The Franchise Association of South Africa (FASA) recently held its fourty-sixth AGM as the representative association that has overseen the growth of franchising over more than four decades.

According to FASA’s 2023/24 Franchise Survey, the franchising sector showed resilience during the three years of Covid-19, with the 727 franchise systems and its 68 463 franchisees contributing 15% to the country’s GDP and employing about 500 000 people.

But according to FASA CEO Fred Makgato, some franchise companies are struggling to regain their footing and new franchise concepts are impeded by political uncertainty, higher interest rates, rising cost pressures and cautious consumer spending.

“With government committing billions to transformation through small business development, it needs to look at the franchising business format as the ideal way to roll out viable business enterprises based on the tried-and-tested universal franchising principles – not only on the commercial front but in terms of using franchise business principles to roll out public/private partnerships to address service delivery.”

Despite the headwinds that franchising is experiencing owing to global political and economic shifts, franchising around the world remains buoyant and viable as it remains the backbone of many economies, FASA says.

“Franchising has emerged as a powerful engine of growth and economic development worldwide, and South Africa is no exception. In a country grappling with high unemployment, economic inequality, and the need for sustained entrepreneurial activity, franchising offers a viable and sustainable business model,” says FASA founding member Eric Parker.

“South Africa’s economy is characterised by a dual nature: a well-developed industrial base co-existing with widespread poverty and unemployment,” he says.

He notes that, according to recent statistics, the unemployment rate remains alarmingly high and economic growth has been sluggish. Against this backdrop, Parker says small and medium-sized enterprises (SMEs) are viewed as critical drivers of economic development and job creation.

“Franchising, as a business model, aligns well with these national priorities,” he says.

FRANCHISE STATISTICS
In a franchise survey – conducted by FASA and sponsored by financial institution Absa – the franchise industry’s estimated turnover for 2023 reached R999-billion, marking a 36% increase from 2019.

FASA notes that some benefits of franchising include its significant multiplier effect on job creation.

It explains that each new franchise outlet not only creates direct employment opportunities but also stimulates indirect jobs in supply chains and related services.

In a country where youth unemployment is a critical issue, franchising can provide young entrepreneurs with a structured pathway into business ownership and management, the association says.

Moreover, franchising offers a lower-risk route to entrepreneurship.

FASA says franchisees benefit from the established brand, proven business models, training and support from the franchisor.

This reduces the likelihood of business failure compared to starting an independent business.

“For many South Africans with limited business experience, franchising provides an accessible entry point into the business world,” says FASA.

Moreover, FASA says franchising can promote economic activity beyond the urban centres, reaching rural and underdeveloped areas.

By leveraging local resources and markets, franchises can contribute to the economic decentralisation and development of remote areas. This geographical spread can help alleviate regional economic disparities.

The association explains that the franchising model is based on a symbiotic relationship between the franchisor and franchisee.

The franchisor provides ongoing training, operational support and marketing expertise, ensuring that franchisees are well-equipped to run their businesses effectively.

“This continuous skills transfer is invaluable in a country where educational and skills deficits are prevalent,” it says.

CHALLENGES

FASA notes, however, that one of the primary barriers to franchising in South Africa is access to finance.

It notes that many potential franchisees lack the capital required to invest in a franchise. While some franchisors offer financing options, there is still a need for more robust financial support mechanisms from both private and public sectors.

Additionally, navigating the regulatory landscape in South Africa can be challenging.

FASA notes that potential franchisees and franchisors must contend with various laws and regulations, including labour laws, tax regulations and industry-specific legislation.

Hence, it argues that a more streamlined and supportive regulatory framework could enhance the growth of franchising.

Further, FASA notes that, in urban areas, certain franchise sectors, such as fast food and retail, are approaching saturation.

It expresses that this requires innovation and the exploration of new sectors and markets, including healthcare, education and renewable energy, which are less saturated and hold significant growth potential.

“In 2025, the franchising industry stands at a crossroads of opportunity and challenge.

"Success will hinge on the ability to adapt to economic shifts, embrace technological innovations, and align with evolving consumer values.

“FASA appeals to government to partner with it to plan a growth roadmap to capitalize on opportunities, unlock the entrepreneurial spirit that can transcend generations, and stimulate new business opportunities that will lead to job growth and prosperity,” the association expresses.

Meanwhile, FASA welcomes its new chairperson for 2025/26, Ayabulela Njingolo who is with the OBC Group that has, for many decades, grown its footprint as a trusted supermarket retailer in both urban and rural areas of South Africa.

Also appointed as chairperson-elect for 2027/28 is Sheldon Tatchell, the founder of Legends Barbershop.