African Franchising On The Move
Africa Month is commemorated in May every year to celebrate African success stories and to strengthen ties between member states of the African Union. It’s a month where Africans reshape the African narrative as one of progress and not despair. In a nod to Africa Month, we take a look at the franchising story on the African continent.
The fast food sector leads the way
As more people throughout Africa move out of poverty, markets will continue to open up for many different types of franchises. Hotel, supermarket and retail development is another major factor driving the expansion of franchise brands. Then, as disposable incomes rise, Africans are catching on to the global trend of eating out more; eating out used to be a luxury and an event, but it’s got much more affordable with the emergence of the fast casual dining category.
Here are some the franchise brands that are making the most of the African growth story:
- KFC has expanded to over 1,000 stores in Africa
- Domino’s Pizza has opened stores in Nigeria
- American franchisor Kahala Corp has opened Cold Stone Creamery ice-cream franchises in Nigeria.
- The Spur group currently trades in 12 African countries
While Africa is believed to be the last continent for major growth in the fast food industry, several chains are finding that African expansion is much tougher than expected. We list three of the key challenges:
- Understanding local customers
Franchisors with an eye on African expansion must ensure that they understand the values, needs and behaviour patterns of local customers. This affects, for example, packaging strategy. Some consumers prefer to purchase smaller quantities while others prefer extra-large sizes when they have the money, to avoid costly travel expenses. For the fast food sector, local tastes may vary hugely, choosing cassava over potatoes or preferring an unexpected cut of steak.
- Costs, costs, costs
African expansion is costly. Local produce, including beef and chicken, can be significantly more expensive than in South Africa. Then, kitchen equipment and shopfitting comes with a hefty price-tag compared to other parts of the world. The high price of entry combined with a higher risk profile has meant that many of the world’s established brands have given African expansion a wide berth.
- The distance
Africa is the planet’s second largest continent. Support and ongoing training is critical to ensure that franchisees succeed. This becomes challenging when providing support is many air miles away. Then, there’s the time and regulatory challenges involved with moving goods across borders. This means that franchisors need to have a strong logistics thinker on their franchise expansion team.
Morocco is not Mauritius
With 54 countries and more than 3000 languages spoken, Africa is a continent of incredible diversity. The business landscape also differs considerably; doing business in Nigeria is quite unlike setting up shop in Namibia. Every year, the World Bank releases the global ‘Doing Business’ ranking of countries’ business environment, rating them based on how easy it is to register a company, raise finance, connect to the power grid and other key indicators for entrepreneurs. Although few African states are globally competitive, several have been striving to make operating easier for entrepreneurs. Here are the 10 best countries to start a business in Africa for 2016 according to the World Bank:
- South Africa
Ask an expert
Thinking of buying a business in another country? Ask our panel of franchise experts for their advice on building a franchise business across borders. Know of a great home-grown franchise that you’ve seen on your travels in Africa? Drop us a line with your experiences.