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What you need to know about franchising in South Africa

| Economic factors

The Franchising Association of South Africa (FASA) has released the results of its 2015 FASA survey, providing some remarkable facts about the franchising industry in South Africa.

According to Ethel Nyembe, Head of Small Enterprise at Standard Bank, 2016 will see increased activity within the franchise sector, particularly the fast food franchises.

This comes as international brands that announced their entry into the market this year look to establish operations around the country in the New Year.

Following Burger King’s successful launch in 2013, South Africa has opened its doors to many new international brands, including Krispy Kreme, Paul bakeries, Dunkin Donuts and Starbucks, which will start operating in 2016.

However, the sector won’t be without its pains.

“With South Africa moving closer to a recession and possible credit-rating downgrade to junk and as investors lose faith in our struggling economy, the franchise sector will have to dig deep to weather this latest storm,” FASA said.

“Survival in these tough times will have to be a collective effort between all stakeholders,” it said.

Franchising is a massive contributor to the South African economy. FASA has released these stats showing just how big the industry is:

Franchise contribution to GDP is now at 12.5%, in monetary terms the franchise market is worth an estimated R456 billion;

There are 17 business sectors through which franchising contributes to GDP;

Quick Service Restaurants and Restaurants (24%), Retail (12%), and Building, Home & Office Services (11%) remain the largest contributing sectors;

There are 627 franchise systems/franchisors in South Africa;

There are 39,119 franchise stores, most of these are operated by the franchisees, who form the backbone of the franchise industry. The Majority of these outlets are located in Gauteng, Western Cape and KZN;

From a satisfaction perspective, 80% of franchisees reported good relations with franchisors, and 73% are satisfied with their suppliers;

More importantly, 72% of franchisees reported an optimistic outlook about the future in the face of economic challenges.

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