International Franchising Prospects in Nigeria
Generally, franchising is a complete and compact business model that focuses in one particular limited industry area. Though franchising is one of the most successful business models in the world, the strength and management ability of a global brand determines its scope of franchise operations. Ralph Tathagata, in this report, x-rays international franchising business in Nigeria and its prospects.
Franchising is the business of extending a product or service rights and trademark from a business owner (franchisor) to another (franchisee). The trademark on the brand serves as a clear message to consumers that only company-owned shops sell that product line or render a particular service and that any other channel where the product/service line is available is not officially authorized.
By doing so, the franchisor greatly reduces the possibility of its products/service being counterfeited and crosses from the manufacturing phase to the retail phase. Once the brand acquires market recognition, the franchisee is saddled with the responsibility of custodianship.
However, in order to maintain quality, franchisors often intervene into operations of the franchisees and take strict control of the franchisees’ management. The franchisors often set various restrictive provisions in their franchising agreement and franchisees are often controlled or restricted by the franchise agreements with respect to branding activities, management models, supplies and so on, and must give up control in strategic decisions. For example, a franchisee may not have the flexibility to adjust its operational model to suit local customers’ needs.. As a result, although a franchisee is legally an independent owner, it is in fact a subordinate of the franchisor.
For example, a staff of Nando’s Nigeria at GRA Ikeja, Lagos, who spoke on condition of anonymity because he was not authorised to speak to the press, revealed that Nando’s South Africa, where the bulk of its business is (about 180 outlets), still monitors a lot of activities in the Nigerian franchise to ensure proper standards.
“You can see that everything is being done in the presence of our customers for them to see how our products and services are made. It is part of our efforts to maintain international standard,” he says.
He also revealed that another branch of Nando’s has just been opened in Abuja recently.
On whether the Nando’s menu in Nigeria differ from other parts in the world, he says: “There are slight differences in some of our side order offerings such as rice but the core offering which is chicken peri-peri is similar to the rest of the world.”
Meanwhile, the faster a franchisor expands his franchising businesses, the bigger a franchising territory is, the harder for the franchisor to control franchisees. But total deviation from the core value of the franchisor will ultimately damage the franchised brand, and may result in losing its market completely.
Franchising in Nigeria
With the growing franchise sector in Nigeria, the country is fast becoming a recruitment ground for franchisors around the world.
According to some experts, Nigeria’s national economy is ripe for benefitting from franchise intensification if only the government will recognise the role of franchising as one of the major economic boosters.
Mr Olayinka Babalola, Executive Secretary, Nigerian International Franchise Association (NIFA) in an interview with M2 says: “The scale and strength of the Nigerian franchise sector means that we can no longer overlook that sector as one of the boosters of our economy. And NIFA is dedicated to promoting national and international franchise business among Nigerians.”
On what NIFA has been able to achieve so far, he adds: “NIFA has been able to impact the Nigerian Franchise community by organizing seminars and providing other relevant services including consultancy expertise, feasibility analysis, financial and marketing advice, market research, publications and franchisee recruitment through many firms to make sure franchisees become fully trained and take the helm of their own businesses.”
He explained that the role of NIFA is to both encourage the importation of new and famous franchise brands as well as encourage Nigerian companies in adopting both national and international Franchise Development Programmes. Mr Babalola believes that many famous brands are keen to award their master franchise rights to interested and would-be Nigerian franchisees.
Recently, one of the world’s greatest brands, Kentucky Fried Chicken (KFC) made a historic entry into Nigeria through Devyani International Nigeria Ltd.
In a press statement, Marc Schreuder, CEO of the company was quoted as saying, “Over 25 Nigerian employees were sent on International training before the off take of this restaurant, to ensure that no compromise is made on the quality of this product as well as maintaining our service delivery commitment and to retain the local content of our environ.”
Benefits of franchising
On the benefits of franchising, Mr Babalola says: “The benefits of owning a franchise rather than starting and running a business without experience, unlimited resources and sizeable self-confidence are many. For example, the classroom and field training reduces your learning curve and improves your start-up skills.”
Going further, he adds; “Secondly, the trust earned from an established and respected brand name promises immediate credibility with the franchisee’s customers. Tested and user-friendly accounting, personnel and management systems enhance Franchisee’s productivity and burnish his/her image as a professional organization.”
Mr Babalola explains that a franchisee automatically becomes a business owner with massive professional support.
“In franchising you’ll own your business, but you’re not alone. You’ll have a professional and seasoned support team there when you need them. Additionally, you’ll find your franchise peers to be a reliable and ready network of understanding and advice.
“You’ll work hard, but experience a rewarding return on your effort. You’ll find more time to do what you want, when you want. You’ll be a respected business owner in your community. And, you’ll be proud to be a franchisee within the Service Brands’ family,” he says.
Challenges of Franchising
In a recent press interview, Lawrence Rock, business development manager, Nando’s Africa, was asked about the Nando’s operation in Nigeria. Rock describes the country’s franchise environment as young and unsophisticated but growing rapidly.
However, Mr Babalola reasons that a franchisee who only obtained territorial authorization is often dissatisfied with its subordinate position. But he maintains that if the franchisor has to rely on a franchisee’s financial support and distribution networks, the franchisee will then desire a stronger position which may lead to future conflict.
“The current financial crisis has made more franchisors to rely on the franchisees’ financial support. And this new imbalance may cause a franchisee to gradually deviate from the franchisor’s control, the unified management standards, and quality requirements,” he says.
On his advice to aspiring franchisees he says: “They should match their choice to your own personality, aptitudes, skills and background. The main thing they should keep in mind is that succeeding with a franchise especially in the service business absolutely requires them to be a good marketer, while success with a product rests more on being a good manager.”
