Franchising has been used by businesses across the world to quickly and cheaply transfer skills, create jobs, play commercial diplomacy and generate massive wealth.
By Wambugu Wa Gichohi
Walking on the streets of business and residential districts of Kampala and other leading cities in East Africa, you will notice many new high quality establishments selling all sorts of items. Most visible are fast food, hospitality and auto-related brands among many others. What most East Africans do not know is that as our East African entrepreneurs outdo each other by opening many (few, limited by financial and operational considerations) company-owned outlets, owners of these multinational brands realized long ago that the easiest way to conquer the world is to build an army of dedicated business partners running their own businesses using the multinationals' long-established brands under pre-agreed arrangements, thereby guaranteeing them a quick worldwide footprint at a fraction of the cost of setting up and running company-owned outlets. The reality is that multinational franchise brands are trooping into Africa attracted by Africa's youthful population and the burgeoning middle class, coupled with market saturation back home. If the situation is not addressed actively, early, we will end up like Philippines where 70% of the franchise sector is controlled by foreign brands as opposed to South Africa where 90% of all franchises are home-grown.
In deciding between the Philippines and the South African model, we should consider the benefits of each. These multinationals play a very significant role in creating jobs, transferring skills, playing commercial diplomacy and creating wealth for themselves and everyone in the value chain. But they repatriate all their profits back home and import most of their inputs from centralized supply chain bases out there, thereby creating the bulk of jobs there. This also exacerbates trade imbalance between their host countries and their mother countries and partly explains why there are more inward-Uganda bound containers at Dar Es Salaam or Mombasa than there are outward bound! If Uganda is to meet her development goals, this imbalance needs to be addressed and one way of doing this, in addition to encouraging the multinationals to source inputs locally (by first training locals to meet quality specifications) is to encourage indigenous brands to perfect their business at home (Buy Uganda Build Uganda) then start export to EAC, SADC, COMESA and other African trading blocks before finally exporting to the world. This worked miracles in South Africa during economic sanctions of apartheid days. They produced world-class goods and services for local consumption and when economic sanctions were lifted, their brands could only grow one way-outwards. This explains why many foreign multinationals find it difficult to compete in South Africa, hence South African brands controlling 90% of the franchise sector there.
Franchising has been used by businesses across the world to quickly and cheaply transfer skills, create jobs, play commercial diplomacy and generate massive wealth thereby contributing enormously to GDPs of countries such as USA at 2.5%, Mexico at 6%, Australia at 10% and closer home, franchising contributes 11.67% of South Africa's GDP. In East Africa, its contribution is negligible because we still believe in old-school brick and mortar models of company-owned outlets, due to among others, little understanding of how franchising works, shortage of expertise in the region to guide brand owners through the franchise development landscape and inadequate policy and legal frameworks for franchising.
In order to address these and mainstream the contribution of franchising to Uganda's GDP, and in an effort to support the government's BUBU drive, New Visoin has partnered with a leading Franchise Consultant to educate the business community on the franchising ecosystem aimed at nurturing a vibrant franchising sector in Uganda with a good balance of indigenous and foreign brands. For the foreseeable future, we will run this column weekly The consultant will write about franchising, including understanding what franchising is and how it works, how businesses can use franchising to scale up in the country before going regional and international, how multinational franchise brands work in Uganda and globally, what Uganda would gain by facilitating indigenous brands to franchise, minimum legal environment needed to nurture a vibrant sector, what individual brand owners stand to gain by franchising, what to do when looking for a franchise, what to do to franchise your brand, what could go wrong when franchising, your role as a franchisor, your role as a franchisee, expectations for suppliers to franchise networks, what government can do to facilitate indigenous brands to franchise, role of the Uganda Franchise Association and many other areas of interest to franchising.
The column will run alongside an editorial commentary about any business that is currently operating under the franchise model in Uganda. After booking an ad, we will write an advertorial about your brand, which a normal ad cannot do. The consultant will, whenever possible, use your brand as the main example in the accompanying article, thereby giving your brand maximum exposure.
We will also run a whatsapp group (to join send an email) specifically discussing matters franchising in Uganda (including any opportunities available) which would guide content. We welcome participation from the business community, government, development partners, scholars and our readers in general so that we can together build this new sector that holds the answer to many questions in our economy. If you have any questions regarding the concept, please email the consultant, who will answer questions in subsequent articles.
Join the conversation- email@example.com
The writer is a Franchise Consultant helping indigenous East African brands to franchise, multinational franchise brands to settle in East Africa and governments to create a franchise-friendly business environment.