Standard Bank: Franchising Formalises Informal Economy, But More Support Needed

Franchise King articles are editorial information and AI-assisted franchise intelligence, not professional advice. Use them as a starting point for your own due diligence.

Franchising is increasingly being recognised as a tool to bring informal economic activity into the formal sector, according to Standard Bank. In a recent statement, the bank noted that the franchise model is helping to formalise informal economies in South Africa, but emphasised that more support is needed to sustain this progress. Franchise King is watching this signal because it touches on a critical issue for the South African franchise sector: the transition of informal businesses into structured, regulated operations. For franchise buyers, this suggests opportunities in sectors where informal operators are being formalised, but also raises questions about the adequacy of funding and support.

Why Franchise King is watching this

Standard Bank’s observation aligns with ongoing trends in South Africa where many small businesses operate outside formal systems. Franchising offers a proven model for standardisation, compliance, and access to supply chains. However, the call for more support indicates that the current ecosystem may not be fully equipped to handle the influx of formalised operators. This has implications for funders, franchisors, and franchisees who need to adapt to a changing landscape.

Buyer impact

For franchise buyers, this signal suggests that the market may see an increase in franchise opportunities emerging from previously informal businesses. Buyers should be cautious about the level of support available from franchisors and funders. Standard Bank’s call for support implies that the formalisation process is not always seamless, and buyers may need to verify that the franchisor has adequate systems in place to assist with compliance, training, and funding.

Franchisor impact

Franchisors may see an expanded pool of potential franchisees from informal backgrounds. However, they will need to invest in training and support to ensure these operators can meet formal standards. The bank’s statement also suggests that franchisors should actively seek partnerships with financial institutions to provide tailored funding solutions. Standard Bank’s endorsement could be a signal to other lenders to increase their franchise lending.

What to watch

• Whether other major banks in South Africa echo Standard Bank’s view and introduce new franchise funding products.
• The emergence of franchise models specifically designed for the formalisation of informal businesses, such as mobile retail or service kiosks.
• Regulatory changes that may accelerate or hinder the formalisation process, particularly around licensing and compliance.
• The response from franchisors in terms of adapting their support structures for less experienced franchisees.

Questions buyers should ask

• What specific training and support does the franchisor offer to help new franchisees transition from informal to formal operations?
• Are there funding options available from banks like Standard Bank that recognise the potential of formalised franchisees?
• How does the franchisor ensure compliance with formal business regulations, and what is the track record of their existing franchisees?

Franchise King take

Standard Bank’s statement is a positive signal for the franchise sector, but it also exposes a gap. The informal economy is vast in South Africa, and franchising offers a structured path to formalisation. However, without adequate support—especially in funding, mentorship, and compliance—the promise may remain unfulfilled. Franchise buyers should view this as an opportunity to enter emerging markets, but must do their due diligence on the franchisor’s support systems. For franchisors, now is the time to strengthen their training and financial partnerships to capture this growing segment.

Why it matters

This matters because standard bank signals can affect how buyers judge capital requirements, operator support, timing and risk before they shortlist a franchise opportunity.

Who is affected

Opportunity and risk

Medium attention required. This rating is editorial guidance for further investigation, not financial advice.

Related sectors

Use this article as a starting point for your own due diligence. Franchise King content is editorial and AI-assisted; it is not professional advice or a guarantee of accuracy, outcome or suitability. Read the full disclaimer and AI content policy.