Success Factors for Franchise Business Models in South Africa

Abstract

This study explored the factors that influence the development of successful franchise business models in South Africa. The study uncovered factors that facilitate and impede the success of home-grown franchises in South Africa to compete globally. A total of ten participants in the franchise industry were selected for the study, and a self-administered questionnaire with twelve open-ended interview questions was used to collect qualitative data. Latent thematic and inductive analyses revealed themes and sub-themes in the collected data. Deductive templates of codes and driven induction led to the identification of various themes and sub-themes. These themes and sub-themes revealed factors that can lead to the development of a successful franchise business model in South Africa. The findings revealed that most of the participants (managers and entrepreneurs) were aware of crucial factors that define a successful franchise business model and showed their ability to assess successful franchise business models. The following factors were identified for assessing the franchise business model: market share, branding, revenues, profitability, and sales. Successful and highly ranked franchise firms scored highly on these factors, according to the participants. The following were identified as impacting successful franchise business model development in South Africa: E-hailing, which has reduced entry barriers; digital marketing platforms, which provide misleading information; and load shedding, which affects operating hours. This study found that franchisors and franchisees face several challenges within certain FFRs, including high franchise fees and ongoing royalties paid by franchisees, inadequate moral and technical support from franchisors, and exploitation by franchisors. These factors lead to poor FFRs, which damage trust and franchisee profitability models. Finally, the study recommends the following as important aspects in order to design effective food franchise business models for the South African market: Proper market research on prospective franchise models before launch, avoiding hasty franchisee outlet growth, staying friendly with franchisors (FFRs), specialisation in menus and service delivery, effective supply chain management and product differentiation (avoid copying what is already existing in the market can lead to business model failure).