Black-owned franchises are on the decrease, despite efforts to relax access to credit for people wanting to start their own businesses.
Access to capital is the main reason black people struggle to participate in the franchising sector – which is still dominated by white men.
Deputy Minister of Economic Development, Hlengiwe Mkhize, says the number of black franchisees stood at 33% in 2010. By 2012 the figure had dropped to 20%.
Speaking at the Franchising Association South Africa (Fasa) international expo, Mkhize said the failure of black people to come into the sector can also be attributed to South Africa’s historical legacy of capital being in white hands.
SA Franchise Warehouse recruitment and training director Belinda Bradley says government, through the Industrial Development Corporation, is beginning to award capital to business start-ups, especially black franchisees.
Bradley says the franchising sector, along with small business, has been identified as an engine for job creation.
And it is easier for entrepreneurs to get access to capital when they opt for the franchising route rather than starting an enterprise from scratch, says Barney Klassen of Absa. This is because franchises are low-risk.
“Franchises show a low propensity for downturns because of their tried-and-tested business model,” he says.
The state of franchises
Despite the challenges faced by franchises, people in the sector are doing well.
Franchising developer Makabongwe Thabethe has been running the Nyama and Chips franchise for two years and says business “has been good”. He has recently opened three more shops in Pretoria and five more in Johannesburg.
On transformation he says: “White people and Indians find it easy to get into franchising”, but, on the other hand, it is not difficult to get development finance.
If, for example, a prospective franchisee does not have the R300 000 needed to own one of Thabethe’s fast food stores, he could “meet him half-way”, he says.
The Fasa expo, which features franchisers showing their businesses and canvassing for prospective franchisees, had business owners voicing their frustration with the industry.
Remigias Chandiwana, franchise manager for SA Clinics, the parent company for Mens Clinic International, says people think franchising is way to make a quick buck, but this is far from the truth.
“People think it’s easy money, especially when they don’t have a source of income. It normally takes three to six months to start seeing money come in,” he says.
The company operates in the men’s medical industry, Chandiwana says, and its business model is successful; it plans to expand into Africa.
Bradley echoes Chandiwana’s sentiments. She says the franchising industry is misunderstood and people often have unrealistic dreams of unlocking fortunes through it.