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What Is The Latest Buzz In Franchising?

Morne Cronje, Head of Franchising at FNB Business, shares some of his views on what to monitor in the franchising sector.

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Much has been said about the slothful state of the economy and have echoed sentiments that 2017 is not going to be a walk in the park. The franchising sector has however found its way through the slow economy with industries such as the fast food segment showing positive growth in 2016.

That said, franchising in South Africa is still not fully realising its true growth potential and franchises need to continue to plan ahead, innovate and adapt to changing market conditions to ensure that they stay abreast of the changing business environment.

“The splendour of franchising is that you’re in business for yourself but not by yourself, however, one has to let go of the myth that franchising brings instant success. It is a safer type of business because it is part of an established brand: the risk nevertheless is not necessarily lower,” says Morne Cronje, Head of Franchising at FNB Business.

Related: How To Make Money While Making A Difference

He shares some of his views on what to monitor in the franchising sector:

Effects of the current economy on franchising

A slowing economy creates opportunities and we will see new niche concepts entering the market. We will also see existing concepts refocusing on their core business making sure their Franchise network is profitable.

Franchisors looking to expand their network will tend to grant a second or multiple units to existing franchisees that have proven that they can make a success of their franchise, than taking a risk with a new franchisee.

Segments that are performing in franchising

South Africa is increasingly becoming the destination of global franchise concepts especially in the food chain franchisors. Many global brands are expanding into South Africa.This increased competition is very good news for the sector. Competition will create more market awareness, improved service, quality and price.

The automotive sector is an interesting sector to observe with new car sales remaining depressed as cash strapped consumers continue to opt to keep their cars, as a result the pre-owned car sales market is on the increase. We are also most likely to see growth in concepts that sell tyres; spare parts, batteries and non-structural vehicle repairs as consumers look to stretch their Rand.

We have also noticed growth in hardware franchises, which we link to a growing DIY culture in the country.

Challenges franchisees will face

As with any other business, the ultimate litmus test for a business is cash flow – so the age old business advice remains, manage your money proactively.

You need to seriously consider the effect that interest rates will have on the cost of running the business. In most cases, a franchisee needs to put up a 50% unencumber owners capital investment, the other 50% is normally financed, its repayment will be impacted by the interest rate as it will be linked to the prime lending rate – ensure that this has been accounted for.

Related: 3 Factors That Could Get You The Best Franchise Deal

A really important consideration in franchising is the proposed minimum rates of wages that government is moving to put in as law. It will no doubt affect budgets and will have a direct impact on cash flow.

Franchisee should be actively involved in their businesses

Franchising must be treated like an active investment. The franchisee must be 100% dedicated to the business – do not leave it to managers to run the business. If you as the franchisee are invested in the franchise, you can ensure that costs are managed; cash flow is managed; and most importantly you can plan ahead.

Cronje emphasises that the days of buying into the right brand and expecting automatic success are long gone. “We need to raise the profile of the industry and ensure economic growth in the country for decades to come and the best way to achieve this is to always plan ahead in a competitive landscape.”

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Franchise News

The 7th Annual FNB Franchise Leadership Summit

FNB Business remain committed to helping grow this very important sector and are well positioned to provide solutions supporting franchising as it evolves with these themes.

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The franchising sector has shown steady growth over the past four years, in a tough economy from contributing an estimated 9.7% to the country’s GDP in 2014 to its recent figure of more than 15%, according to the Franchising Association South Africa (“FASA”) 2018 survey. This trend is expected to continue.

The survey further highlights that 78% of franchisors are optimistic about future growth in their businesses. Around 30% of franchises are now owned by previously disadvantaged South Africans, with one in three franchises turning over more than R20m per annum. This together with the fact that on average a franchise employs 18 staff members (the sector employs more than 370 000 people), makes it clear that as a business model, franchising remains critical to the future of South Africa.

Given the FNB Franchise Leadership Summit theme this year – “the future of the franchising sector”- I thought it would be good to reflect on some of the key trends we are noticing in this very dynamic space…

1. 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 location. And then another. By recreating your success in multiple locations, you can quickly grow your revenues and increase your business’ sustainability.

Many franchisee owners are also opening other, non-competing franchise offerings as they grow their businesses in an effort to diversify earnings.

2. 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. Looking at new, less expensive alternate locations beyond the shopping malls and strip malls to expand into stand-alone kiosks, food trucks, corporate catering, campuses, sporting events, craft markets, is a major trend.

Related: Johnson & Johnson Launches Africa Innovation Challenge 2.0

3. Niche markets

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 consumer is challenging the role that business plays in society and franchises have wonderful platforms to play a positive role and in so doing win customers.

4. Increased customisation/ personalisation

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.

5. On-demand products/ services

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.

6. The significance of online and social media

Social media is how your customers chose to interact with brands, whether to express anger, inquire or to 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. Today’s digital-savvy customers are highly choosy about online buying. Some key points to consider:

  • You need A Responsive, Interactive and up to date Website
  • Customers should be able to view your website perfectly on any device
  • Data Analytics is Important – Like it or not, your data is what drives your business
  • Seemless and Safe digital payments are critical.

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. We at FNB Business remain committed to helping grow this very important sector and are well positioned to provide solutions supporting franchising as it evolves with these themes.

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Franchise News

Be Your Neighbourhood’s Best Buddy

Ubuntu is a treasured part of South Africa’s heritage – but it could be better applied in parts of the country’s business sector, believes Richard Mukheibir, CEO of Cash Converters.

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“Businesses operate most sustainably when they are entrenched in and care about the community that surrounds them,” he says.

“Ubuntu means we are people through our interactions with each other and I firmly believe that a people-centred approach like that should be a strong thread in sound business development.”

Embedding yourself in the community is also good for business – as long as you authentically and truly work at being your neighbourhood’s best buddy, he says.

“Be about helping people get on with life, about making their lives easier,” he advises. “We always encourage new franchisees to take a fresh look at the neighbourhood where they are setting up so that they can be active participants and not just providers or suppliers.”

Corporate social responsibility applies some of this thinking but, says Mukheibir, if it is a “parachute drop”, one-off activation in a community, this is far less convincing than sustained communication and cooperation.

Cash Converters places such emphasis on this that it is a major focus of the strategies implemented by the company’s Local Area Marketing Manager Juan Botha. This approach enables each franchise in the group to be in touch with its neighbourhood through social and other local media challenges, giving them added strengths locally while being supported by the advantages and professionalism of national and international 21st-century business systems.

“All franchises and chains are aware that branches represent the company on the ground,” says Mukheibir. “But Juan opened our eyes to the importance of being good neighbours and not just another store along the street.”

If you are a neighbour buddy by acting as a central, participating and unifying figure in the community, your neighbourhood will in turn work for you. You can build awareness by sponsoring local events such as food festivals, cycling races or trail runs, especially if you can offer part of your own site as a venue, for example.

Related: Cash Converters Franchise Listing

You will establish real, long-term partnerships, though, by working consistently with community gatekeepers, from schools and welfare groups to gyms and conservancies. Adopt a community project and encourage staff to give their time and effort and this will generate goodwill that will be reflected back at you.

Such activities are about a lot more than column inches in community media, says Mukheibir. Building good relationships with communities can enhance your brand’s reputation, he believes. But being your neighbourhood’s best buddy can also make an important contribution to social cohesion.

“Plenty of people hark back to the good old days of mom-and-pop stores when everybody in the neighbourhood looked out for each other,” he says. “It’s not just nostalgia to want to rebuild that in our society – it makes sense.

“We all need to contribute to the safety and stability of our neighbourhoods, whether we are individuals or businesses. The season of goodwill is fast approaching – why not see what difference your business can make in your neighbourhood by then?”

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Franchise News

Clean Out, Clean Up – And Win Big With Cash Converters!

Spring is on the way and Cash Converters is celebrating the season of renewal with a bigger than ever Spring Clean Sale – and this year it gives you two very different opportunities to cash in.

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From 24 August to 2 September, you can help Cash Converters spring clean all its stores nationally by snapping up discounted items across all their different product categories. Then in the second phase starting on 3 September, Cash Converters returns the favour by giving away R200 000 over 20 days! A total of 100 customers will win cash prizes in this Spring Clean Special Draw of R10 000 per day from 6 to 25 September. To enter, all you need to do is sell Cash Converters an unwanted item that you have decided to spring clean.

Sorting through your cupboards for items that are in good condition but rarely used and that you are ready to sell could put you in line to be one of the lucky winners of a fistful of cash that will make your budget stretch further or give you a head start for early Christmas gift buys. If you have not yet managed to act on this year’s resolution to declutter your space, here is an excellent incentive to make good on that goal.

Many of us have items crowding our homes that turned out to be bad buys, were unwanted presents or are outdated for our needs. Trading in these items can help you trade up to something that suits you better – as well as giving you the chance to be one of the lucky cash winners!

Get ready to cash in on:

  • Spare phones, computers or cameras
  • Unused power tools or exercise equipment
  • Unwanted jewellery and watches
  • Unnecessary kitchen appliances and electronic goods
  • Surplus gifts or inherited items

“Essentially, we are paying you to spring clean!” says Richard Mukheibir, CEO of Cash Converters. “Even if you are not fortunate enough to be one of our daily cash-prize winners, you will be cashing in on items you do not need. That is a welcome boost to anybody’s wallet with petrol prices and the VAT increase still eating away at our income.”

Apart from all the excitement around the opportunity to win big, the outcome is win-win for everybody, says Mukheibir. Whatever you choose to trade in for cash in hand could well become the treasure that somebody else has been looking for. He believes the Spring Clean process also has an important message for South Africans.

“We are specifically running this promotion during Heritage Month because it helps enable a key change in mind-set that we need to entrench if we are to live sustainably on our beautiful planet,” he says.

“It has been estimated that the City of Johannesburg’s landfills will be full in just six years’ time, for instance. But enabling items you do not need to have a second, useful life, or astutely buying quality second-hand items you do need, is taking action on the reuse, recycle, repurpose message of our times. That makes you one of the savvy consumers who are doing what they can to save our planet for future generations.”

Related: Cash Converters Franchise Listing

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