What’s cooking in fast-food franchising?

SA’s franchise industry — mainly the fast-food sector — is not only swelling the country’s coffers but is also turning out successful entrepreneurs.

The Franchise Association of SA’s (Fasa’s) data shows that the total turnover for the franchise sector stood at R587bn in 2017, with a 13.3% contribution to GDP.

The highest proportion of turnover was generated by the fast food and restaurant sector at 29%, followed by the building, office and home services industry at 17% and then retailing at 14%.

According to Fasa, casual dining and quick service restaurants employ about 65,000 people.

“Indications are that the food sector will continue on its growth trajectory. This is of particular importance in the South African context because it creates real, value-creating opportunities for the establishment of sustainable small enterprises under franchise arrangements and further job creation. Moreover, the sector makes an important contribution to SA’s vibrant tourism industry,” said Fasa.

Hugh Melamdowitz, a partner at Spoor & Fisher, a Johannesburg-based intellectual property law firm, said: “With a franchise you hit the ground running. Within the first two months you should have a decent turnover. It’s a massive industry which can operate from the bigger towns all the way to small rural areas.

“What you are doing is essentially giving entrepreneurs the chance to operate a big business in a small setting.”

Melamdowitz, who draws up franchise agreements, said franchising allowed entrepreneurs to generate a decent income and create job opportunities.

“Franchising goes across the board, from petrol through to fast food, clothing, pretty much anything that can fall within the ambit of a franchise. Right now I am busy with a real-estate franchise to operate in SA.”

When it comes to protecting intellectual property with franchises, Melamdowitz said “know-how” — which includes a business’s trade secrets — is usually difficult to protect.

“As soon as know-how is imparted to another person, the other person becomes aware of it and it becomes very difficult to control.

“The way that know-how is generally controlled is through a confidentiality agreement,” he added.

This article was first published in Times Select.

Date published: 29 August 2018
Author: Spoor & Fisher