The sector contributes an estimated 15% of national GDP and supports around 500,000 jobs across food, retail and services. According to the Franchise Association of South Africa, franchising has the potential to accelerate job creation and economic recovery if growth is managed sustainably.
For many entrepreneurs, the appeal lies in structure. Proven operating systems, established brands and centralised support reduce execution risk compared to starting an independent business from scratch. However, while the model lowers operational uncertainty, it does not eliminate financial risk.
Brent Downard, head of credit at Merchant Capital, says access to appropriate funding remains a decisive factor in franchise performance.
“A proven franchise model won’t protect a business from poor funding solutions. In 2026, successful franchise growth will depend on access to capital that supports cash flow realities, not one-size-fits-all lending structures,” he says.
Despite franchising being perceived as lower risk by traditional lenders, many SMEs still struggle to access suitable finance. The FinScope MSME South Africa report shows a significant proportion of small businesses rely on internal funds or informal lending, largely because formal credit products do not align with their operational needs.
Lengthy approval processes, collateral requirements and fixed monthly repayments often fail to reflect the trading cycles of franchise businesses, particularly during early-stage growth or reinvestment phases. As a result, funding constraints frequently influence operational decisions.
Some franchisees delay hiring or equipment upgrades that could unlock growth. Others expand cautiously and risk losing market share, while some overextend and place pressure on cash flow. In many cases, the constraint is not the franchise model itself, but the structure and timing of available capital.
Downard argues that sustainable franchising is built on controlled expansion rather than rapid scaling.
“The businesses that perform well over time are usually those that use growth capital to expand in a measured way. Capital that arrives quickly and is structured around real cash flow gives owners room to make considered decisions rather than reactive ones,” he says.
The funding question becomes more acute as franchisees move beyond a single outlet. Expansion introduces additional complexity across staffing, supply chains and compliance, requiring upfront investment before returns materialise. While multi-site growth can drive significant job creation, it also increases exposure if funding structures are misaligned with revenue cycles.
In this context, franchising remains a resilient model for SME growth, provided funding mechanisms support disciplined decision-making rather than undermine it.
