Government Funding For Franchise In South Africa – Sheila Ujoodha MIoD: “A more diverse and inclusive board brings better results for the company and society at large”
Africa Franchise Report: A Study of Franchising in Africa covers the development and current state of franchising on the continent. In order to achieve the general objective of the study, a detailed analysis was made of 18 countries representing all five regions of the continent (South Africa, East Africa, West Africa, Central Africa and North Africa).
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The study revealed that, apart from South Africa, Nigeria, and the examples in the North Africa region of Arabic/French and Arabic/English speaking sub-regions, the franchising sector on the continent is not well developed. The study also notes the prevalence of large South African and Zimbabwean franchise brands that have expanded beyond their borders (outbound) into the South African Development Community region and beyond.
Business Grants (non Repayable)
Conversely, there are opportunities in the area. Changing consumer patterns offer the potential for a strong franchise market and the respective governments have expressed a willingness to support franchise development. The possibilities include:
The study explored the connection between finance and franchising development and analyzed the role of finance in facilitating franchise operations. The extrapolated market size for franchise finance in Africa is estimated at $93.9 billion, with the total supply of franchise finance estimated at $37.6 billion. In addition, the current size of the franchise financing gap is estimated at $7.51 billion.
The study identified the African diaspora as a powerful financial and non-financial force for franchise development for countries of origin through remittances, trade promotion, investment, research, innovation and knowledge. The diaspora can play three different roles in the development of the African franchising sector:
Notably, surveys and interviews with various respondents in the diaspora revealed the following concerns related to investments in Africa:
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Franchises on the continent are regulated in four different ways. The first includes countries that specifically provide for franchising in their legislation. The second is countries that have referred to franchising and other legislation. The third category covers the countries without specific mention of franchising in their legislation but with laws that affect the industry. The fourth category includes countries that have left franchises for self-regulation. Among the main findings of the report was that only two African countries, Tunisia and South Africa, directly regulated franchising.
African countries that want to stimulate their economies through franchising must respect international data protection standards regarding the information shared between franchisors and franchisees and consider the implications of intellectual property protection related to inbound franchising.
Franchising has the potential to drive the next phase of growth for the African continent. Undoubtedly, the franchising sector is a critical but often overlooked potential path to economic growth. With 55 countries in the African market, many and fragmented, scaling a business on the continent presents many challenges.
As part of the case study, examples of successful franchises are assessed, using the evolution and development of the South African Nando’s franchise as a comprehensive thematic case study to identify critical success factors and key lessons learned and as an example of successful outbound franchising. © 2023 Media, Inc. All rights reserved. ® and its related marks are registered trademarks of Media Inc.
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The successful business owners grew their companies into something worth investing in, and managed to land funding, here’s how.
Landing funding for any can make or break your business. The ten have successfully financed and grown their businesses into well-known and profitable companies.
But it’s not just that the investors funded them, it’s how they grew their businesses into something that investors support and how they closed the deal.
Unless you’re a hot Silicon Valley startup with unicorn potential, you’re unlikely to attract funding until you’ve shown some traction.
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Enish Shabdasani and Shapin Anwarsha didn’t even think about finance in the early days of Giraffe. “We were focused on getting the platform into the business,” says Anish.
“We put our own money into the business and managed to give ourselves 12 months of runway. For this period we did not think about VCs and financing.”
“We also found that VCs are usually reluctant to invest if you don’t bootstrap for a while,” adds Shafin. “They want to see that your company has some traction, and they want to see that you’re invested—that you’ve put your own money into the business and that you’re committed to making it work.”
The best way to build a sustainable company is to spend as little money as possible up front and get cash flow positive as soon as possible.
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“While we bootstrapped ourselves early, we also met investors. These were mostly people we were put in touch with through our own personal networks,” says Anish.
“The important thing is that we never asked for money. In fact, we didn’t ask for money until now. We simply introduced ourselves to investors and put the giraffe on their radar.”
By introducing potential financiers to the company, but not asking for money, Giraffe’s founders let the company’s performance speak for itself.
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“We simply explained our intentions when we met with investors. When we saw them again six or twelve months later, we could tell them that we had implemented our plans. We achieved real traction, which made us want to invest,” Shapin says.
Startups without much need for funding are usually the companies that attract it. This is hardly surprising. Investors want to finance companies with growth potential, not startups struggling for survival.
So, focusing too much on attracting investment can be counterproductive. Instead, get the basics right and build a sustainable business. If you do, the money will eventually come to you.
Less than two years into his business, DB Girnon attracted the attention of Rand Merchant Investment Holdings (RMIH), a financial services investment company.
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They are the funders who supported Adrian Gore when he started Discovery and Willem Roos when he started Outsurance.
How did Dow find itself in a position to offer investors at this level? Months earlier, RMIH had launched a fintech incubator called Alpha Code.
The idea was to find pre-revenue startups that are the next game changers. Their research led them to merchant capital.
“We didn’t exactly fit their mandate because we were already operational and profitable,” says Dobb, “but they still really liked the business. They researched the fintech space, and saw the potential in SME-recognized loans, which is our Focus… They really wanted to invest, but I wasn’t sure at the time if I wanted to avoid my shares even more.
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Dobb already had an investor, the Capricorn Group, whose investments include Hallard’s, Nando’s and Clientel, and until then he was careful to hold on to his stake.
His relationship with Capricorn was excellent, because the investment team added great strategic value to the business beyond capital, and therefore he did not actively seek additional funding.
And then a new opportunity arose. “We realized we had golden data about the SME space. How could we sell our base and monetize the data? We started conversations with RMIH who were aligned with our thinking.
“When I realized the value that RMIH could add to our business, my whole perspective changed. Here was an investor who could potentially help me build a billion dollar business. I would dilute the shares, but build a much bigger pie .”
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It was just a challenge. While RMIH’s investment team liked Merchant Capital’s business model, investments had to be signed off by the board, which meant that Dov and his co-founder Daniel Moritz had to present to them in person so they could see their energy, passion and vision. For merchant capital.
“One of my judges, a very successful venture capitalist from Silicon Valley, actually explained to me the meaning of the elevator pitch. Imagine you got into an elevator with the CEO of Goldman Sachs, he said.
If you’re lucky, you’ll have seven floors to get them interested in your business to want your card, and maybe even a meeting. They can’t learn everything about your business there and then – they just need enough to pique their interest.
“Because you don’t know how much time you have, or who you’re talking to and what their expertise is, you can’t just learn a pitch by heart, and you certainly shouldn’t have any power. Both are very bad ideas instead, you Need to know your business inside and out so well that you can give your pitch to the person you’re talking to based on what interests them.
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“Through this advice, I was able to cut the first two minutes of my pitch to the RMA board to what they were interested in. If I got their attention, I could hold it for the next 20 minutes, which would actually be close to two hours. If I didn’t, after 20 minutes (if not sooner) we would have politely shaken hands and