WeeklySA_AdminCAPACITY: South Africa’s franchise sector is growing rapidly, but overstretched support systems and weak operational structures could undermine long-term performance, says industry leader Larry Hodes…
By WSAM Reporter
South Africa’s fast-growing franchise sector is at risk of outpacing the operational structures needed to sustain it, according to Larry Hodes, a board member of the Franchise Association of South Africa (FASA) and CEO of Grow Franchising.
Hodes said, while the sector continues to post strong headline growth, underlying structural weaknesses — particularly in operational support layers — are beginning to show.
“Growth is outpacing the structures built to hold it,” Hodes said, warning that the issue is not the expansion of franchise outlets, but the lack of adequate mid-level management capacity to support them.
According to FASA data, South Africa has 727 franchise systems and more than 68 000 franchisees contributing about 15% to GDP, with turnover nearing R1 trillion and employment of roughly 500 000 people. Ownership among previously disadvantaged groups has also risen sharply, from 20% in 2019 to 48% in 2023.
However, Hodes said these gains risk being undermined by operational strain within franchise networks.
He pointed to overstretched area managers, inconsistent franchisee support, and reactive reporting systems as key pressure points. In many cases, he noted, area managers are responsible for too many outlets, reducing oversight to compliance checks rather than meaningful engagement.
“The weekly store visit has become a tick-box audit rather than a conversation,” he said.
This, he added, leads to delayed intervention when franchisees struggle, increasing the risk of underperformance and brand dilution.
Hodes emphasised that the issue is structural rather than individual, stemming from how support roles are defined, measured and resourced. Research in multi-site retail operations suggests that effective middle management can influence store performance by as much as 20%, highlighting the scale of the gap.
The warning comes as parts of the sector, particularly fast food and retail in major urban centres, approach saturation — a trend already flagged by FASA. Hodes said this makes operational efficiency, rather than expansion, the key differentiator going forward.
“When the easy geographic wins run out, the businesses that keep growing are those that extract more performance from existing stores,” he said.
He added that the challenge is not unique to franchising, but extends to corporate multi-site operators across retail, hospitality and fuel sectors.
As franchise models shift increasingly towards multi-unit ownership, Hodes said the need for stronger support systems becomes even more critical, with franchisees managing multiple outlets requiring more sophisticated operational backing.
He argued that leading franchise groups are already shifting their approach by repositioning mid-level roles from compliance-driven oversight to leadership and capability development.
“The middle layer is either the multiplier or the bottleneck,” Hodes said, adding that future growth will depend on whether companies invest in strengthening this layer.
He said the sector’s next phase will test whether it can sustain its growth trajectory while maintaining brand consistency and operational performance across expanding networks.
“The question is whether we can hold that growth structurally,” Hodes said.
Grow Franchising is a division of Grow, specialising in structural readiness, leadership development and operational scalability for franchise networks and retail operators across South Africa.
