SA set to match global success story
THE runaway success of franchising globally has opened up business opportunities never before imagined - with franchises recognised as symbols of value, quality and consistency in a rapidly growing business sector which now spans about 70 industries.
Franchising is no longer the domain of the US. It is becoming more indigenous and "home grown" franchisors are becoming the norm.
South Africa is experiencing a spurt of new franchise concepts and the trend in the new South Africa is towards the low-cost entry franchise systems.
The role that Fasa (Franchise Association of Southern Africa) is playing in the rapid expansion of franchising is considered crucial. From its partnership with the Department of Trade and Industry in trying to stimulate self-employment and in creating jobs through accessible franchising, to achieving greater statutory powers, the association is forging a path towards the new millennium.
The expanding market in franchising - while creating opportunities and employment - can also result in unscrupulous operators who disregard all business ethics.
In this field Fasa plays a pivotal role. In addition to promoting franchising, Fasa sets principles and guidelines on which sound franchise schemes should operate. In line with the international guidelines to ethical franchising, Fasa's requirements for franchisor members include:
ý Adhering to a strict code of ethics which has been sanctioned by the Business Practices Committee and the Competition Board.
ý A disclosure document. This is to protect prospective franchisees and follows international standards. Fasa was instrumental in introducing this document which details the franchisor's background, his financial and operating principles - and which gives the prospective franchisee up-front information and transparency.
ý A copy of the franchise agreement which sets out all the legal responsibilities of both the franchisor and the franchisee.
ý An operations and training manual which details the system under which the franchise will operate.
ý Standard franchise procedure that sees all accredited franchises allowing prospective franchisees a "cooling off' period of at least seven days to study the disclosure document, the franchise agreement and the operations manual.
"Government is interested in franchising because it can help stimulate the economy. There is job creation and also skills transfer, which all ties in with the government's policy of promoting economic growth and productivity," says Nic Louw, executive director of Fasa.
Louw points out that surveys of the US franchise industry last year revealed that the average franchise - of which there are 600 000-plus in the US - employs about 30 people and creates and maintains jobs for an additional 33 people.
This additional indirect creation of jobs is an area of franchising not fully acknowledged, Louw says.
If the average SA franchise operation employs about 10 people directly, this gives it the potential to create at least another 20 jobs.
"Franchising is generally acknowledged as an important force to help generate employment and to contribute to a more equitable income distribution, to activate competition, exploit niche markets, enhance productivity and technical change - and through all of this, to stimulate economic development. Franchising fulfils the quest for independence and desire to accept responsibility for one's own well-being.
"Inherent in the success of franchising is that it is based on a proven concept, a mentorship that lasts the life of the franchise agreement," says Louw.