LOOKING AT FRANCHISING IN 2018

Survey results released by FASA in 2017 show that the sector’s performance remains on an upward trend. During the period under review, the sector comprised 845 franchisors and over 40,000 franchisees, it employed around 343,000 people and generated sales of R587-billion. This equates to 13.3 percent of the country’s GDP; a significant increase over the 9.7 percent recorded in 2014. The survey also corroborated the stability of the sector, with some brands having traded for over 50 years.

Even as the franchise sector outperforms the overall economy, problems do crop up from time to time. Paradoxically, these usually arise as a result of franchising’s success record on the one hand and the would-be franchisees’ disinclination to conduct a thorough due diligence on the other.

Experts have compared the franchise relationship to a marriage, and I agree. To make a marriage work, the partners must share similar values, have clearly defined goals that both parties contribute towards, and both parties must be willing to compromise when necessary. A franchise relationship is no different. The franchisor is responsible for developing a workable blueprint for the franchise and proving the viability of the business, whereas franchisees must do their part by investigating an opportunity before committing to it. Problems arise when an impatient entrepreneur offers franchises for sale before the foundations for sound franchising have been established or over-eager investors join a franchise without conducting a through due diligence.

Investing in a franchise, even if the franchisor is a FASA member, is by no means a guarantee of business success. Investing in a FASA accredited franchise does however offer substantial comfort to investors.

Before being admitted as a member of FASA, franchisors must complete a detailed application form. FASA then conducts an investigation into the applicant’s track record, assesses their financial stability and evaluates the franchise’s documentation. Upon admission, members become bound by FASA’s Code of Ethics which further protects the interests of franchisees.

Even so, dealing with a member of FASA does not negate the need for would-be franchisees to conduct their own inquiry into the opportunity. Investing in a franchise is a significant long-term commitment and prospective franchisees should examine all relevant aspects, including their own attitude, aptitude and willingness to invest the effort required before committing pen to paper or making any payments.

During 2017 we were forced to ask several members to either comply with the Code or resign. In our relentless drive for constant improvement, we intend to apply even stricter standards during 2018 and even as we aim to grow membership numbers, we will never place quantity over quality.

FASA is working on various exciting initiatives designed to assist both newcomers to the sector as well as existing members. FASA also offers ‘How to’ guides for prospective franchisors and franchisees. Moreover, our free newsletter informs about franchising and provides details of forthcoming events and workshops. 

There is no doubt in my mind that franchising can look forward to a bright future and I invite you to join us on the exciting journey that lies ahead.

Across the globe franchising is recognized as one of the most aggressive forms of business expansion with some high profile brands counting among the leaders in franchising. In most countries franchising has fallen under the umbrella of local franchise associations like FASA which, in turn, belong to the World Franchise Council (WFC) who promotes good and ethical franchising internationally. 

There is always a risk that unscrupulous entrepreneurs operating under the guise of franchising will make empty promises and sell unethical businesses to unsuspecting operators. One of the first questions any would-be franchisee should ask is, “Is the franchise I am considering accredited by FASA? And if not, why not?”

FASA members voluntarily align themselves and their brands to an internationally recognised body that adheres not only to international best practices, but to sound business ethics established through the Consumer Protection Bill, the Franchise Industry Code and the soon-to-be-appointed Ombud for the sector. FASA member franchisors voluntarily open themselves to scrutiny, showing their commitment to running an ethical operation based on sound business principles. FASA members are viewed as credible operators and quality companies within the franchise community and are usually accredited by the major banks and lending institutions.

Each FASA membership application is subjected to a thorough assessment and must meet the following minimum requirements: