Different Franchise Types

More and more business sectors are waking up to the opportunity to franchise in South Africa. There are still many more to come. There are approximately 630 franchise systems totalling 39 000 franchise outlets in the country as at 2017. They contribute 12.5% to the economy and provide work for 325 000 people.

Already, these numbers are a blur for anyone looking to find a business opportunity in franchising, but there is probably much more to come yet considering that only 6.5% of South Africa’s SMEs are franchised, compared to 30% in more developed economies such as Canada.

How to go about choosing which business sector would best suit you? Here are some general trends.

Franchise categories in South Africa

Although Franchise 500 measures US franchises, it reports that 55% of these are outside the US, and so are global in nature. The following are the biggest business sectors. For comparable South African figures see categories:

FASA statistics 2016:

Industry Sector

 % 2016 

 % 2015 

Automotive products and services  7% 5%
Building and home maintenance 11% 11%
Business to business supplies 11% 7%
Child education and training 9% 8%
Fast food / restaurants  24% 24%
Health and beauty services  5% 6%
Building, office and home services  11% 11%
Real estate agencies 7% 6%
Personal services   4% 3%
Retail incl. convenience stores 16% 12%
Leisure & entertainment  4% 3%

To narrow down your search, let’s discuss a few categories in more detail. Some sectors have been proven to be more suited to a family-type business.

These include the following three categories:

1. Food Franchises

These tend to be the most visible of all franchises, and remain an ever-popular choice for today’s prospective franchise owners. The long hours in the food-service industry tend to discourage many people, but can be a little easier to manage if run as a husband-wife combination. On the one hand, they can get to work together, and secondly they can trade opening and closing duties. The kids can also pitch in as needed, and the family can cover at short notice for employees that call in sick, or during holiday seasons. Burnout is common in the food-service industry, but managed right it can also pull a family together.

2. Retail Franchises

A retail franchise does not usually involve as long hours as food franchising, and the wide variety of functions makes it suitable to a family business where those duties – such as inventory control, bookkeeping and marketing – can be divided among family members. Retail comes with considerable seasonal variation – as much as 20% to 40% – in level of sales, and families are ideal for managing these peaks and troughs.

3. Automotive Franchises

Today’s automotive franchise owners come from all sorts of backgrounds, so you don’t necessarily have to be a car guru to own a franchise in the automotive sector of franchising. Families are to be found running many automotive franchises in car maintenance, tyres, glass repair and the rental-car market. Like retail, the range of functions lends itself to a split among family members. The automotive sector holds particular promise: as new car sales remain depressed with cash strapped consumers opting to keep their cars longer, this encourages growth in concepts that sell spare parts, batteries and non-structural vehicle repairs.

Some of the fastest growing sectors internationally (and therefore likely to grow in South Africa) include the following, and are poised to benefit from any pick up in the economy:

1. Personal services

Factors driving this category are the interest in health and fitness, as well as the growing lifespan of the population. An aging population typically has more disposable income and leisure to enjoy services such as spas, senior care, massage, hair salons, waxing and nail salons, but also other personal-services such as childcare, au pair and tutoring. The competition in this sector is fierce, especially in the fitness and senior-care industries. Fitness studios with smaller overheads and specialised workouts are springing up and creating a more personal experience for clients. Still relatively new to franchising is massage centres, but they have grown exponentially in the US.

2. Business services

Tax services are one of the fastest growing business services, as are staffing firms and business-coaching franchises.

3. Quick-service restaurants

Quick-serve has been in the sweet spot with diners for some time now, as consumers seek high-quality food served fast. While fast-food companies still dominate the rankings, having locked up the high speed and low prices camp, the majority of new franchisors’ systems fall firmly into the fast-casual camp looking to compete on food quality and atmosphere instead. Particularly popular among emerging franchisors is the ‘build your own’ model in which customers can personalise everything from pizza to sushi.

4. Retail products & services

Retail-store chains should benefit from the general economic improvement. While online sales are growing in South Africa, most retail purchases still occur in bricks and mortar stores.

5. Commercial & residential services

As business picks up, there’s more call for services such as industrial cleaning.  The real estate category has also grown a lot.