In Business Today

Bank involvement boosts franchising industry

With South Africa’s recent focus on entrepreneurship, franchising has gained significance in terms of attracting new business owners. South African franchisors are seeing enormous interest in the purchase of their outlets by people across the economic spectrum - from young people just starting out, to older people keen to leave their jobs in the corporate world. In addition, economic growth means that more businesses are looking to expand their businesses by franchising their concerns.
 
“All in all, it’s been a great time for banks to become more involved in the industry,” says Riaan Fouche, Head of Franchising at First National Bank (FNB).  “In the past, the franchisor often handled the financing of a deal for a new franchisee, but now people interested in buying into a franchised business come directly to the bank.  That allows the franchisor to focus on his core business and the banks to focus on theirs.”
 
Since this change in the way franchising operations are funded, franchising has become a competitive field in the banking industry.  “A few years ago, there was little specialisation or particular franchising knowledge in any of the big banks, but today most banks have a dedicated franchising unit.  Many banking staff members are active participants in the franchising industry, serving in the industry association, the Franchising Association of Southern Africa (FASA), which means that banks now have substantial knowledge of the industry,” Fouche adds.
 
Fouche believes greater involvement by the banking industry has brought growth to the industry and this augurs well for the future.  The industry is set to continue expanding, creating more jobs in the country and adding substantially to South Africa’s GDP.  
 
What will be important in the future, according to Fouche, is that we encourage more South African business concepts to spread out through the franchise model.  South Africa is an attractive location for foreign franchisors, but we should do more to help local businesses to entrench their positions. In this way, money will not flow out of the country, but be kept here for re-investment.
 
Franchise issues will soon fall under the spotlight during the annual industry showcase, the International Franchise Expo, which takes place at the Sandton Convention Centre from 3 – 5 May.

Disclaimer: In Business Today disclaimerThe In Business Today section is reserved for relevant company announcements and releases. Companies are not entitled to have their announcements published in this section, but from time to time, these may be selected by Moneyweb for publication in the interest of the Moneyweb Community of readers. The copy has not been generated by Moneyweb nor should be attributed to Moneyweb. Nor has the information contained therein been verified by Moneyweb journalists. 29 January 2007