Luphert Chilwane
4 May 2009
Johannesburg — WHILE most sectors of the economy have suffered as a result of the global economic decline, the franchising sector appears to have benefited, with an increase in the number of application inquiries.
Elana Koral of Franchize Directions says the sector has grown because people increasingly look at franchising as an alternative means of making a living after being retrenched. Franchize Directions is helping prospective owners with information about the application process.
She says activity in franchising is contributing to the development of the South African small business sector.
Standard Bank's small and medium enterprises head, Louis Van Ravesteyn, says the bank is willing to assist franchisees in whatever ways it can, as long as there is sufficient commitment, proper business planning and cash-flow.
Danelee van Dyk, head of economic research at the bank, says there is a need for the franchising sector to adapt as hard-pressed consumers are increasingly seeking value for their money.
She says the depth of the current recession has been underestimated, with some economists predicting the economy will not grow this year.
Consumers will still buy goods, she says, but because of the economic situation they will be more careful and spend their money more wisely, with fewer impulse purchases.
Individuals would not be buying as many luxury goods or purchasing on credit as much as in the past, so it was "important to look at where you stand as a business," Van Dyk says.
She said that as big companies were busy retrenching people, it was a good time for the franchising sector to acquire new skills. Meanwhile, the franchise industry is hoping that commercial rentals will drop, especially in shopping centres, as this is considered the single biggest obstacle to more rapid growth in the sector.
The Franchise Association of SA reports that the UK has led the way in this respect, with a general softening of the terms of lease agreements as economic activity slows and the property market continues to slump.
Small tenants' bargaining position in SA is expected to strengthen as mall vacancies rise, which should provide another boost to the franchise sector. The association is attempting to engage with large owners of commercial properties to negotiate better terms for its members.
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