Lack of regulation, government support and non-clarity of franchise rules have been identified as a bigger threat than funding to franchising business Africa. Government of most African countries has a scanty understanding of franchising and its capacity to transform the fortunes of small and medium scale enterprises (SMEs) on the continent, according to the 2019 Africa Franchise Index report unveiled in Lagos by the Africa Franchise Centre (AFC).
The report is meant to provide existing and prospective franchisors, franchisees, governments, fund providers, regulators and the public intelligent information to make success of franchising endeavour.
“The report helps to fill the data gap. You cannot move franchising forward without data. It is data that will convince people to know that there is a future in franchise and also convince global franchisors to come to Africa”, Paul Arinze, director, AFC, said.
The survey, a continental effort that covers 18 African countries over 3-month duration, reveals untapped potential within the franchise market. The report reveals that South Africa is leading Africa’s franchise industry but there have been an increasing number of franchises in other African countries like Morocco, Nigeria, Kenya, Zimbabwe, Uganda and Botswana.
“The survey is perhaps the first of its kind in Africa that seeks to provide a lamp to light the path for operators and regulators alike on the continent. Its uniqueness lies in the number of countries covered. In addition, AFC interviewed a selection of US commercial diplomats in 8 West African countries,” Emma Esinnah, chairman, AFC, said.
Franchising, according to the report, will unlock economic growth and prosperity in Africa where about 326 million people are estimated to spend about $2.2 trillion on buying of goods and services by 2030.
“Enterprising business people across the globe have employed the franchise business model to generate literally trillions of dollars of value to themselves, their communities and their countries. As African economies diversify, the franchise business model can and must be strategically employed to reduce downside business risk and failure,” Brent Omdahi, US Commercial Counsellor, said.
The Africa Franchise Index report states that as the continent’s middle class grows, there is a corresponding increase in demand for consumer goods as well as luxury brands. This demand is clearly reflected in the food and beverages, retail and business services sectors of the economy accounting for 75.24 percent, 31.31 percent and 27.4 percent patronage of franchise business, respectively.
However, prospective franchise owners are more open to franchising opportunities in the business services sector as indicated by 63.38 percent of the sample size. It is even more important to note that 54.8 percent of consumers patronise franchise businesses at least once a month, owing to the quality of service they enjoy. This implies that the goods and services of franchise businesses enjoy significant market demand even with the current level of purchasing power.
Arinze said there was need to persuade government to get behind franchising as a way to create jobs and mop up the ever-increasing youth population.
“With draft bill on franchising on the way in Nigeria, the legislation could open a wave of opportunities for franchise businesses in country and also provide a template for other African countries to adopt,” he said.
