By Tosin Sulaiman
JOHANNESBURG, Sept 7 (Reuters) – From fried chicken to ice
cream and body-building supplements, international franchises
are making inroads into Africa, tapping into consumers’ hunger
for their brands as developed markets stagnate.
Hilton Hotels, owned by asset manager Blackstone, Yum
Brands’ Kentucky Fried Chicken and the fashion retailer
Mango are some of the companies driving the growth of
franchising in Africa. Others in the fast food, automotive and
education sectors are also expanding into the continent.
Franchising creates opportunities for African entrepreneurs
and provides jobs in the formal sector, while for brands it is a
chance to enter a new market at a lower cost and with a business
partner who is familiar with the terrain.
“It’s an inexpensive means to expand using the money of
others,” said Kendal Tyre, editor of a new book on franchising
in Africa. “You have a franchisee who is coming in and paying a
franchise fee to have access to your system that you’ve
developed over some period of time.”
However, weak judicial systems, corruption and poor
infrastructure are still deterrents for potential franchisors.
The repatriation of profits from some African countries can also
be difficult and there are concerns about the protection of
intellectual property.
Until recently, franchising in Africa had only taken hold
in the continent’s more advanced economies, such as South Africa
and Egypt. South Africa’s 300 billion rand ($36 billion)
franchise sector accounts for 12 percent of GDP, according to
Standard Bank.
The industry employs around 500,000 people directly. Nearly
700 brands operate franchises, including KFC and McDonald’s, and
home-grown businesses such as Nando’s, a chicken restaurant.
But as Western brands face slowing growth at home they are
paying closer attention to the rest of Africa, encouraged by
legal and economic reforms and governments keen to spur the
growth of small businesses, said Tyre, who edited Franchising in
Africa: Legal and Business Considerations.
Continued…
