Franchising for industrialisation
One year ago, we set out to popularize franchising for SMEs through this column. We have covered many basics but the best is yet to come.
We hoped SME-owners would seize the opportunity to franchise their brands using information given here.
Regrettably, only two (outside Tanzania) responded and have since started their franchising process. To overcome the current tough economic times, Tanzanian brands need to seriously consider franchising, otherwise they continue suffering from the hash economic times.
We dedicate this and next week’s anniversary editions to discuss how governments in the region can use franchising to accelerate industrialization, food security, universal health care, affordable housing and manage their burgeoning wage bills. These are common priorities for governments in East Africa.
East African governments are pushing the industrialization agenda. Tanzania has “Tanzania ya Viwanda”, Kenya has manufacturing under her BIG4Agenda, in Uganda, Buy Uganda Build Uganda “BUBU” and Rwanda has been attracting investors to set up industries.
Under a Manufacturing License Agreement (MLA) an inventor allows a manufacturer to produce, market and sell the inventor’s brand for payment of royalties or a lumpsum.
Under contract manufacturing a manufacturer agrees with another for the latter to produce a brand owned by the former, which the former markets and sells.
Inventors in East Africa have no financial muscle to set up manufacturing outfits. With government incentives to set up cottage industries in our backyards, these industries would quickly need partners in all regions where they seek markets, These partners would use their money and time to set up manufacturing outfits and grow the now successful brand, thereby achieving industrialization more rapidly than current models where investors wait to afford expensive machinery to set up in new markets.
Coca-Cola and Pepsi Co have used a combination of MLAs and franchising to conquer the world. By licensing manufacturing to specific factories across the world, they ensure product availability at a fraction of the cost of setting up own factories.
Franchised distribution networks set up by the MLA-holders ensure the products reach the final consumer seamlessly.
With current low levels of intra-EAC trade, this arrangement works for everyone’s best interest.
Tanzanian brands (and vice versa) would license production and franchised distribution networks in other countries thereby entrenching their market positions. Regional economic integration would easily be achieved through franchising.
Second is food security. In agriculture, livestock and fisheries, the government would set up model farms and seed multiplication centers for each crop/animal in different parts of the country.
These would have high standards as needed for export to ensure smallholder farmers produce high quality products.
Smallholder farmers would form themselves into cooperatives around crop/animals, with each cooperative acquiring a farm franchise for the specific crop/animal from the government. This would ensure not only high production but high quality of farm products.
Franchising is about standards. One of the standards would address management of post-harvest losses.
The said cooperatives would set up processing facilities- high quality facilities following international best practices in franchising.
Branding of the processed farm products makes it easy for such cooperatives to set up and franchise product outlets across the country/region. The first customers of the processed products would be the cooperators.
Following international best-practices in franchising would ensure the country achieves not just food security but high standards of raw produce and finished products, making it easier to sell in regional and global markets.
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.
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