In almost every street corner and shopping mall of South African cities, big and small, there is at least one kiosk selling fish and chips and serving drinks to hungry passers-by.
These franchises have been mushrooming day in and day out from Johannesburg to Cape Town and other remote places, providing some means of survival to both owners and employees.
The reason for the proliferation of fish and chips franchises in South Africa in the last few years has now been unpacked by one expert.
Gerrie van Biljon, executive director of Business Partners Limited, said some interesting developments were taking place within sectorsthat have been extensively franchised to date, for example, the restaurant industry. “One such trend is the increase of investment, by both franchisees and franchisor, into smaller, more affordable units,” he said.
Such franchises, which include the fish and chips franchises tend to be more affordable than the large multi-million rand investments required by the big-name sit-down restaurants. “For both the franchisee and the franchisor, the risk is more evenly spread between a number of smaller outlets.”
He also cited a few franchises within the service industry which he said seemed to be on the increase.
“Franchise concepts in the childcare, education and training industry are growing rapidly, which is positive as there is an increasing need for these services.” Furthemore, van Biljon said with franchisors tending to cap the royalties payable on the revenue generated by these smaller outlets, these can be very profitable for franchisees.
He predicted fast growth of smaller units in years to come.
He attributed the move towards smaller units to the fact that financing available for buying franchises has decreased as the economy struggled over the last few years.
However, he said,the rejection rate of franchise finance applications has not increased as much as that of independent, stand-alone businesses.
Photo courtesy of the Guardian.co.uk