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Franchising Continues to Grow

News, Articles, Success Stories and Advice on Franchising
Franchising Continues to Grow

Franchising Continues to Grow

Although the franchise sector is not immune to the vagaries of the economic downturn, franchisees of reputable brands are weathering the storm much better than owners of independently owned small businesses. This is not surprising because the lure of the brand, the network’s purchasing power and the franchisor’s support infrastructure combine to increase franchisees competitiveness.

KFC on the expansion trail

KFC Africa operates 570 franchised stores in South Africa; between them, they employ over 19 000 people. Not content with the status quo, the company announced that they would spend R2.5 billion on store upgrades and the establishment of 200-300 additional units. This will result in the creation of an additional 9 000 jobs.

The mere fact that all this happens during a period when other companies are pulling back proves the resilience of one of South Africa’s most-loved brands. Said Keith Warren, KFC Africa’s managing director, A truly successful business should provide customers with what they want when the economy is booming, as well as when times are tougher.

The company’s performance over the years proves that the company pays more than lip service to this statement. According to Warren, the company showed strong growth in 2008 and results for 2009 indicate that double-digit growth will continue.

Pick n Pay expands in Soweto

Soweto was the stepchild of retailing for far too long but this is about to change. It took Pick n Pay less than 18 months to establish a veritable footprint there and plans are afoot to expand into other township areas in the near future. Pick n Pay’s first store in Soweto opened in December 2007. Three more stores followed in 2008 and in the first half of 2009, two stores opened their doors. This must be welcomed because it has brought competitive pricing and shopping convenience to Soweto.

In a recent press interview, Pick n Pay’s CEO Nick Badminton said that 52% of shoppers and 40% of spend in Pick n Pay stores nationally now comes from the middle- to lower income groups. To cater for this growing trend and to meet their BEE obligations at the same time, Pick n Pay are converting an average of three supermarkets that were previously trading under the Score brand into Pick n Pay family stores. These stores will be operated by franchisees under an innovative BEE scheme.

The Coffee Stop an attractive opportunity

Derek Smith is no stranger to BEE. His brand, Hot Dog Cafe®, has been long recognised as a leader in this field. A string of awards garnered at the fiercely contested FASA Awards for Excellence in Franchising, Emerging Entrepreneur category, bear ample witness.

Not one to rest easily on his laurels, Derek has done it again. In partnership with the Builders Warehouse unit of Massmart, he created The Coffee Stop, a coffee concept that offers previously unemployed youths a realistic opportunity to learn a skill and eventually even become owners of a Coffee Stop outlet.

This initiative was started during 2007. It takes an average of 15 youngsters at a time and puts them through a seven-month entrepreneurial skills development programme. The training these youngsters receive is primarily hands-on. Only one month is spent in the classroom, the rest working in a Coffee Stop.

Throughout the training period, candidates, known as cadets, are continuously evaluated. Those who excel are offered an opportunity to acquire their own Coffee Stop, initially with no funding of their own.

This is not a give-away, however. Rather, these budding entrepreneurs qualify for a loan to acquire an initial stake of 51% in the business. Derek and his team then support them to the hilt for a minimum period of five years. This ensures, as far as this is possible, that the venture progresses as planned.

Expectations are that at the end of the five-year period, the initial loan will have been paid back out of profits generated by the business over this period. At this point, the entrepreneur can purchase the remaining 49% shareholding in the business whereupon the arrangement converts to a normal franchise.

Those individuals who pass the initial training course but do not qualify for store ownership do not walk away empty-handed either. They will have acquired transportable skills and enjoy continued employment in one of the stores of the growing chain.

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