A study of franchising as a growth strategy in the residential alterations and additions building sector.
The building industry in South Africa especially in the sector of smaller operators in the residential alterations and additions market is subject to poor perception in the market place. The low barriers to entry and the attractiveness of the market make it susceptible to a large number of new entrants. The concomitant extreme rivalry has led to many cost cutting measures, creating an overall impression of lack of quality and poor standards. The ease of exit in this market has often left dissatisfied clients with no recourse or redress in rectifying poor workmanship and subject to an additional cost of hiring another builder to repair problems. As a growth strategy, franchising has shown great potential over various types of industries. However, the building industry, and in particular the residential alterations and additions market has not been explored in this light. The most attractive feature of franchising as a growth option is the lack of capital required for the franchisor. The least attractive option is overcoming the seemingly fixed mindset of the public on price as the overriding factor when considering a contractor. Experience in the industry has shown that advertising in the form of word of mouth is the most effective means of gaining new clients, however with the nature of franchising being more pervasive, it is envisaged that client awareness of the franchise will increase exponentially with each exposure in the form of building contracts. To introduce a standard of quality and excellence in this market in a cost effective manner may be achievable through the introduction of franchising with its benefits of economies of scale, high management standards and, most importantly, the franchisee's will to succeed. This work will investigate fully the ramifications of the franchising option, test the feasibility, acceptability and suitability of the strategy, making a final recommendation on the franchising model to be adopted, should the research validate the strategic option.