RAJESH JIVANI & JABU MAHANGE | Franchise sector transformation needs the broad view - TimesLIVE

South Africa’s franchising sector is an important engine of economic activity, employment and entrepreneurship. It also has a significant role to play in the country’s transformation journey. Too often, though, that transformation conversation is reduced to a single measure — which demographic owns the greatest number of franchise outlets.

Ownership is obviously a very important metric, and increasing participation by historically disadvantaged entrepreneurs remains a vital goal. But if transformation in the sector is only assessed at the point where a franchise opens its doors, the extensive economic activity behind that outlet is ignored.

Any franchise business sits at the end of a long value chain. Behind every restaurant or retail outlet are employees, suppliers, manufacturers, farmers, logistics providers, service businesses, training partners, and, of course, a franchisor.

Each part of that system can either reinforce existing patterns of participation or help broaden access to meaningful economic opportunity. That’s why transformation in the sector has to be understood in its entirety, not simply as ownership percentages.

Our experience at Famous Brands has reinforced how important such a view can be and how long it can take. In 2018, the group was noncompliant from a broad-based BEE perspective. Its subsequent progress to level 1 has been the result of years of work across employment equity, skills development, procurement, enterprise and supplier development and other parts of the business. The lesson from that journey is that transformation becomes more meaningful when it is built into the way a business operates, rather than treated as an exercise that happens at verification time.

For the franchise sector, that means looking at the full economic footprint created by a network. Skills development is one part of it.

Through the YES Programme - a business-led programme that creates quality work experiences for unemployed South African youth, equipping them with practical skills and experience to improve their employability and pathways to sustainable livelihoods. For example, young South Africans have been placed in working environments across the Famous Brands franchise network, where they gain practical experience and transferable skills.

In the latest reporting period, 173 of 300 participants were placed across 151 franchised restaurants, with the programme reporting an 87.86% absorption rate into full-time employment.

This broader transformation value-creation principle extends well beyond employment. Franchise systems have purchasing power, predictable demand and established routes to market. Those capabilities can help emerging businesses move from being supported enterprises to sustainable commercial participants.

Small businesses frequently need technical expertise, mentoring, financing and assistance to meet the quality, compliance, capacity and reliability requirements of a franchise network. Enterprise development is therefore at its most effective when it helps those businesses build the capability to supply at scale.

Famous Brands’ owner-driver programme offers a good example of this approach in practice. It involves black entrepreneurs operating delivery businesses within our franchise distribution network. The programme currently comprises 27 owner-drivers and supports 60 direct jobs.

The point is not just the creation of jobs for black entrepreneurs. It’s that a franchise system has the scale to create sustained market access for developing businesses across its entire value chain. If the transformation focus is exclusively on shifting franchisee demographics, many of these broader opportunities can easily be missed.

Commercial discipline is also an important part of the equation. Transformation cannot be sustainable if it weakens the economics of the franchise system. Franchisors have a responsibility to ensure that procurement and enterprise-development strategies support the long-term viability of franchisees while also broadening participation in the value chain.

A transformed supplier needs to also be a competitive supplier that is able to meet the network’s requirements for quality, availability, service and price. In the same way, an enterprise-development initiative is stronger when it creates a business capable of competing for continued commercial demand rather than remaining dependent on preferential support.

Franchising has a unique advantage in building this kind of sustainable transformation because of its scale. A single intervention within a franchising network can have an impact across hundreds of outlets, suppliers and communities.

That is why the conversation about transformation in franchising has to be broad and ensure that it is using its full economic ecosystem to create opportunity and broaden participation.

The bottom line is that transformation in franchising cannot begin and end at the franchise door. It has to run through the entire value chain. Crucially, this work must be led from the centre. A franchisor cannot hold its network to a standard it has not met in its own boardroom, workforce and supply chain. It has to set the bar before it can expect the entire system to reach it.