By Philip Myburgh
The stage for expansion of franchise operations in Southern African Development Community (SADC) countries and beyond has shifted as franchisers have gained experience in African markets.
Interestingly, we are seeing progressively more food retailers and quick-service restaurants eagerly trying to form business partnerships with the fuel service industry. While the concept has already taken off in South Africa, with limited maturity in neighboring countries like Namibia, it is still at infancy stage in the rest of the continent. This presents an opportunity for more partnerships. Examples include finding KFCs at Total service stations in Nairobi and Maputo, and Food Lovers Market with their ‘Food Lovers Local’ brand at Puma in Tanzania.
The benefits of these partnerships include well-placed operational footprints, increased ease and speed of establishing a franchise and access to existing management skills.
Increasingly, franchisees have started acquiring their own logistics and supply chain businesses to give them better control over the supply chain. The main driver for expansion of franchise operations remains the attractive growth of African economies and the linked increase in levels of disposable income. In countries like Namibia, Zambia and Botswana, the food services sector has shown very strong growth during the last few years.
This is not to say that there are no challenges. Unwary franchisers entering the African market can fall prey to a number of issues. These include:
• Lack of infrastructure in some markets and difficulties with logistics outside major urban areas.
Uganda Turns to Citibank After Years of SGR Delays Over Financing• The cost of training. In many cases training for franchisees has to take place in South Africa, adding substantially to establishment costs.
• Regulatory issues that may prohibit the import of certain categories of goods and foodstuffs in certain markets.
• Changing behavior patterns. In many countries where there is no entrenched ‘fast food culture’ locals buy from sidewalk vendors. To grow market share means changing this behavior and encouraging people to adopt more formal shopping habits.
For financial institutions operating from South Africa, the new realities of franchising in Africa have also required a change in strategy. We have realized this and have concentrated on establishing country operations that have the best of both worlds: local knowledge and the ability to source particular skills from South Africa.
The writer is Head of Franchising Africa at Standard Bank
