In essence, the report confirms that franchise relations in South Africa are in excellent shape, franchisees would chose this opportunity again if given a chance and 82% will renew their contracts when the franchise expires.
In stark contrast to the small business sector in general where business failures are the order of the day, the franchise sector is extremely stable. This is important because it reinforces the notion that the franchise sector has the potential to address one of South Africa's most pressing problems, namely unemployment.
This stability appears to be the root cause for a high level of satisfaction among franchisees, with their majority expressing satisfaction with the performance of their franchises and the level of support they receive from their franchisors.
Franchisees are clearly in it for the long haul; the majority owns their franchise for 5 years or more and 70% of them continue to manage it hands-on. This finding confirms the long-held belief that the owner-behind-the-counter syndrome is among franchising's main success secrets.
83% of franchisees said that the profitability of their franchise exceeds their expectations and 75% expect profitability to increase either substantially or at least somewhat.
Most franchises fall into the small business sector, with the majority recording sales levels below R7.5 million per annum. And while multi-unit ownership is all the rage overseas, 69% of local franchisees are content to own one franchise which is their primary source of income.
Only 30% of franchisees own more than one franchise; of these, 76% prefer to invest in the same brand or industry sector. When asked about their plans for the future, it emerged that franchisees in the food sector are the most likely to add additional units to their portfolio in the forthcoming year. As we shall see, this is a significant finding.
It is widely accepted that the prevailing job shortage poses a serious threat to the stability of our country, putting job creation on top of government's agenda for the next five years. Due to its aggressive expansion stance and standardised procedures, franchising is well poised to assist with job creation. Unfortunately, this is frequently overlooked.
The majority of franchises employ at least one person at the start-up stage then add employees as the business grows. Upon reaching maturity, the bulk of franchises employs between 2 and 25 people. Take the food sector, for example. Because it is very labour intensive, the average number of people employed per outlet numbers 30. As it happens, 47% of respondents drawn from the food sector plan to add additional units during the forthcoming year; this means that more people will be employed. Large retailers with extended shopping hours employ up to 100 people.
Overall, franchisees are satisfied with their lot and, if given the chance to wind back the clock, would not hesitate to invest in the same franchise again and only a very small number displayed the so-called 4-year itch, a desire to leave the network at that point.
As can be expected, there were a few concerns but these are not directly related to franchising. 50% of respondents are worried about the general state of the economy, 19% about high rental charges and 9% about increased competition. Although these are valid concerns, it is clear that members of a network are in a better position to deal with them than owners of individual businesses.
When it comes to assessing the quality of the franchise sector in South Africa, franchisees' response to the final statement is the most compelling. It read, "When the franchise agreement expires, I plan to renew it". 82% of respondents either "strongly agreed" or "agreed" with this sentiment.
This is a clear indication that the franchise sector is in fine shape and well on its way to achieving the ambitious targets the FNB Franchising initiative set itself at its launch in 2009, as can be seen from the website www.x2in5.com.
Examples of responses to questions designed to gauge satisfaction levels franchisees experienced at various stages of the franchise relationship follow.
| Initial disclosure and support | ||
| Problem statement | Percentage of respondents who | |
| Strongly agree | Agree | |
| The franchisor was upfront about the pros and cons of the opportunity | 20% | 55% |
| I had no trouble raising the start-up capital I needed | 19% | 53% |
| I was very happy with the set-up process | 29% | 55% |
| The franchisor provides all the necessary training | 26% | 51% |
| My franchise achieved break-even more or less in line with projections | 15% | 57% |
| Ongoing operations | ||
| Problem statement | Percentage of respondents who | |
| Strongly agree | Agree | |
| I receive all the marketing support I need | 24% | 48% |
| The network's marketing programme brings a steady flow of prospects | 15% | 51% |
| I would welcome more benchmarking data to help me gauge my franchise's performance | 13% | 51% |
| Quality of the franchise relationship | ||
| Problem statement | Percentage of respondents who | |
| Strongly agree | Agree | |
| The franchisor uses a partnership type approach in interaction with franchisees | 9% | 52% |
| The network's rules are not too restrictive | 18% | 35% |
| The franchisor delivers on promises made | 24% | 50% |
| I would like more engagement with the franchisor and fellow-franchisees | 14% | 45% |
| I do not feel isolated in running my business | 30% | 45% |
| I appreciate opportunities for a frank exchange with the franchisor | 25% | 63% |
| Reflection | ||
| Problem statement | Percentage of respondents who | |
| Strongly agree | Agree | |
| I am proud to represent the network's brand within my territory | 40% | 52% |
| Operating a franchise represents a challenge | 38% | 48% |
| The franchise has lived up to the promises made by the franchisor | 25% | 50% |
| Given what I know now, I would invest in the same franchise again | 30% | 48% |
| The ongoing franchise fees represent value for money | 12% | 46% |
| When the franchise agreement expires I plan to renew it | 36% | 46% |
