South African franchise costs put outlet health in focus

South Africa’s franchise community needs to address cost pressures, franchisee difficulties and staffing problems together rather than as separate challenges, according to commentary published by ZAWYA on 11 September 2026. Drawing on the Franchise Association of South Africa’s (FASA) 2023 survey, Grow Franchising chief executive Larry Hodes argues that pressure on outlet profitability can spread into service standards, relationships and brand performance.

Older survey, renewed operational warning

The figures cited in the commentary come from FASA’s 2023 research, not a new 2026 survey. Six in ten franchisors identified costs as a major challenge, while 45% pointed to franchisee-related issues and 42% to staff.

Hodes, who is also a FASA board member, uses those findings to make a broader point about how franchise networks respond to operational strain. His argument is that the three challenges often reflect connected weaknesses rather than independent problems requiring separate fixes.

He describes a pattern in which a franchisee facing tighter margins stops replacing staff, allows training to slip and sees service standards deteriorate. Softer sales can then add further financial pressure, while frustration grows between the operator and head office.

The commentary does not establish how those survey percentages have changed since 2023. Its current relevance lies in the management response Hodes advocates: identifying the underlying cause before a financial difficulty develops into a wider network problem.

Rechecking the economics of each outlet

Costs were the most frequently cited challenge in the survey. Hodes links that pressure to inflation, expensive rentals, a slow economy, rising operating expenses and lower margins.

He questions whether assumptions made when a franchise model was designed remain appropriate after material changes in rent, labour, electricity, stock, finance and logistics costs. An annual price increase and instructions to reduce expenditure, he argues, may not be enough when the economics of running an outlet have changed.

His proposed response is a closer examination of where margins are being lost. That includes supplier arrangements, product mix, labour models and exposure to rental costs, alongside a review of whether particular outlet formats remain affordable in particular locations.

According to the commentary, the FASA report identifies smaller-footprint models and more flexible investment options as possible ways to contain overhead and labour costs. These are presented as options for consideration, not as a guaranteed remedy for every network.

Hodes also cautions against treating expansion as evidence that the underlying model is healthy. Opening additional outlets does not resolve the difficulties of existing operators, and can bring further support demands if those weaknesses remain unaddressed.

Recruitment and support need to work together

Franchisee-related challenges were identified by 45% of respondents. The research cited by Hodes included difficulties finding franchisees with sufficient capital and experience, as well as cases in which operators failed to maintain required standards.

His distinction is between problems that can be addressed through better support and those that begin with recruitment decisions. Selecting an unsuitable operator can create difficulties that become costly for the wider network to manage.

That does not remove the need for ongoing support. Hodes argues that the franchisor-franchisee relationship should allow difficult conversations about profitability, staffing, debt, standards and performance before an operator reaches serious financial trouble.

The emphasis is on earlier diagnosis rather than simply increasing intervention after a crisis. Weak outlet economics, limited operator capability and management shortcomings may require different responses, even when their visible symptoms look similar.

Staffing pressures extend beyond the outlet

Staff challenges, cited by 42% of respondents, included training, turnover and retention, difficulty attracting qualified employees and retrenchments.

Hodes argues that these cannot be treated solely as the franchisee’s responsibility. Although the operator may employ the staff, customers experience the brand through the service they receive.

He recommends practical support from franchisors, including recruitment and onboarding tools, clear job profiles and management training. He also urges head offices to look for recurring staffing patterns across their networks rather than waiting for individual outlets to report serious problems.

Potential warning signs identified in the commentary include reduced engagement with head office, deferred maintenance, repeated discounting, unusually aggressive cost-cutting, declining standards and persistent staff turnover. None is presented as proof of a single cause; the point is to investigate before problems deepen.

Practical takeaway: Franchise owners and head offices should review outlet profitability alongside staffing, standards and communication. Where several warning signs appear together, the priority is to establish the cause and agree targeted support, rather than rely on another round of cost reductions.