SA’s franchise industry begins long road to recovery

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From negotiating rental relief with landlords and royalty fees with franchisors to asking for relaxed loan repayments with banks, franchise operators in South Africa have continued their battle to survive the COVID-19 lockdown as trade starts under Level 3 for some franchise sectors but crippling restrictions remain for others.

Franchising is often seen as a safe business model, as operators buy into an established brand with support from franchisors. About 26% of franchise operators, which make up the largest portion of the industry, are in fast foods and restaurants, followed by direct marketing at 18%. Leisure and entertainment, construction, personal services, and telecommunications make the smallest segment at 5% and lower, according to research by the Franchise Association of South Africa (FASA).

“The longer the lockdown measures are applied across the board, the deeper the loss will be,” said Vera Valasis, executive director of FASA. “With 80% of respondents to a survey conducted by the association believed that they will not be able to continue to maintain their business beyond July, unless they can be allowed to trade normally, the future of the franchise sector which contributes almost 14% to the country’s GDP is in the balance.”

Valasis added that: “Some sectors have weathered the COVID-19 storm much better than others but more importantly it seems business owners who managed to re-open their doors at the first opportunity stand a better chance at long-term survival, even while trading with only limited lines or products and a limited staff complement.”

According to Valasis, it is important that assistance is given to franchisees so that they in turn can keep employees on the payroll and ride the storm in order to grow when the pandemic passes.

“Having a franchisor whose franchisees can rely on becomes even more critical during these times of crisis. Thankfully most franchisors have taken strong leadership steps and have kept their franchised systems informed as and when developments and information is published by the government about the lock-down regulations, financial aid and other funds that can be accessed for financial assistance,” she said. “They are also the ones that will institute whatever measures are necessary to ensure the safety of their staff and customers.”

Whilst most franchise sectors can now open for business under Level 3 – including retail; auto services; building, office and home services; and business-to-business – other sectors such as childcare, education and training grapple with how to boost their online services whilst planning to return to physical teaching with social distancing.

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