Thursday, February 22, 2018

Franchise: Franchising: powerful tool for economic integration

Wambugu Wa Gichohi

Wambugu Wa Gichohi 

By Wambugu Wa Gichohi , or

Africa is headed towards a common market when the free trade area agreement is ratified by member states of all existing economic blocs.

EAC, like other economic blocks across Africa, has been seeking a winning formula to integrate her people. While other methods exist, franchising is one of the most powerful tool that should be deployed to faster integrate us.

It is true that East African communities have traded with each other over centuries. Most such traders have trusted partners across borders, with relationships built over time.

The very nature of franchising takes to the next level the same principles these traders have deployed over the centuries.

A successful Tanzanian brand would, ideally, first franchise outlets in all regions where its products are demanded.

It would continuously improve its quality offerings such that when time comes to target regional markets, the product quality is in such high levels as those of competing brands in the region.

Then using the Master Franchise model, the brand would appoint a local Country Master Franchisee to roll out its franchise network in each EAC country.

The franchisee so selected would be a native of that country who, among others, knows the local market well, commands sizeable respect within the local business community, has financial resources and the commitment necessary to grow the brand and meets other preconditions set by the Tanzanian franchisor. Invariably, such a franchisee has better capacity to navigate the local conditions and succeed better than the Tanzanian brand setting up its own branch. Regular unified communication between the franchisor and the franchisee and the market is the secret key to ensure seamless integration. The parties work together harmoniously to satisfy demand from locals, who would adopt the brand as a local brand sold by one of their own.

For franchising to work in integrating the EAC, a few things, however, need to be addressed.

First a common franchise policy may be needed at EAC to act as a beacon of all franchising activity in the region.

Second, a common intellectual property office at EAC level would ensure that once a business registers its intellectual property in one country, the registration and enforcement thereof would apply in all EAC countries. This would truly make the EAC one common market.

Third, harmonisation of laws affecting franchising would be needed. This might require some minimum legislation addressing areas like minimum disclosures a prospective franchisor must avail to prospective franchisees, what documents to deposit with what authority before franchising, among other areas.

Fourth, an EAC Revolving Franchise Fund would be required to avail much-needed equity to brands taking the franchise route and their franchisees.

Debt capital availed by banks is expensive and a cheaper source would give more choice. Some easy sources of seed capital for such a fund would be the Youth Funds and Women in Business Funds currently set up by almost all governments in East Africa, and whose funds have done little to achieve their stated objectives.

Fifth, governments could incentivise upcoming indigenous franchisors through lowering taxes initially, gradually raising them back over five years as brands expand.

It is for this reason that the author has partnered with the East African Business Council to bring franchising to the forefront of economic integration in East Africa. As Africa becomes one common market, franchising stands out as the most important tool to integrate her people.

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.