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FRANCHISING OPPORTUNITIES: UNLOCKING AFRICA'S POTENTIAL
by David J. Saunders

 

Franchising, in its fifty-year history, has shown remarkable resilience in weathering the economic ups and downs. In the face of the recent worldwide economic slow down, the franchise sector has remained upbeat and a significant global force. At the very root of the concept lies the melding together of a franchiser's brand of products and/or services with reliable support systems and by self-motivated franchise owners. It is this high level of motivation, combined with a rigid business format that has allowed franchising to thrive, even in depressed times. Because, franchising is a business format that has no boundaries and no impediments to success, anyone from any walk of life, can become an entrepreneur and enter into a profitable business venture. Ideally suited to small and medium-sized enterprises, (SMEs), franchising encourages small business development in every imaginable business sector and is a great catalyst for job creation, skills transfer and wealth creation.

Globally, franchising has yielded unprecedented results. In the United States, which leads the field in franchising success, about fifty percent of all retail business carried out is conducted by franchise networks. Canada is a close second, with forty-five percent of retail business going through the franchise sector. Australia has twenty-six percent of its retail sales going through franchising with far-east countries like Taiwan and Japan sitting at around the twelve-thirteen percent mark. South Africa currently accounts for an estimated seven percent of all retail business fed through the franchise sector and although it lags far behind most countries, it proves, quite categorically, that the potential for growth is unlimited in Africa. As franchising becomes saturated in developed countries, the emerging markets like the Far East, South America, Eastern Europe and Africa become fertile grounds for franchising to take root.

The small business sector, and franchising in particular, is without doubt the answer to unemployment and has proved worldwide to be the job creator of the future. In the United States, every franchise unit creates and maintains on the average thirty-three jobs (thirteen direct jobs and up to twenty or more indirect jobs in the form of suppliers, etcetera). Australia has created one hundred thousand new jobs each year for the past four years through franchising which they claim to be two and one-half times more successful than independent small businesses. Given that franchising has a strong spin-off job creation factor between 1 and 1.5 additional jobs for every one franchise employee, the estimated current job creation potential in South Africa, in direct and indirect jobs is in the region of 600,000. With a concerted effort by all stakeholders, franchising opportunities in Africa could have more than 1,000,000 people employed by the year 2003.

 

Acknowledged as the "global ambassador of small business", franchising can become the business model that can contribute wealth, growth and stability to the African continent. Consequently, Africa is considered the new frontier in franchising and in this context; South Africa is ideally positioned as the frontline to the entrepreneurial potential of Africa. It is also widely recognized that South Africa is the springboard for potentially explosive growth into Africa and the stark reality is that the broader African economies cannot grow in isolation as the continent's future is inextricably linked to South Africa and the example that it sets.

There is no also question that South Africans have a better understanding of the challenges that are inherent in the African continent and are better equipped to operate in the African business environment. With South Africa spearheading an initiative to help Africa add value to its natural resources, diversify its markets, develop infrastructures and encourage small business growth and development, there is a huge potential for the franchise sector, both locally and internationally, to open a two-way street of business investment that will be to the benefit of all parties concerned, but more importantly, to Africa's people.

In recent years, the international franchise community has worked closely with many African governments to inform them of the importance of franchising within the SME market. Job creation, poverty alleviation, economic growth and black empowerment rank high on Africa's economic recovery agenda, and franchising, with its advantages of skills transfer, start-up support and ongoing operational assistance is rapidly emerging as the preferred type of business to address many of the socio-economic challenges of Africa. Moreover, its lower risk profile offers a safer way of establishing new small businesses and offers a sustainable solution to some of the macro-economic problems confronting Africa's economies.

 

Such an initiative has been undertaken by the Franchise Association of Southern Africa (FASA) which was formed in 1979 by a handful of forward thinking franchisers who believed that franchising had a promising future for both South Africa and the rest of Africa. Crucial to the overall success of franchising was an adherence to the international principals and code of ethics set down by the international franchising community. For the past twenty-two years, the FASA has been operating as a voluntary organization which has set standards for ethical franchising in Africa and has successfully steered franchising to where it is today in Africa.

In South Africa today, the structure and control of franchising currently is seen as a working example of successful business practices and the FASA's code of ethics and business practices have formed the basis of a more broader consumer code of business practices adopted by the captains of industry and business. In addition to becoming the most established and well-respected franchise association on the African continent, FASA has established a strong international network of contacts and today the FASA is a full member of the World Franchise Council (WFC) &endash; the international body that overseas franchising worldwide and is instrumental in maintaining business standards in an industry that is fast becoming a world leader in entrepreneurial success.

To this end, the Franchise Association of South Africa will be hosting Franchise Week May 6-11, 2002 at the Sandton Convention Centre in Johannesburg, South Africa. Franchise Week will bring together the successful franchise nations of the world to meet the viable nations of Africa in a week of communication, interaction and endless possibilities. Four important events will form the basis of a unique week-long focus on franchising: The World Franchise Council Meeting, an International Franchise Review Convention, the International Franchise Exposition (IFE 2002) and an African Symposium on Franchising. This week-long event will also be the first ever showcase of Franchising in Africa.

The Africa Symposium on Franchising will provide an excellent opportunity to explore business investment in the franchising community. South Africa, as the leader in franchising in Africa, boast an impressive record with fifty-six percent of its franchise concepts exported to other African countries &endash; with seventy-nine percent in Sub-Saharan Africa and nine percent in Northern Africa. Although South Africa ranks number one in franchising in Africa, the potential for the expansion of franchising into the rest of Africa is enormous. In may parts of Africa, South Africa stands as the principal investor of franchises and most African franchisers interested in further expansion believe that once they have established themselves successfully in South Africa, there is huge potential for the rest of Africa. Recent trends show that the three most favored franchise sectors are: (a) food services, (b) retailing, and (c) entertainment and leisure. It should be noted that these popular franchise sectors are highly intertwined with the growth and development of the travel and tourism industry in Africa.

 

The objectives that the FASA aims to achieve with its Franchise Week include:

 

Creating an awareness of franchising as a form of business for Africa. The developed nations have proven that franchising plays a pivotal role in the economic success of any country. The developing nations are also proving that franchising is ideally suited to emerging markets; that its business format stimulates entrepreneurship; and its structured support system brings about skills development, job creation and the empowerment of its people.

 

Promoting the understanding and knowledge of Franchising. Understanding the dynamics that make up franchising is crucial to its long-term success. FASA hopes to bring a new understanding through the events of Franchise Week &endash; not only to the international delegates that will want to know the logistics of investing in Africa &endash; but to the participating African countries who need to understand how franchising can be adapted to service the needs of many different industries in their respective countries and to contribute to their socio-economic revitalization.

 

Involving government and the private sector from African countries in acknowledging the unlimited potential of franchising. Through Franchise Week, FASA hopes to bring together both governmental and the private sector delegates from Africa and around the world to lay the foundation for economic growth through franchising. It is believed that Africa's economic recovery will require the initiation of new partnerships with the rest of the world to awaken the economic powerhouse that lies in Africa.

 

Drawing international attention to what Africa has to offer. Emerging markets play a critical role in the worldwide expansion of franchising. Developed countries need to extend their franchise systems into new markets and new territories in order to sustain growth and increase turnover. Africa is indeed a "new frontier" for franchise expansion and it is envisioned that Franchise Week will undoubtedly draw attention to Africa and its potential.

 

Stimulate the international franchise community to invest in Africa. By hosting the World Franchise Council Meeting and showcasing the International Franchise Exposition, the FASA hopes to change the perception that Africa trails behind the rest of the world. The IFE 2002 Expo, which will showcase some of South Africa's most prolific franchise concepts, boasts a staggering eight-four percent of home-grown franchise concepts that could easily be exported to any country around the world. This together with Africa's potential should be an incentive to local initiative and investors.

FASA has spent many years making sure that the international franchise community is cognizant of the vast potential that lies within the African continent and Franchise Week is an ambitious but critical milestone in the future of Franchising in Africa. As the future frontier of franchising, Africa now needs to stand up and be recognized. Governments and private business sectors from countries throughout Africa are therefore being encouraged to participate in Franchise Week and to experience for themselves what franchising is all about.

In conclusion, with the SME market being acknowledged worldwide as an economic power base to stimulate growth and to generate employment, franchising offers positive opportunities and options. South Africa has proven that franchising can and does work within the "African" context for economic growth and development. FASA also believes that international franchised companies have just begun to penetrate the myriad of business sectors for Africa's economy. Franchising options are what Africa needs to inject new life and vigor into our economies. In this regard, South Africa can play a pivotal role in steering franchising opportunities into the direction of success and prosperity for Africa.

About the writer: Mr. David J. Saunders is the Chief Executive Officer of Venue International Professionals, Inc. (VIP) &endash; a full service travel and tourism consulting company based in the Washington Metropolitan Area that specializes in travel and tourism opportunities to the Continent of Africa. He is also the Director of Management and Administrative Services for the Constituency for Africa (CFA) - which is the premiere advocacy-focused non-government organization (NGO) based in the United States devoted to the empowerment of Africa and its peoples. He is also an instructor of international trade and investments at Howard University's Small Business Development Center (HUSBDC) as well as a frequent writer for several trade magazines to include Black Meetings and Tourism Magazine and the Africa Travel Magazine. He can be contacted at Tel: (301) 856-9188 or e-mail: vipinc@erols.com.