Investopedia defines a franchise as a type of license that a party (franchisee) acquires to allow them to have access to a business’ (the franchiser) proprietary knowledge, processes and trademarks in order to let the party sell a product or provide a service under the business’s name.
Investopedia says that franchises are a very popular method of starting businesses, especially for those who wish to operate in a highly competitive industry like the fast-food industry.
It goes further to say that one of the biggest advantages of purchasing a franchise is that you have access to an established company’s brand name; meaning that you do not need to spend further resources to get your name and product out to customers.
Across the world, franchising is one popular way of achieving business growth and strong return on investment. Small and medium businesses are leveraging this for growth.
The Franchising Association of South Africa (FASA)’s latest survey, published in November 2017, showed that the performance of franchises was on an upward trend, with 845 franchisors and over 40,000 franchisees generating sales of R587 billion – contributing 13.3 percent to the country’s GDP.
The British Franchise Association in partnership with NatWest Research found in 2015 that franchise industry annual turnover was £15.1 billion, while the number of franchisor brands operating in the UK was 901. Similarly, number of franchisee outlets grew to 44,200, just as the number of people employed in franchising was 621,000. Also, percentage of units profitable was 97.
Nigeria is still miles apart from understanding the economics of franchising, though the last four years have seen businesses adapt to the trend.
“We want to be able to come together to create value and see immense opportunity we can tap through franchising,” Chiagozie Nwizu, managing consultant, Franchise Business Development Services, said at the firm’s matchmaking forum in Lagos.
“For the past years, franchising has made some progress. We now have a number of businesses that have done franchising. Some have had their fingers burnt, but what we found was that these businesses needed support. A lot of businesses have done well and will learn from the mistakes of others. We are beginning to see local businesses such as Spa and House of Tara in this,” Nwizu said, adding that through a research funded by the DFID, some Nigerians have been able to learn how franchising works in four countries.
Murad Alnasur, founder, Restonalysis FZE, United Arab Emirates, said Nigeria needs to protect franchising by passing some laws that protect identity.
He said franchises are succeeding across the world because businesses are aligning themselves to the demands of the millennials.
Sam Ohuabunwa, founder of African Franchise Institute, said franchising would go down in the Nigerian history as a key driver and motivator of the gross domestic product (GDP) and development.
“In every clime and nation, some ideas come up and you will sometimes begin to ask where you have been. I have been involved in initiating and setting up 33 businesses. Less than one-fourths is still alive. I got my fingers burnt in many cases. If I had known about franchising, perhaps, all these businesses would have been alive,” Ohuabunwa, who is also the founder of Ohuabunwa Foundation for Economic Empowerment, said.
He said many young people often confront him with the question of the business they should start, but he often racks his brains to find one enterprise that he could endorse. He added, however, that with franchising and Franchise Association coming up in Nigeria, he has no more reason to worry.
On his part, Peter Bamkole, director of Enterprise Development Centre of Pan-African University, said six years ago, he pioneered the EDC to strengthen small businesses and grow them into medium to large enterprises.
Bamkole said he has observed that a few things are missing, as growing rapidly requires a different skill set.
“The human capital is a big issue. Franchising, therefore, offers the best opportunity today. You can no longer be successful alone; you have to be successful together with your competitors and partners,” he noted.
Furthermore, Prakash Pantham, commercial director of the programme, pointed out that franchising can reduce high unemployment rate in Nigeria to the barest minimum.
Pantham said the European market is shrinking; the Asian market is stabilising, while the African market is full of opportunities, adding that franchising can only succeed when there are monitoring, execution and implementation.
ODINAKA ANUDU & IFELAYO EHINMOSAN
, Nigerian SMEs