The eighth FNB Franchise Leadership Summit was held on 3 March, showcasing the latest trends in franchising as well as sharing ideas on branding, unconventional marketing and entrepreneurism.
Setting out the grim economic scene was FNB’s consumer and property economist Siphamandla Mkhwanazi, followed by a South African multi-unit owner of one of the world’s most iconic brand names, KFC, who explained how through innovation one can continue to grow throughout the economy’s ups and downs. Burt Gunning personifies the successful multi-unit franchisee as an owner of 41 franchised units in the KFC network, with more than 1,300 staff, and is KFC Franchisee of the Year 2019. He presented one of his protégés, Kedibone Malatji, who is herself today a 29-store owner in her own right, as well as being this year’s KFC Manager of the Year.
He described one of the biggest step-changes in the fast food business as the ‘drive thru’ concept which Gunning says “people readily took to” and nearly doubled his sales at that time. He also describes the latest trend which is boosting sales as being online ordering and delivery. Delivery is not new, but a previous attempt at telephone-based delivery had not been a success, due to its more laborious and error-prone ordering system.
Another of the fastest growing sectors of franchising is the petrol station forecourt retail business. Desi Gilbert, head of convenience strategy and partnerships at Engen Petroleum, explains: “Growth at Engen’s convenience store network has comfortably outpaced both inflation and the growth of retail chains.” This forecourt growth is being driven more by the practices of the FMCG retailers and franchises than the petroleum industry.
Here too innovation is the spur to growth: “Engen has opened two new outlets on Barry Hertzog Avenue, in which the consumer can do his/her shopping in a full turnaround time of 15 minutes. FMCG retailers know how to do that, and petroleum companies need to learn the skill. Another lesson that needs to be learned is customisation – how to stock differently a store in Tembisa from one in Morningside,” says Gilbert.
The informal market is bound to become a key enabler of franchising in the future, according to author and entrepreneur GG Alcock who has written extensively on the informal , unseen economy. He terms it ‘Kasinomics’ (the economy of the townships), and says it is growing faster than the formal sector at “an urgent, organic pace”. Recent Nielsen research shows that 20% of all money spent in South Africa is spent in informal stores, but most importantly is increasing at 7% a year compared to 4%/year in formal stores.
The economy may be unseen, he says, but in fact is all around us – right in view outside on the pavement. “There are 50 000 informal food takeaway outlets selling everything from the township burger called a koto to vetkoeks, shisa nyama’s and amaplate food trucks where the top outlets can turn over up to R50 000/day seven days a week – giving a total turnover in excess of R90-billion a year.”
He says the muti market alone is worth R18-billion in turnover employing almost 150 000 people and serving 27-million customers. There are more than 100 000 informal spaza shops turning over more than R200-billion/year. There are 500 000 hawkers or tabletop vendors earning on average between R1 500 and R3 000 each month in profit. The market has 150 000 hair salons ranging from home back rooms to colourful corrugated iron dunusa selling hair pieces and stylings worth millions every weekend.
The market may exist, but it requires innovative business ideas, and one such idea was presented by Ryan Bacher, co-founder and MD of NetFlorist – a business started ‘by accident’. He offered tips on how franchisors could start their own online business.
Once the idea was developed, direct marketing is typically prohibitively expensive when starting out, so, “Rather partner with other brands to grow your customer base. Consumers trust brands so co-branding or partnering with well-known and trusted brands makes sense.” At the commencement of the NetFlorist business in 2000 it had only 40,000 email addresses – not enough to sustain a business – and no money for marketing, says Bacher. The business therefore approached MTN to add its flower service to their bouquet of offerings – something which makes sense to an existing brand which is concerned to broaden its footprint and range of services – as long as NetFlorist did all the work.
Keeping control of expenses is vital during this tough economy, and Chris Yelland, founder and managing director of EE Business Intelligence, urged franchisors to use their scale to find electricity solutions on behalf of their franchisee members – both to keep the shops trading and to manage the sharply escalating cost of energy. He offered franchisors practical tips to reduce their bills, but also urged the private sector to take initiative in the generation of their own needs.
In another case study of a business start-up, Portia Mngomezulu described how she took her fledgling skin care idea to today’s Portia M Skin Solutions brand, which has become synonymous with affordable skin care. She used incredible networking opportunities to covert the brand from a garage business to supplier to major FMCG businesses such as Pick n Pay, Makro and Spar nationally, as well as in six other African countries.
Finally, a team of Madelaine Krige of Think Leverage, Warrick Guest of Valora, Melanie Ramjee of public relations firm Tutone Communications, and James Maposa of Valora, presented a case study of how to brand a business and launch a new business using unconventional marketing. By use of social media and community influencers, within a matter of months the entertainment venue, Propaganda, was exceeding budget and driving down its cost of marketing from 18% to 6% of revenue.
The theme of this year’s event was “Agility accelerates growth”. In these times of rapid changes to technology, the competitive environment and consumer demand patterns, agile organisations continue to grow and thrive. What does it mean to be agile? According to a McKinsey Global Survey, it’s the ability to quickly reconfigure strategy, structure, processes, people, and technology toward value-creating and value-protecting opportunities. This has never been more relevant and true given recent events including the spread of the Corona virus. Only those businesses who can adapt quickly will weather this storm.