Bruce Whitfield:
Increasingly we see that more and more South Africans are going the franchise route when they set up their own businesses. Are they people who have got an entrepreneurial spirit?

Some people, unfairly I think, say that they are people who don’t have a sense of imagination, who don’t have an entrepreneurial bone in their body. They are dependant on other people to do the thinking for them.

Well, Kobus Oosthuizen, Franchise Association of Southern Africa Vice Chairman, joins us on the line right now. A very exiting event happening in Gauteng next week and that is an international franchising conference. Tell us about it. What are you planning to do?

Kobus Oosthuizen:
The main event is the expo itself. There will be various forums and demonstrations by people in the industry. On Friday there will be a road show hosted by Old Mutual also covering a few topics in the franchise industry.

On the Saturday morning the IDC is hosting a conference, which is more aimed towards potential franchisees, giving them some more information.

Bruce Whitfield:
Generally when I think about franchising, I think about pies, I think about pizzas, I think about bread, I think about fried chicken, but there is a lot more franchise opportunities than that in the South African market, isn’t there?

Kobus Oosthuizen:
Yes, that is quite correct. The fast food industry was the first industry to introduce franchising and getting their retail network out there.

Yes, there are quite a number of other industries. Fast food is one of them, in South Africa we got about 14 or 15 other industries. In the US for instance, there are 54 industries that use franchising as a model to expand their business.

Bruce Whitfield:
Everything from motor lubrication and all that sort of stuff, I mean we are seeing greater emphasis on the other kind of franchises in South Africa, aren’t we?

Kobus Oosthuizen:
Yes, sure. The food is still the most representative one and then the retail sector, I would say, is second in line.

Then you have got your service industries, you have got your estate agents, which is quite active in the franchising game, the automotive industry is growing quite rapidly, the home improvement concepts are contributing quite a bit, and then healthcare and education training are also a popular concept.

Bruce Whitfield:
How much of the South African franchising industry is actually home grown? I have seen the figures — 80 percent, is it that high?

Kobus Oosthuizen:
It is high and one of the reasons is because South Africa is unique in terms of its trading environment and it is in many ways not like the rest of the world.

And that really necessitated the development of home grown concepts. The international brands, of which there are a few, are quite well established, KFC is probably the most established one and it is one of the few international brands that really survived well in South Africa. There are quite a number of young and upcoming concepts, which are all quite exciting.

Bruce Whitfield:
The International Franchise Expo, is it international franchisers coming into South Africa to make opportunities available for locals?

Kobus Oosthuizen:
There are quite a few, again, I would say, as you mentioned, only 20 percent of the new systems comes from abroad, 80 percent of the new ones, comes from within.

Bruce Whitfield:
There are some fairly significant barriers to entering in terms of franchising. If you want to open up a bakery franchise or a KFC franchise, I would assume it is going to take the better part, if not more, of R1-million to set it up.

Kobus Oosthuizen:
Again, it varies. Surely your more established food brands are quite costly to set up. In South Africa as an association, we do try to promote the more affordable concepts, also to try and promote BEE in the franchising sector, but cash is one of the barriers.

And if one can reduce the set-up costs, and work towards the development of more affordable concepts, you can widen the base quite substantially.

Bruce Whitfield:
One thing I quite like, is the ‘man in the van’ or the person in the van in the politically correct context. That is the sort of thing that is going to be promoted more and more, I would assume.

Kobus Oosthuizen:
Yes, it is quite correct, also because of the fact that it is generally more affordable. Your risk is a bit less, premises are always expensive, and you must have a reasonable balance sheet before a landlord accepts you as a tenant.

The ‘man in the van’ concept doesn’t require that. And that is definitely one of the reasons why it’s become so successful.

Bruce Whitfield:
Eleven percent of franchises go bust. That is a bit of a disturbing number.

Kobus Oosthuizen:
In the general small business environment that figure is at least four times as much so franchising really does give you better odds than a non-branded or non-associated business.

So yes, small business always carries risk and in the franchising industry we just like to believe that the risk is a bit less.

Bruce Whitfield:
You can’t be an idiot if you go into franchise, you still have to pull your weight. You still have to make an effort to make it work, you have to work your fingers to the bone, if not more so, because there are still risks. Just because you bought into the franchise doesn’t mean you’re going to make it big.

Kobus Oosthuizen:
Absolutely. One of the first things that you will tell a new franchisee is that it is still your own business, you are still carrying the key and the buck still stops with you.

We can assist you, we can guide you, we can help you in certain things and we are going to look after you in many respects, but eventually you have got to keep your own customers happy and you’ve got to manage your own people.

Bruce Whitfield:
From Pretoria, Kobus Oosthuizen, thank you very much indeed. He is the Vice Chairman of the Franchise Association of Southern Africa.