What is franchising? Franchising is the practice of using another firm’s successful business model. For the Franchiser, the Franchise is an alternative to building “Chain Stores” to distribute goods and avoid the need for investments and liability for a chain. The Franchiser’s success depends on the success of the Franchisees. The Franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business. There are many franchising advantages in business franchising.
Businesses for which Franchises work best have one or several of the following characteristics
- A good track record of profitability
- Ease of duplication
- Detailed systems, processes and procedures
- A unique or unusual concept
- Broad geographic appeal
- Relative ease of operation
- Relatively inexpensive operation
As small business owners you may be wondering what the best way to go about starting a business is while ensuring that you get it right and remain in the business beyond the first two years. The secret behind USA’s small business success is “Franchising’.
[sws_blockquote_endquote align=”left” quotestyle=”style02″]Franchising offers Franchisees the advantage of starting up business quickly based on a proven trademark, and immediate access to the tooling and infrastructure, as opposed to having to develop them.[/sws_blockquote_endquote]
A critical initial decision is identifying the right product. Consider hiring a consultant to analyze the market systematically and think through the entire business and the business opportunity that is available in Kenya for that particular product. Among the most common mistakes new Franchisees make is signing on before adequately researching the business. Study what it will take to run the business successfully. And be realistic. Owning a Franchise is rarely a get-rich-quick scheme. Many franchise models need to be considered.
In Kenya Franchises have been there, with the most known being in the fast food market. Kenchic a local company sells in wholesale to supermarkets and restaurants as well as in the Kenchic Inn Franchises. They are now the local suppliers for KFC. Other food Franchises in Kenya include well known brands from South Africa, which include Debonaires, Pizza inn, and Steers. America is the most Franchised country in the world, with a good establishment in business franchising, but most of them have not diversified to the Africa market yet and that’s where the next big opportunity is.
But in last August, the first American Franchise, KFC (Kentucky fried chicken) a super-brand in the world, entered the Kenyan market, opening a much hyped branch at the Junction shopping mall. Since then they have opened 3 new outlets bringing the total to four. The Chairman of KFC America has stated that they plan to open 15 new outlets in Kenya in the next 24 months.
Sub-Saharan Africa is seen as one of the last untapped, still-potentially-lucrative markets in the world. McDonald’s, another great fast food Franchise from America, has been rumored to be considering an entry into East Africa as well, and other chains like it will be well on their way to capture this virgin market.
While franchising advantages are abundant, it also has its set of challenges. Hundreds of Franchisees fail every year. The most frequent reasons being: lack of funds, poor people skills, reluctance to follow the formula, a mismatch between Franchisee and the business, and poor management.
Please do adequate research on franchise models before signing up and be realistic. Just because it has succeeded in some other country doesn’t really mean it would in Kenya. Understand the local cultural elements and negotiate if there is a need to localize the product to the Kenyan market. Remember, owning a Franchise is rarely a get-rich-quick scheme.