Its chairman, John Baladakis, said statistics showed that “franchising is a much lower risk investment with only a 10% failure rate … as opposed to up to 90% in independent businesses”.

Also, analysts believe franchising could be used as a springboard to broaden SA’s entrepreneurial base. They point to the fact that despite a sluggish growth environment the industry has shown resilience.

And its growth has shone a ray of hope for small business development efforts and job creation.

Analysts said given SA’s current unemployment rate of about 25%, the franchise sector was essential as a driver of economic growth and employment creation.

Business Partners executive director Gerrie van Biljon said franchise businesses operating in the education and training, health and beauty, retail, and quick-service restaurant industries experienced the most significant growth.

“The growing middle class … has resulted in consumers seeking convenience to the ever-increasing pressures of work and home life, and has been the largest contributor to the rise of businesses operating within these industries,” Mr van Biljon said.

Investment forecasts are positive. “Only 17 franchise classification categories of the local economy have a significant presence within the industry, and considering other countries globally, such as Canada, with about 50, and the US with 70, SA can expect the franchise industry to continue to provide solid growth in the future.”

SA last week hosted the 20th Franchise and Entrepreneurial Expo, at which a memorandum of understanding between the Franchise Association of SA and the Small Enterprise Finance Agency was signed to develop a funding model. Small Business Development Minister Lindiwe Zulu said the franchise sector was vital for enterprise development in SA.

April 23, 2015;