Published On: Wed, Jan 20th, 2016

Prospects bright for SA franchising

SA mapJOHANNESBURG, (CAJ News) – THE South African franchising sector is projected to defy prevailing economic challenges and reduced spending by consumers to record growth.

Experts attributed the positive projections to increasing competition and the entry of new players.

“Setting the pace for 2016, will be increased activity within the franchise sector, particularly the fast food franchises, as international brands which announced their entry into the market this year look to establish operations around the country in the New Year,” said Ethel Nyembe, Head of Small Enterprise at Standard Bank.

She pointed out at the major shopping centres where there is competition in the quick service restaurant subsector.

There are also concerted efforts by new entrants to establish outlets close to those of existing competitors.

“For consumers this is great news. Their product choice will expand as competition increases. There is no doubt that 2016 will be a year in which consumers will be spoilt for choice in a market where competitors will be doing all they can to offer quality products and services, whilst keeping prices in check as much as they can.”

Nyembe said as those who had already entered the marketplace fought for increased market share, so other international brands who had announced their entry in South Africa would be measuring up their expansion opportunities.

She said American franchisors in particular would become household names in South Africa.

“In 2016, we can look forward to the entry of brands selling food that varies from donuts to coffee, burgers and pizza. Many of which are already household names in the USA.”

The fact that they may be new to South Africans would not deter franchisors moving aggressively to establish presence in local business centres.

“Within the next 12 months, many will be well established and patronised by locals.”

She nonetheless pointed out the franchising sector would be presented with a number of challenges in 2016.

Among these will be pressures on disposable household income.

“These pressures will be compensated for to an extent by the need for franchises-particularly those in the food sector- to remain competitive. Despite these factors the franchise sector will continue to play a positive role in the South African economy during 2016 and for some time to come,” said Nyembe.

CAJ News

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