This is a best prospect overview of industry sectors for this country.
Franchising has proven a successful mode of business in South Africa. Since the 1960’s, franchising has grown steadily. According to the latest survey by the Franchise Association of South Africa (2019/2020), the number of franchise systems has dropped from 865 to 811, with 47 923 stores in the country (2019), of which 91 percent are franchisee owned,
Most franchises are found in Gauteng Province, the capital hub of South Africa, followed by Kwa-Zulu Natal and the Western Cape. Around 39 percent of local franchise brands have operations outside of South Africa, mostly in neighboring countries like Botswana, Lesotho, eSwatini and Namibia, and 13 percent have a reach beyond Africa, including Middle East, Mauritius, the U.S., and UK.
Franchising turnover is estimated at approximately $49 billion, equivalent to 13.97 percent of South Africa’s GDP in 2018, with a significant number of people employed in the sector.
The following categories dominate the franchise landscape:
- Fast-food and Restaurant: 26 percent
- Retail and Direct Marketing: 18 percent
- Building, Office, and Home Service: 10 percent
- Childcare, Education, and training, B2B services, Automotive Products Services: 8 percent
- Health, Beauty, and Body Culture: 6 percent
- Leisure and Entertainment, Construction, Personal Services, Electronics/Mobiles/Telecoms: <5 percent
Most franchises in South Africa are local in origin. Approximately 27 percent are international, which includes a significant number of U.S. brands, such as Krispy Kreme, Burger King, McDonalds, Signarama, Pizza Hut, and Starbucks.
Market impediments to obtaining U.S. concept are difficulty in financing the high start-up costs, as all the fees are dollar denominated. The ability to source locally is an important factor in reducing in-put costs. The pool of qualified franchise candidates is small and difficult to find. Franchisors often cite the difficulty of finding the right franchisee and right location for their concepts, as well as the complexity of the market (highly fragmented). An indication of the current economic recession is that it now takes longer for franchisees to break even.
For more information, the U.S. Commercial Service South Africa can be contacted via email: Felicity.Nagel@trade.gov Phone: +27 11 290 3332
Franchise Association of South Africa (FASA)