Everything You Need To Know About How The Franchise Sector Is Performing

Survey reveals turnover generated, new stores launched and closures


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The Franchise Association of South Africa (FASA) released the findings of its annual franchise survey, once again shedding light on the current state of the franchising industry, which despite trying socio-economic conditions, political uncertainty and tough trading conditions, according to the survey, continues to show growth. 

The results of the survey are based on the responses of 312 franchisors, and 300 franchisees out of a total market of 854 franchises. The interviews were conducted in May and June 2017. 

Let's find out how the industry performed - Here are the winners, losers, and important numbers from this year's survey. 

THE INDUSTRY BY NUMBERS

  • 40 528 – Total number of stores, compared to 35 111 in the 2016 survey – most of which are owned by the franchisees (86%) or 34 742.
  • 2 789 - Total number of outlets opened compared to a nett number of 2 184 stores opened in 2016. The Retailing and Fast foods & Restaurants categories dominated in terms of the nett number of businesses opened, followed by Health, Beauty & Body Culture.
  • 605 - Claimed franchise businesses that were closed down during the course of the franchisor’s last financial year. Fast Food outlets & Restaurants (120) and Retail stores (174) make up almost half the stores that were closed. Other franchises with closures in excess of 50 were Automotive Products & Services (75), Childcare, Education & Training (53), and Building, Office & Home Services (63).
  • R587 Billion - Total estimated turnover, up from R493 billion in 2015.
  • 13.3% - Total contribution to South African GDP – up from 11.6% in 2016. The Gross Domestic Product (GDP) in South Africa was 294,84 billion US dollars in 2016.
  • 343 319 - Number of people employed by the sector.
  • 88% - Percentage of franchise brands that are homegrown. 
  • 59% - The number of stores in shopping malls/centres up from 57%. The biggest increase was with stores in high streets at 62% (from 54% last year).

THE WINNERS
The largest franchise sector remains the Fast Food & Restaurants sector which grew from 24% in 2016 to 25% in 2017.

Building, Office & Home Services grew from 11% to 13% and Beauty & Body Culture grew from 5% to 8% - supporting the ‘lipstick’ effect theory that, in a recession, beauty, health and grooming remains a priority.

Also on the up and up is the Entertainment sector which grew to 5% from 4%. 

Childcare, Education & Training remains static at 9%.

THE LOSERS
Reflecting the tough business environment is Business to Business which drops from 11% to 5% and Real Estate Services drop from 7% to 4%.

Retail & Direct Marketing saw a drop of 1% from 16% in 2016 to 15% in 2017. Automotive Products and Services dropped from 9% in 2016 to 7% in 2017.

THE CHALLENGES
Whilst the top challenges facing franchisors remains finding the right franchisees and staff with the necessary skills, there seems to be a shift in priorities and challenges to finding the right location, the poor economy, increasing costs and finding franchisees with the necessary finance has taken on more importance.

Other lesser issues are aspects such as high rentals, franchisees not meeting the standards of the business, the marketing of the business, lack of business/industry experience and staff training.

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