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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.
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