By MTHULISI SIBANDA
JOHANNESBURG, (CAJ News) – THE challenges persistent in the local market have encouraged South African franchisors to look beyond the country’s borders and take a long-term view on introducing integrated strategies for the growth of their brands across the continent.
This is according to a local expert, Philip Myburgh, who said the stage for expansion of franchise operations in Southern African Development Community (SADC) countries and beyond had shifted as franchisors gained experience in African markets.
“Interestingly, we are seeing progressively more food retailers and quick-service restaurants eagerly trying to form business partnerships with the fuel service industry,” said Myburgh, Head of Franchising Africa at Standard Bank.
“While the concept has already taken off in South Africa, with limited maturity in neighbouring countries like Namibia, it is still at infancy stage in the rest of the continent, which presents an opportunity for more partnerships.”
He said examples include finding KFCs at Total service stations in Nairobi and Maputo, and Food Lovers Market with their ‘Food Lovers Local’ brand at Puma in Tanzania.
He said the benefits of these partnerships include well-placed operational footprints, increased ease and speed of establishing a franchise, and access to existing management skills.
“Quick-service food brands often take the lead from established food retailers when it comes to selecting a location for new stores, since they already have a good understanding of the market and naturally attract a lot of customers,” said Myburgh.
Increasingly, franchisees have started acquiring their own logistics and supply chain businesses to give them better control over the supply chain.This ensures a more consistent customer experience. For example, they now have control over the temperature of the goods while in transit from the supplier to the outlet.
The main driver for expansion of franchise operations remains the attractive growth of African economies and the linked increase in levels of disposable income. In countries like Namibia, Zambia and Botswana, the food services sector has shown very strong growth during the last few years.
“Botswana, as reflected in a recent announcement by a major South African franchise group, has seen a big increase in franchised food service outlets industrywide in the past five years,” said Myburgh.
Other attractions in African markets include positive political changes, the rate of foreign direct investment, lower tax and sales tax rates, and increasing political and economic stability in the fastest growing territories.
However, there are challenges such as lack of infrastructure in some markets, difficulties with logistics outside major urban areas, lack of retail skills amongst staff, rising costs of training and regulatory issues among others.
“Franchising in Africa remains a challenge. Nonetheless, the sheer size of the opportunities on the continent will see progressively more franchise operations looking for opportunities. There is no doubt that, for those taking cognisance of local requirements and establishing the correct partnerships, the rewards can be worthwhile,” Myburgh.
– CAJ News