Thursday, January 18, 2018

FRANCHISE: Powerful growth tool for family businesses

Wambugu Wa Gichohi

Wambugu Wa Gichohi 

By Wambugu Wa Gichohi , or

Statistics on small business growth from various sources worldwide indicate that 80 per cent of all businesses started today will not survive to their fifth birthday.

And worse still, another 80 per cent of the remaining ones never see their eighth. But what is more shocking is that many seemingly successful family businesses today, particularly the African-owned ones, follow their founders to the grave. Even Asian family-brands which we all respect for good succession planning are currently challenged by modern social and economic dynamics.

The story of some leading indigenous brands in East Africa is one, like most other success stories, of men and women who overcome all odds to build market-leading brands- Azam, Equity Bank, Mo-brands, Britam, Mukwano, Centum, Bidco etc. Some of their founders narrate how they walked barefooted for long distances to get an education, how they slept in the same house with sheep and goats in their early village life, how they sold this and that in school to support their siblings, how some of them save meticulously to take their children to world class universities in the West and how some of such founders did not even make it to secondary school, yet they built brands we all respect today.

Naturally we all do not want our children to go through the same life as we did. So we spare nothing to secure the best education and the best trappings of life for them. Children of many African entrepreneurs often take up educational courses that are parallel to the family business that pay their fees, meaning that after graduation, they are employed elsewhere, sometimes retiring without ever getting involved in running the family business. In the meantime, as the family matriarch ages, business fortunes dwindle and on the deathbed the matriarch bequeaths the business to the child who never did as well as the others education wise- never mind their zero involvement in the business at its prime. The result-a once blissful business weathers and soon follows its founder into the grave, in a graveyard littered with many similar brands run in similar fashion. And when the family starts fighting to divide late matriarch’s property (many die intestate) there goes the last nail on the coffin of a once blossoming family business!

Asian and western families approach their businesses differently, particularly Asians. From as small a business as a tea kiosk, through meticulous saving habits which run in their DNA, their children attend university knowing that when they graduate, the tea kiosk awaits them to grow into a hotel. They take up courses as nearly relevant to the family business as possible. Present-day Bidco, Mo and Azam brands come to mind among many others. While these businesses are likely to survive their founders, their long-term sustainability could be threatened by the ambitious millennial generation that their children are. “Yes our family owns this business and has educated me, but how many are we in this? I want mine, bigger…. You have exposed me to the world’s best and my Harvard colleagues are talking Analytics, IOT and BIG data, I belong there- not in a family business where my free voice (which Harvard taught me) is unlikely to be heard!” Though the author has not interviewed any of the bigger brands, a good number of Asian family-owned SME brands he has worked with are currently facing this challenge.

The writer is a franchise consultant helping indigenous East African brands to franchise, multinational brands to settle in the region and governmnents to create a franchise-friendly business environment.