South Africa - FranchisingSouth Africa - Franchising
Franchising provides a good market entry mode into the South African marketplace. According to the Franchise Association of South Africa, there are 865 franchised systems, over 45,000 franchise outlets, and 17 franchise business sectors. Franchising contributes around 12.5% to South Africa’s GDP and is an important driver in the country’s economy, in addition to having one of the highest business success rates. According to the latest data, total turnover for the sector was around R721 billion in 2018.
Food franchises make up about 25% of total franchises, with some segments that are considered saturated such as pizza and burgers. Several U.S. brands have made their entry in the last few years, namely Burger King, Pizza Hut, Krispy Kreme, Domino’s and, most recently, Starbucks. Other franchise concepts such as business-to-business (B2B) services, automotive, after-care, and education are also making inroads into the market.
Franchising has become more popular in recent years, as business owners perceive them to be an effective way to conduct and grow successful businesses across a range of services. Franchising also plays an important role in furthering the development of small- and medium-sized businesses. Job creation, poverty alleviation, economic growth, and black empowerment rank high on the South African Government’s agenda, and there appears to be a growing recognition by the Government that franchising can be an effective business model to address these needs.
Approximately 40% of franchises are in Gauteng Province, particularly Johannesburg and Pretoria, the economic powerhouse of the country, and the African continent. Patterns within existing franchises are changing, due to economic belt-tightening by the population and changing consumer behavior. Some franchise owners are starting to develop smaller, more cost-effective models with reduced fees, lower start-up costs, fewer employees, and reasonable rentals. Franchise owners are exploring new, less-expensive locations beyond traditional shopping and strip malls, and are developing models such as stand-alone kiosks, corporate catering, campuses, and sporting events. Other developments include incorporating a brand within a convenience store or a service station. Some franchises have found success by operating in tandem with non-competing brands. Almost 90% of franchises are locally developed and around 12% of master licenses are international. Some of the bigger South African franchisors, such as Famous Brands and Nando’s, have expanded to other regions in Africa. One notable challenge is the limited access to finance as banks tend to be more cautious in the financing of franchises. This translates into a relatively small pool of entrepreneurs and companies with the ability to absorb the costs of master licenses of popular international brands.
Several business laws apply to franchising and copyrights including the Consumer Protection Act, Copyright Law, Common Law, Contract Law, and Intellectual Property Law, which the private sector vigorously adheres to.
Additional information can be found at:
Franchise Association of Southern Africa (FASA)
Postnet Suite 256, Private Bag X4
First Floor, Block A, Eastgate Office Park
South Boulevard, Bruma 2198
Tel: +27 (0) 11 615 0359; Fax: +27 (0)11 615 3679
Website: http://www.fasa.co.za/
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.
Food franchises make up about 25% of total franchises, with some segments that are considered saturated such as pizza and burgers. Several U.S. brands have made their entry in the last few years, namely Burger King, Pizza Hut, Krispy Kreme, Domino’s and, most recently, Starbucks. Other franchise concepts such as business-to-business (B2B) services, automotive, after-care, and education are also making inroads into the market.
Franchising has become more popular in recent years, as business owners perceive them to be an effective way to conduct and grow successful businesses across a range of services. Franchising also plays an important role in furthering the development of small- and medium-sized businesses. Job creation, poverty alleviation, economic growth, and black empowerment rank high on the South African Government’s agenda, and there appears to be a growing recognition by the Government that franchising can be an effective business model to address these needs.
Approximately 40% of franchises are in Gauteng Province, particularly Johannesburg and Pretoria, the economic powerhouse of the country, and the African continent. Patterns within existing franchises are changing, due to economic belt-tightening by the population and changing consumer behavior. Some franchise owners are starting to develop smaller, more cost-effective models with reduced fees, lower start-up costs, fewer employees, and reasonable rentals. Franchise owners are exploring new, less-expensive locations beyond traditional shopping and strip malls, and are developing models such as stand-alone kiosks, corporate catering, campuses, and sporting events. Other developments include incorporating a brand within a convenience store or a service station. Some franchises have found success by operating in tandem with non-competing brands. Almost 90% of franchises are locally developed and around 12% of master licenses are international. Some of the bigger South African franchisors, such as Famous Brands and Nando’s, have expanded to other regions in Africa. One notable challenge is the limited access to finance as banks tend to be more cautious in the financing of franchises. This translates into a relatively small pool of entrepreneurs and companies with the ability to absorb the costs of master licenses of popular international brands.
Several business laws apply to franchising and copyrights including the Consumer Protection Act, Copyright Law, Common Law, Contract Law, and Intellectual Property Law, which the private sector vigorously adheres to.
Additional information can be found at:
Franchise Association of Southern Africa (FASA)
Postnet Suite 256, Private Bag X4
First Floor, Block A, Eastgate Office Park
South Boulevard, Bruma 2198
Tel: +27 (0) 11 615 0359; Fax: +27 (0)11 615 3679
Website: http://www.fasa.co.za/
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.