There are more than 35 111 franchise outlets in South Africa. As the business landscape continues to evolve, it presents entrepreneurs with a new set of challenges and opportunities.
Franchisors and franchisees who stay ahead of industry developments will continue to grow and remain a step ahead of their competitors. Those who don’t could easily get left behind as consumers tighten their belts, and competition increases from global brands. Ultimately, though, you need to cater to customers who believe that convenience is a non-compromise.
Why consumers want more for less
One of the franchising industry’s biggest threats is the above-inflation cost of living increase that consumers face. Shrinking disposable incomes make them more selective about where and how they spend their money.
“Consumers are spending less and will have to make bigger trade-offs in their decision making,” says Louise Hefer, Media Strategist at The MediaShop.
Solution: Increases in fuel and electricity prices, further unemployment and ongoing drought mean consumer spend is going to get leaner. They are becoming more discerning in their purchases. But, it’s not just about price, as Vera Valasis, Executive Director of FASA (Franchising Association of South Africa), points out: “When times are tough consumers don’t stop spending. In my opinion the spending continues, but it is just different,” she says. “It’s even more imperative to ensure service is top notch together with quality and a market related price.” So up your service game, and you can keep customers coming back for more.
The playing field is getting larger
Your Vida e Caffé, Steers or Romans could be doing incredibly well – up until the Starbucks, Burger King or Pizza Hut opens down the road from you. How do you compete with international giants showing up at your doorstep, enticing your customers with worldwide popular appeal?
“Competition can push you to be better,” explains FASA chairman Naas du Preez. “While this has a positive economic impact, and gives consumers more choice, it significantly increases competition and puts more pressure on the performance of established brands.”
Solution: The arrival of global brands in your territories could lead to an expanded customer base in your arena, creating an opportunity for you to improve on your product, service and brand as a whole. “Competition helps you to focus and to improve the quality of your products and service. Competition will highlight your weaknesses for you,” says Du Preez. So, identify what the international brands are doing to attract spenders and see if you can deliver what they’re offering – more competitively.
Adapt to the consumer’s needs
If you rely on the same practices that have gotten you this far in your business, to get you through the next 10 years, think again. According to SA Franchise Warehouse, following a tried and tested model is no longer a guarantee for success in the franchising sector. “Convenience and innovation in technology is increasingly becoming important to customers,” says Liza Mijburgh.
“Consumers now want the option of ordering meals online and getting them delivered to their homes.”
Solution: The surge in South African smartphone users has seen 17.7 million of the 37.2 million adult population make use of mobile apps or access the Internet via their smartphones, according to MMAS (Mobile Marketing Association of South Africa). This means creating a delivery app and finding other ways to communicate with your customers using technology could be advantageous in catering to your current clientele as well as broadening your target audience.
Consumers aren’t just spending less, but are more selective in their purchasing decisions. This means value and quality trump price, and convenience gives you an edge over your competitors – local or international.