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10% increase in BLACK OWNERSHIP
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outh Africa is a franchising nation with a large range of businesses employing hundreds of thousands of workers and contributing millions to the economy. The strength of the local franchising sector is a tribute to the value of standardised business procedures, contracts and proposals, along with the support that the model offers to budding entrepreneurs in a country that desperately needs to stimulate small business. In this issue of Franchising, we review the sector’s strengths as revealed by the Franchise Association of South Africa’s latest survey. What’s really interesting about franchising in South Africa is that it’s dominated by local businesses, with almost 75 per cent of our franchises being local in origin, so we dig into the reasons behind this, as well as the potential challenges international franchises might face in setting up shop here. Of course, a business is only as strong as its people, and thus effective HR management is crucial. We look at the type of information that should be included in a franchise manual in this respect, along with the legal obligations that franchisors and franchisees should bear in mind when operating a business in South Africa. Staying on that theme, we gauge the outlook for HR and payroll outsourcing franchises in a world of distributed teams. And speaking of distributed workers, we also find out how a local real estate company navigated a franchise partnership with flexible space provider WeWork.
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PARTNER CONTENT Unpacking the results of the Franchise Association of South Africa’s latest survey.
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South African franchising is dominated by local businesses. Why is this so?
17 HUMAN RESOURCES HR and payroll outsourcing businesses are helping start-ups to find their feet. Copyright: Picasso Headline. No portion of this magazine may be reproduced in any form without written consent of the publisher. The publisher is not responsible for unsolicited material. Franchising is published by Picasso Headline. The opinions expressed are not necessarily those of Picasso Headline. All advertisements/advertorials have been paid for and therefore do not carry any endorsement by the publisher.
A human resources framework is one of the most essential tools in the franchise toolbox.
The flexible workspace revolution offers enormous growth prospects across Africa.
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PA R T NER CON T EN T
FRANCHISES STAND STRONG The latest survey from THE FRANCHISE ASSOCIATION OF SOUTH AFRICA highlights the strength of the franchise system
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esearch and surveys are, on the face of it, all about the cold hard facts of statistics and the numbers – what’s the turnover and contribution to gross domestic product (GDP), and how many outlets make up this important business sector. However, in reality, the success being celebrated with the release of the franchise survey lies in the strength of the franchise system and the community behind the brands – the franchisees behind the businesses, offering their products and services. That insight, from Margaret Constantaras, researcher in chief at Research EQ, who oversaw the survey commissioned by the Franchise Association of South Africa (FASA) and sponsored by Absa, lies at the heart of the two surveys – one on the performance of the franchisor sector over the past four years, the other on franchisee satisfaction. The statistical outcomes are simply a reflection of the dedication and resilience of every single person who uses the “franchise formula” to run their business, and
demonstrate just how passionate and positive some of the franchisors interviewed were. James Noble, head of wholesale, retail and franchise business at Absa, agrees that franchising’s example of how to tackle the curve balls of the past four years is reflected in the positive survey results. “As a bank with a dedicated franchise division, we have become part of the solution that franchisors and franchisees collectively identify with, whether it’s giving them stop-gap financing or advice on energy solutions, or helping them cope with financial challenges.”
MORE UPS THAN DOWNS With more upward than downward trends, the franchise survey results are a testament to the power of the “ubuntu” collective that is the cornerstone of franchise success, as franchisors and franchisees work together to analyse challenges and find solutions that will not only benefit themselves, but also their staff, dependants and the consumers they serve.
THE FRANCHISE SURVEY RESULTS ARE A TESTAMENT TO THE POWER OF THE “UBUNTU” COLLECTIVE THAT IS THE CORNERSTONE OF FRANCHISE SUCCESS.
• Optimism about the success of their businesses continues to strengthen among franchisors (81 per cent in 2018, 89 per cent in 2019 and 98 per cent in 2023) despite the upheavals from 2020 to 2022, and the expectation that turnover will grow in the next financial year is almost unanimous. • Time in business, namely the time the franchise system has been operating since signing its first agreement, showed that three in four franchises fell into the more experienced range of 10-plus years, with the average age of the business being 21 years – proving the resilience and stability of the franchise sector in South Africa to provide long-term investment opportunities. • The number of franchise systems dropped from 813 in 2019 to 727 in 2023 – clearly attributed to the disruptions of the past four years that put the break on new concepts coming online, and perhaps in the closing of smaller fledgling concepts, which could not get off the ground during the pandemic. • The number of franchise outlets was grossed up, due to the greater franchisor sample, especially of large franchises with 200-plus outlets, to represent 68 463 franchises, reflecting the increased number of large franchisors participating in the survey.
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country, which translates into approximately 471 233 employees, based on figures provided by Stats SA regarding employment in the first quarter of 2023. Of those, 51 per cent are black staff, 12 per cent are coloured staff; 12 per cent are Indian staff and 25 per cent are white staff. • In an average franchise system, 8.5 per cent are franchise management, 38.3 per cent are franchisor staff, 7.7 per cent are franchisee management and 45.5 per cent are franchisee staff.
“FRANCHISING DOES NOT GET ENOUGH CREDIT FOR ITS CONTRIBUTION TO THE COUNTRY’S ECONOMIC STABILITY BY KEEPING THE WHEELS OF BUSINESS TURNING.” – FRED MAKGATO • As a result, the sector’s contribution to the country’s GDP increased from 13.9 to 15.0 per cent of the total South African GDP in 2022, indicating that those remaining systems were resilient and strengthened their market position. • The estimated turnover generated for 2023 was R999-billion, a 36 per cent increase over the 2019 figure of R734-billion, again reflecting the increased number of large franchisors participating in the survey. This amount does not include revenues from listed companies operating in the franchise market – these listed companies did not participate in the survey and are dealt with in a separate section of the report. An estimated turnover of R999-billion for the franchising industry, as per the research, is equivalent to 15.0 per cent of the total South African GDP of R6 660-billion in 2022. • Fluctuation in the number of business units showed the net number of stores opened in 2023 is 2.9 – the sum of 3.1 stores opened less 1.2 stores closed – with 1.4 stores relocated. The general feeling was that while turnover and revenue growth were sought across the board, store growth was not on the immediate radar for most franchisors during this turbulent time. • Franchisor ownership demographics showed an interesting trend, with the average percentage of system ownership by previously disadvantaged individuals improving significantly in the last four years from 20 per cent in 2019 to 48 per cent in 2023, with black ownership
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showing an increase of 10 per cent, almost double what it was previously. Ownership by Indians and coloureds has tripled overall (7 per cent to 18 per cent and 2 per cent to 9 per cent, respectively). A concomitant decrease, though, was noted among white franchisors – from 80 to 42 per cent – perhaps a reflection of the reticence in this entrepreneurial group to launch new systems amid continued failed infrastructure. • Franchisee ownership, in terms of franchised outlets, has also changed significantly in the last four years, with black ownership at 18 per cent, Indian ownership at 17 per cent, coloured ownership at 8 per cent and white ownership at 57 per cent. • Female ownership remained steady at 30 per cent in 2023, possibly due to the multiple roles women had to play over the past four years, especially during COVID-19, which may have restricted their entrepreneurial ambitions. • The franchise industry accounts for an estimated 4.7 per cent of employment in the
Franchising consists of a range of around 12 business categories that make up the franchising pie. The retail and automotive products and services categories tend to be the larger franchises (17 per cent and 10 per cent of the pie, respectively), while fast foods and quick-service restaurants (at 19 per cent) are more likely to fall into the medium category. Smaller franchises are more likely to be building, office and home services (12 per cent of the pie), business-to-business (7 per cent), childcare, education and training (7 per cent), health and beauty (6 per cent), dine-in restaurants (5 per cent) and real estate (5 per cent), with personal services, construction and related services, and others making up 2 per cent of the franchise pie. FASA CEO Fred Makgato says that franchising does not get enough credit for its contribution to the country’s economic stability by keeping the wheels of business turning. “This sector, while one of the most dynamic and visible due to its spread throughout the country through well-recognised brands in twelve different sectors, is not recognised enough by government for its entrepreneurial endeavours, offering viable business opportunities, training staff in a range of industries and creating both direct and indirect jobs. Measured for the first time this year, 23 per cent of franchises are now operating in townships, opening up a whole new untapped market, but government needs to come to the party in terms of supporting and funding small businesses.”
Images: metamorworks/istockphoto.com, Blue Planet Studio/istockphoto.com, ileezhun/istockphoto.com,
PIECES OF THE PIE
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T REND S
DO INTERNATIONAL FRANCHISES FARE WELL AWAY FROM HOME? Do South Africans really prefer local franchises, or is it just too expensive or challenging to successfully operate an international franchise in the country? TREVOR CRIGHTON investigates
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he South African franchising market is dominated by local franchises – 73 per cent, according to the International Trade Administration, and 89 per cent, according to the 2023 Franchise Association of South Africa Franchisor Survey – but the international brands that make up the balance are powerful ones with large footprints, such as KFC, McDonalds or Signarama. Franchise Coaches’ Elana Koral says that culture plays a huge role in the success of international franchises in South Africa. “You cannot cut and paste franchise formulas
Elana Koral
from continent to continent or even country to country. In Angola, for example, KFC restaurants may have up to 200 seats and visiting the restaurant is used to mark an occasion or significant event. Botswana has a strong sit-down culture. Fried chicken may still be in demand in certain countries, but grilled chicken is preferred in others.” Koral’s view is that international franchises coming to South Africa must carefully consider the business model they plan to use. “Franchises have failed in South Africa due to the master franchisee owning the ‘cherry sites’ and giving the sub-franchisees the less lucrative ones. Franchising is based on trust. If that trust is broken and the master franchisee is seen to be self-serving, the franchise is destined for failure.”
“CULTURE PLAYS A HUGE ROLE IN THE SUCCESS OF INTERNATIONAL FRANCHISES IN SOUTH AFRICA. YOU CANNOT CUT AND PASTE FRANCHISE FORMULAS FROM CONTINENT TO CONTINENT OR EVEN COUNTRY TO COUNTRY.” – ELANA KORAL
FAST FACT
According to Euromonitor International’s market share data, KFC holds 24.3 per cent of the fast-food market by sales in the country, followed by McDonald’s (13 per cent), Nando’s (6.5 per cent), Debonairs Pizza (4.7 per cent) and Wimpy (4.1 per cent).
SOUTH AFRICANS SUPPORT LOCAL Sasha-Lee de Bod Smith, partner and development consultant at Franchising Plus, says the dominance of local franchises over their international counterparts in South Africa can be ascribed to a dual interplay of consumer inclinations and practical challenges within the franchise sector. “South African consumers, driven by a strong preference for locally sourced offerings, actively contribute to the success of homegrown businesses. Moreover, the hurdles faced by international franchises in the South African market, including navigating intricate regulatory landscapes and adapting to local cultural nuances, contribute to their comparatively lower presence.” She adds that local franchise prevalence over international brands – and their success – stems from a confluence of factors deeply rooted in the specific dynamics of the market. “Firstly, local franchises often have a nuanced understanding of the cultural and consumer landscape, enabling them to tailor their offerings to meet the preferences and needs of the local population. This cultural resonance fosters a stronger connection with customers, contributing to sustained loyalty and patronage. “Moreover, the support structure provided by local franchises tends to be more robust. These businesses are often deeply ingrained in the local community, benefitting from established networks, relationships and a better understanding of the regulatory landscape. This support network becomes a crucial asset, especially when compared to certain international franchises that may prioritise selling master licences without providing adequate localised support.” Sasha-Lee de Bod Smith
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INTERNATIONAL FRANCHISE CHALLENGES The prohibitive costs associated with acquiring international franchises, including hefty upfront fees and ongoing royalties, can present a formidable barrier for many prospective entrepreneurs, says de Bod Smith. “Furthermore, beyond prominent global brands, the limited support structure offered by some international franchises – particularly those focused on selling master licences – further diminishes their appeal in comparison to the robust support systems often provided by successful local franchises. This intricate combination of consumer sentiment and pragmatic challenges sheds light on the prevailing landscape of franchise dynamics in South Africa.” Koral cites some other challenges when it comes to establishing international franchises in South Africa: • Access to finance for franchisees with high start-up costs. • Difficulty sourcing local products. • Difficulties in recruiting high-quality franchisees. • Finding optimal locations. • The turbulent local economy. • The tenuousness of title deeds in property ownership – particularly when venturing north of South Africa’s borders. “There is, however, still plenty of opportunity for franchising to be the perfect vehicle for economic transition,” adds Koral. “There are many great business ideas within the formal and informal sector that lend themselves to the franchising model. Formalised, well-run businesses, be they in townships or informal operations, can be expanded using the franchise model, creating jobs and work opportunities.
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FAST FACT
Statistics from the Franchise Association of South Africa show that the country’s franchise industry contributes around 15 per cent (R721-billion) to the gross domestic product.
Micro and social franchising has become an increasingly popular means to franchise existing services such as childcare, cellphone remote usage and the like.” Koral says that the international franchises that have succeeded in South Africa are exemplified by McDonald’s and KFC. “First and foremost, they have strong leadership in South Africa, they have global exposure to best practices where they plug into a bigger brand, they adapt their model based on the trends and needs of local communities and they understand the evolving needs of the customer. McDonald’s, for example, has created a local all-female-run franchise, helping to address gender inequality.”
LOCAL FRANCHISES SUCCEEDING ABROAD Outbound franchisors, such as Nando’s, have adapted to the changing needs of the African countries where they operate. “In many cases, they have moved from pure fast-food operations to a quick-serving restaurant model,” says Koral. “Nando’s has found that a master licence agreement, where they directly contact a corporate entity, which can expand on a company-owned basis, is a viable model,” explains Koral. “An owner-operator with a
Margaret Constantaras, head of quantitative research and governance at Research EQ, breaks down some numbers from the 2023 Franchise Association of South Africa Franchisor Survey. Looking at franchise brands from inside South Africa with outlets outside of South Africa, we see: • Forty-two per cent of franchisors claimed to have businesses in Africa, outside South African borders, with an average of 30 business outlets mentioned. Most business units are in the neighbouring countries, particularly Botswana, Lesotho and Namibia. Proximity to these countries, in comparison to countries in East or West Africa, makes them a more popular choice for expanding out of South Africa. • Twenty per cent of franchisors claim to have businesses outside African borders, with the main countries mentioned being the United States, the United Kingdom, Mauritius and Europe. The main challenges mentioned by the international franchisors interviewed included: • Finding franchisees with the right business/industry experience and sufficient capital. • Staff turnover, attracting the right/ qualified staff and staff training. • Costs – inflation, slow economy and high/expensive rentals. • Load shedding – impact on productivity and profitability. • Finding the right location.
master licence may need to open a certain number of outlets to be able to make good returns, have better bargaining power in the marketplace and ensure that both parties have a worthwhile return on investment.” South African franchise brands have been extremely successful in their own right and have met market demand through a variety of food chains, beauty chains, and so forth, says Koral. “We have been excellent at extracting ideas and best practice from international franchises. South Africa is one of the few countries with so many successful local franchise brands that outweigh the global imported brands. Local entrepreneurs have created their own brands, borrowing from systems that come from outside while understanding the local culture and nuances.”
Images: Ivotheeditors/Istockphoto.com, Ceri Breeze/Istockphoto.com, Supplied
FRANCHISE FACTS AND FIGURES
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HUM A N RESOURCES
HELPING START-UPS TO GET GOING By outsourcing the critical functions of recruitment and other human resources functions to franchised partners, start-ups can focus on growing their businesses, writes ANTHONY SHARPE
THE STATE OF HR The Society for Human Resource Management State of the Workplace Study 2021–2022 provides insights into the pressures facing HR leaders, some of which will certainly influence the growth of HR outsourcing. The study found that 72 per cent of HR professionals felt their departments were stretched too thin and working beyond their capacity, with the problem exacerbated in larger companies. The same percentage cited a lack of well-qualified candidates as the greatest challenge facing their department.
DISTRIBUTED TALENT
Images: patpitchaya/istockphoto.com
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tarting and running a business is complicated. Starting and running a business in a globalised economy, with skills questions both potentially solved and made more complex by a decentralised workforce, is really complicated. Many businesses, especially start-ups, are simply trying to focus on refining their offering and maintaining and growing their customer base in a turbulent economic climate. Of course, a business is only as good as its staff, which is why skills testing, recruitment, onboarding, payroll, and other human resources-related functions are so crucial. However, it’s hard to build a raft when you’re trying to keep your head above water, which is why a growing number of start-ups are outsourcing these functions to specialised human resources (HR) service providers. A recent Global Industry Analysts report predicted more than seven per cent growth in the HR outsourcing space, which means a growth in opportunities for a business that lends itself well to the franchise model.
A BUOYANT ECOSYSTEM The good news for the local market is that the South African start-up ecosystem is pretty buoyant. That’s according to Stuart Morris, operations director at Tarento Global, a recruitment, skills testing, hiring and payroll solutions provider. “There’s a number of companies trying to grow, and we’re trying to give them an opportunity to become part of our system.” Tarento Global provides clients with a free HR information system, so they can onboard, manage and pay employees. The company also provides several services, such as a learning management system, as part of a subscription model. Morris says one of the most important things with a start-up is understanding your runway as far as cash is concerned, but many struggle with this. “We try to smooth out their costs by charging a monthly fee for services so they know what their HR costs are.” Brightening the start-up picture further is the number of incubators and accelerators, says Morris, along with growing start-up funding.
A BUSINESS IS ONLY AS GOOD AS ITS STAFF, WHICH IS WHY SKILLS TESTING, RECRUITMENT, ONBOARDING, PAYROLL, AND OTHER HUMAN RESOURCES-RELATED FUNCTIONS ARE SO CRUCIAL.
Morris maintains that South Africa, despite some skills shortages in certain areas, has a wealth of talented people. “Moreover, those shortages aren’t having a significant effect on start-ups because skills can be found in other countries where the salaries are not too dissimilar.” This brings up one service of great value to local start-ups in this position: international remuneration, because getting money out of the country is difficult, Morris says. Businesses such as Tarento Global facilitate this by acting as treasurers, paying distributed team members from overseas accounts. This type of model is also becoming increasingly in demand as local workers seek employment with international firms, revelling in the splendours South Africa has to offer while earning valuable currencies such as the US dollar or euro. In fact, the depressingly weak state of the rand presents an opportunity for businesses in the international payment space, which should drive growth.
THE SKILLS This sort of business suits people with a range of skills, says Morris. “One of our local franchisees is an ex-accountant from a major auditing firm so they are a well-established individual with skills in accounting and finance. Another is an educator, while the other specialises in outsourced services, running a call centre and tacking our services on to their offering. One of our international franchisees has a PhD in artificial intelligence, so he concentrates on working with start-ups around the world that are working in that space because he speaks their language.”
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HUM A N RESOURCES
FRAMEWORKS FOR SUCCESS Your human resources framework is one of the most essential tools in your franchise toolbox, writes MART-MARIÉ DU TOIT
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company is only as good as its employees. When employees are happy, seen and heard, it enables a pleasant employee experience throughout their working life cycle. We asked industry experts what you must include in your framework to ensure your franchise’s human resources (HR) framework doesn’t get left behind while you’re focusing on profits and growth.
THE BASICS Phumza Capa, chief HR officer for Nashua, which currently has 42 franchises across South Africa, says it is important to note who the responsible party is for all HR actions in the franchise. “The franchisor provides guidance and support as well as HR best practices and frameworks. The franchisee implements and manages these at the franchise level,” she says.
Sasha-Lee de Bod Smith, partner and franchise development consultant at Franchising Plus, agrees. “Typically, the franchisor sets certain standards and guidelines for HR practices to maintain consistency across the franchise network. However, day-to-day HR operations, such as hiring, training, and managing employees, often fall under the responsibility of the individual franchisee. Clear communication and a well-defined franchise agreement help establish these roles.”
SETTING IT UP Many different aspects are involved in setting up and maintaining a HR framework in keeping with legislation. Don’t cut corners here; you’ll likely be in trouble later. De Bod Smith explains: “The franchisee, within the scope of their business, functions as
FAST FACT
The global franchise market is estimated to grow at a compound annual growth rate of 9.58 per cent between 2022 and 2027. The market size is forecast to increase by R30.7-trillion. The growth of the market depends on several factors, such as a rise in the number of restaurants and hotels worldwide, the growing demand for convenient food products and increasing construction activities. Source: Franchise Market by Type, Application and Geography – Forecast and Analysis 2023–2027
an independent business and legal entity. Consequently, they serve as the employer for all individuals employed within their business. As the employer, the franchisee’s responsibility is to ensure that HR management aligns with existing legislation. This legislation encompasses the Basic Conditions of Employment Act, the Labour Relations Act, the Employment Equity Act, and other relevant statutes, including collective agreements or sector-specific regulations that may vary across different industries.”
Phumza Capa
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Dr Johan Steyn
Dr Johan Steyn, CEO of the Franchise Chamber of South Africa, says that an HR framework should support the following: • consistency in employee management • legal compliance • recruitment and retention • conflict resolution • brand image • succession planning.
LIABILITY AND STANDARDS Legal compliance is vital in dealing with human resource matters. “If a franchisee is in a dispute with an employee, they should follow the internal grievance process,” Capa says. “If the employee isn’t satisfied with the outcome, they can refer the dispute to the Commission for Conciliation, Mediation and Arbitration (more commonly known as the CCMA).” De Bod Smith agrees: “Both franchisors and franchisees must be mindful of the legal obligations associated with operating a business in South Africa, particularly concerning employees. It’s essential to consider industry standards, benchmarks and minimum wage requirements specific to different sectors within the industry. This ensures that staff members are appropriately remunerated and receive benefits in alignment with legislation or any collective agreements in place.” Steyn adds: “Disputes and conflicts are inevitable in any workplace. A well-established HR framework provides guidelines for conflict resolution, ensuring that issues are addressed promptly and effectively, maintaining a healthy work environment.”
In many businesses, human resources and staffing functions are not central to the core operations of the franchise. “When franchisors recruit franchisees, they typically do not prioritise HR skills as an inherent requirement,” explains de Bod Smith. “Therefore, franchisees should consider outsourcing HR responsibilities to a labour consultant or labour lawyer. These professionals can assist with tasks such as selection and recruitment, onboarding and the legal management of employees. By doing so, the franchisee and franchisor reduce the risk and liability associated with HR matters. Collaborating with a labour-related expert ensures effective handling of disciplinary processes and fosters proper employee relationship management, benefitting the business’s overall health.”
BEST PRACTICE, BEST OUTCOME According to Capa, human resources in any business is usually a work in progress, “but one must ensure that the minimum requirements are in place. The rest can be enhanced and developed over time”. She explains the three options offered by Nashua. “Depending on how far a franchise wants to take HR support and depending on their agreement with Nashua, we offer three models: high HR support (brand protect); moderate HR support (mixed HR priorities); and low HR support (avoid liability).” Every franchisor will have its own human resources model from which a franchisee can write their human resources handbook. “For effective operational guidance, the franchisor is responsible for providing the franchisee with an organogram detailling all necessary job functions,” says de Bod Smith. “This should include the minimum number of employees essential for each job function in the business. The franchisor is also tasked with formulating comprehensive job descriptions for each job function, and these descriptions should be accessible to the franchisee for distribution to employees in alignment with their respective roles within the business.” A franchise can flourish if its human resources framework provides adequate guidelines for managing and retaining employees with a legal, human-centred approach.
“THE FRANCHISEE, WITHIN THE SCOPE OF THEIR BUSINESS, FUNCTIONS AS AN INDEPENDENT BUSINESS AND LEGAL ENTITY. CONSEQUENTLY, THEY SERVE AS THE EMPLOYER FOR ALL INDIVIDUALS EMPLOYED WITHIN THEIR BUSINESS.” – SASHA-LEE DE BOD SMITH 24
BY THE BOOK
Sasha-Lee de Bod Smith of Franchising Plus says franchisors should create a template for an employee handbook. “This can be provided to franchisees for customisation according to their unique business environment. This adaptation includes tailoring specific business policies and procedures, the disciplinary process, remuneration structures and employee benefits.” The Ultimate South African Business Companion Book by Lesley-Caren Johnson, operations and procedures lead at Franchising Plus, states that the franchise employee handbook should include (but is not limited to): • introduction on the employee handbook • nature of employment • employee relation • business ethics and code of conduct • conflicts of interest • nondisclosure • employee personnel files • personal information changes • probation period • performance evaluation and appraisals • job descriptions • employee benefits • leave benefits • public holidays • employee remuneration and paydays • telephone, computer and e-mail usage • violence in the workplace • employee conduct and work rules • drug and alcohol use • attendance and punctuality • personal appearance and grooming • resignation • security and searching policy • discipline in the workplace • grievance procedures • life-threatening illnesses in the workplace.
Steyn explains: “It enables and ensures compliance, mitigating legal risks and potential liabilities, and aids in the recruitment process, attracting and retaining top talent. A clear job purpose, development opportunities and competitive compensation packages enhance the franchise’s appeal to potential employees. This also drives employee satisfaction and productivity. Satisfied employees are more motivated and productive, leading to improved customer service and overall business success.”
Images: julief514/Istockphoto.com, Supplied
KNOW THIS
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OL D MU T UA L A DV ER T ORI A L
SMART PLANNING FOR FRANCHISE SUCCESS OLD MUTUAL shares how smart financial planning can power franchise success
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outh Africa’s franchising sector has demonstrated remarkable resilience and sustainability in recent years, highlighting its durability and potential for long-term success. Anchored by established and reputable brands, such as KFC, Nashua, Battery Centre and Sorbet, franchising has thrived. “Franchising in South Africa is not just a business model; it empowers individuals to craft their destiny,” says Jayendra Naidoo, general manager, Agency Franchise Distribution, Old Mutual Personal Finance.
Images: Supplied
Images: Supplied
ENTREPRENEURIAL SPIRIT: MORE THAN BUSINESS Franchising must be viewed through a lens of economic adaptability and entrepreneurial vigour, says Naidoo. “Franchise ownership expresses entrepreneurial spirit. It’s about embracing the challenge, the journey and the rewards,” he comments. Franchising offers an edge over starting a business from scratch through a robust support system that is both broad and deep. These foundational pillars contribute significantly to the success of a Jayendra Naidoo new franchisee. “It’s the support from the master brand and your fellow franchisees. This support extends to vital operational aspects, such as proven systems and processes that are crucial for the smooth functioning of the franchise. The ability of the franchisor to support
its franchisees with these tested methods is a major advantage over navigating the uncertainties of a solo start-up,” Naidoo notes. He advises prospective franchisees to research and align their values with their chosen franchise. “The brand you choose reflects your aspirations. It’s imperative to delve into the franchise’s ethos and ensure it matches your vision,” Naidoo emphasises. He highlights the importance of a robust support system within the franchise, including ongoing training, marketing strategies and a sense of community. “Franchising in South Africa offers a unique blend of community and innovation, where entrepreneurs share knowledge and grow together,” he adds.
IMPERATIVE FINANCIAL PLANNING Thorough financial planning is essential to successful franchising. “It creates a cushion against uncertainties, ensuring stability for your business and your loved ones,” Naidoo explains. “A solid financial plan involves more than business assets; it’s holistic and extends to personal commitments and the welfare of employees and the franchise owner.” Business assurance, Naidoo says, is critical in safeguarding the franchise’s future. This includes three key areas: 1. Buy-and-sell arrangements ensure a predetermined, fair value for the business owner’s stake, avoiding disputes or undervaluation at critical times. This setup also ensures a smooth succession plan, maintaining business stability. 2. Contingent liability is crucial; many business owners personally guarantee their business debts. Should anything happen to the owner,
this insurance ensures the business can settle its debts without straining its estate. 3. Key person insurance is essential for covering the impact of losing a key employee due to death, disability or severe illness, helping the business during the transition period by providing financial support. “These aren’t just financial tools; they are lifelines in times of crisis,” Naidoo explains.
THE OLD MUTUAL EDGE Collaborating with Old Mutual, Naidoo notes, offers multifaceted benefits for South African franchise owners. “Our approach is holistic. We don’t just offer financial solutions; we build financial fortresses,” he says. Old Mutual’s solution range and vast network of advisers provide accessible, personalised guidance. “Accessibility and trust are key. Our advisers are a phone call away, ready to offer tailored advice for the unique African market,” Naidoo adds. “Old Mutual’s exemplary 178-year track record in claims support is an essential factor in turbulent times. A strong claims-paying record is a promise of reliability when you need it most.” Franchising is a story of growth, resilience and community, offering a roadmap for entrepreneurs to navigate the complex landscape of South African business and global economics. “In this evolving narrative, franchising is not just a business option, but also a catalyst for personal and collective prosperity,” Naidoo concludes.
Do you need more information about Old Mutual’s franchise services, please contact Jayendra Naidoo, OM’s Head of Franchise Distribution. CON
TACT
For more information:
www.oldmutual.co.za
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WORKSPACE SOL U T IONS
SiSebenza and WeWork South Africa are set to impact the African flexible workspace market by sharing knowledge, expertise and resources. By ANDREW ROBINSON, SiSebenza founder and executive director at WeWork South Africa
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iSebenza became the franchise owner of leading global flexible space provider WeWork in South Africa in March this year, purchasing the local operation – 100 per cent of the existing operations in South Africa – and becoming the franchise partner to establish a WeWork presence in Ghana, Kenya, Mauritius and Nigeria, and expand the South African footprint. The barriers to entry into Africa for international franchises, particularly in real estate, are formidable, so partnering with a local expert such as SiSebenza was invaluable for the WeWork brand, which benefitted from SiSebenza’s knowledge of local dynamics, cultural nuances and market needs, all essential to creating a locally relevant and sustainable operation for any business. For SiSebenza, aligning with the global flexible space provider and a dependable and innovative business model helped the company mitigate the risks associated with starting a business from scratch. However, in the flexi-office space, where it’s more than just space on offer, WeWork’s substantial investment in technology, design, community development and support, and productivity enhancement provided a scale that could not have been achieved independently. It’s been a matter of plugging in and benefitting from this wealth of resources.
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WHO IS THE MOST FLEXIBLE OF THEM ALL? As of 2022, the European Union had the greatest number of flexible workspaces worldwide, at 4 169, followed by Asia (4 137) and North America (3 792). Africa, with 679, occupied a distant fourth place followed by South America (626), Oceania (374) and Central America (116). Source: Statista
GLOBAL GROWTH South Africa is one of several WeWork Global franchisors, with Central America and the Caribbean being the latest, and other franchisors in India, Japan and China. The Indian business has just opened its 50th building in New Delhi, which is its first foray into that city, and it came just two months after opening three office spaces in Bengaluru. The co-working environment in India is booming, and we expect much of the same across Africa. While the COVID-19 pandemic temporarily impacted the shared office space market, the long-term outlook is more than promising.
HUGE GROWTH ANTICIPATED Serviced office providers such as WeWork currently equate to one per cent of the commercial real estate market in South Andrew Robinson Africa. With the South African commercial real estate market expected to grow at a compound annual growth rate of 10.84 per cent, from R163.3-billion this year to R273.2-billion by 2028, the proportion of serviced flexi-office spaces can be expected to grow a massive four to six per cent over the same period. The African market currently sits at less than half a per cent, with growth prospects of two per cent in the same period. The timing couldn’t be better for WeWork in South Africa. The workplace revolution is here, and if employers want their teams back in the office, they have to start offering them something of value to travel to and something attractive that drives collaboration and creativity. Companies are developing robust social strategies to ensure that employees return to and thrive in the office. And the thinking that seems to be working best is to make going to work no different than going to an event. Going to the office is something that people must feel excited about – they must feel welcome and comfortable – and that’s what WeWork does so well.
PRE-COVID, FLEXIBLE OFFICE SPACE SAW A GLOBAL AVERAGE ANNUAL GROWTH RATE OF 23 PER CENT, MAKING IT THE FASTEST-GROWING COMMERCIAL REAL ESTATE MARKET SEGMENT.
Images: gorodenkoff/istockphoto.com, supplied
UNLOCKING POTENTIAL
Pre-COVID, flexible office space saw a global average annual growth rate of 23 per cent, making it the fastest-growing commercial real estate market segment. And now, as businesses increasingly acknowledge the benefits of flexible work arrangements and the cost savings associated with traditional office spaces, it’s expected that flexible space will remain a primary growth catalyst for the sector. Global real estate services company JLL reports that in the United States, less than five per cent of office space inventory is controlled by independent, third-party flexible space providers. With the post-COVID industry shifts, it projects that flexible workspace and shared amenity spaces will grow to approximately 30 per cent of the office market by 2030.
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