Franchising as SME strategy in Africa

What you need to know:

But Africa desperately needs to achieve growth. The continent offers real opportunity and prospects that are truly exciting and rewarding. But optimism and hope does not produce results.

The question then begs why Africa has until recently been isolated. The reality checks for business and investors are, broadly speaking, the following which in essence are also Africa’s challenges for future development. Economics and Politics: Africa is the only continent that continues to grow poorer. Even Africans themselves seem to doubt their own economies. It is estimated that about 40 percent of African’s private wealth is held overseas. The GDP of a typical African country is barely that of sizable town in the developed world. In fact, in global terms African economic activities are almost completely insignificant. Governance and Democracy: The continent in general does not get good press. Warfare, diseases, corruption, famine and genocide have been the dominant features of international coverage. Terms like “a hotbed of terror” followed by crippling travel advisories are commonplace directed towards Africa.

It is in this context that small and medium enterprises (SME’s) will play a vital role. The economies of some of the most successful countries in the world have been built on the contribution of SME’s in providing employment and sustained growth. About 70 per cent of the economic output of a country such as the Netherlands is contributed by SME’s. In the United Kingdom SME’s are constantly penetrating new markets to expand the economy and to absorb labor. In pursuit of economic participation, the development of small and medium enterprises has emerged as a ray of hope and is being acknowledged worldwide as an economic power-base to stimulate growth. It is also within the SME market that a new way of doing business started gaining momentum some 50 or so years ago. This global phenomenon is franchising and a way of doing business most suited to the African scenario. To achieve success however there are some major challenges, other than the above, that need to be addressed.

Franchising in its more than 50 years history, has shown remarkable resilience to weathering the political and economic ups and downs. The very root of the concept lies in melding together of a franchisor’s brand (intellectual property) and support systems with service delivery by self-motivated independent businesses as franchise holders. In markets where the model is successful, it is this high level of motivation, combined with a rigid business format, that has allowed franchising to thrive even in depressed times. Franchising as a business model has no boundaries and no impediments to success. It is ideally suited to the SME sector; it encourages small business development in every imaginable business sector and is a great catalyst for job creation, skills transfer and wealth creation.

Success rate: The greatest strength of franchising as an SME strategy is its proven success worldwide when compared to independent businesses. In the Philippines: 95 per cent franchise systems compared to 25 per cent independent retailers survived the 1997 Asian Economic Crisis. In Australia: franchising has proven to be 2.5 times more successful than other small independent businesses and on average, in South Africa, franchisors closed no more than one outlet during 1994 despite major disruption as a result of political transformation from apartheid to the modern democracy the country is. The majority of franchisors (87.3 per cent) did not close any outlets. Studies by the Africa Development Bank in African markets where franchising is relatively successful (south Africa, Egypt, Morocco etc) indicate that only 15 per cent of businesses started within a franchise system are likely to fold up in the first five years compared to a mortality rate of 80 per cent for those started outside franchise systems. The reason for the success is that entrepreneurs (franchisees) do not in the strict sense of the word start a new enterprise from scratch, they enter the SME market by investing in a business that has proven the concept (tried, tested and proven franchise system) whilst enjoying support from the franchisor. Consequently, financiers tend to listen to them more favorably than their green field startup colleagues, thereby increasing the chances of success.

Tanzania brings forward school closing date over El Niño rain concerns

Franchising as SME strategy in Africa

What you need to know:

Latest

Chivayo and Ginimbi: The tale of two African billionaires whose lives were tragically cut short

Ndilito takes early lead in race to succeed Ndejembi in Chamwino

Dar es Salaam RC gives Kariakoo traders October 24 deadline to clear roads

Morocco, Taifa Stars international friendly match cancelled due to five injuries

Experts turn to music to ease pain, stress in palliative care

EAC speakers agree to engage governments on unpaid contributions

In the headlines

Chivayo and Ginimbi: The tale of two African billionaires whose lives were tragically cut short

Dar es Salaam RC gives Kariakoo traders October 24 deadline to clear roads

Ndilito takes early lead in race to succeed Ndejembi in Chamwino

Tanzania brings forward school closing date over El Niño rain concerns

Tanzania brings forward school closing date over El Niño rain concerns

What you need to know:

Beyond the runway: Fashion, beauty and purpose at Tanzania Fashion Festival 2026

When did women’s clothes become everyone’s business?

Chivayo and Ginimbi: The tale of two African billionaires whose lives were tragically cut short

Ndilito takes early lead in race to succeed Ndejembi in Chamwino

Dar es Salaam RC gives Kariakoo traders October 24 deadline to clear roads

Morocco, Taifa Stars international friendly match cancelled due to five injuries

Experts turn to music to ease pain, stress in palliative care

EAC speakers agree to engage governments on unpaid contributions

Chivayo and Ginimbi: The tale of two African billionaires whose lives were tragically cut short

Dar es Salaam RC gives Kariakoo traders October 24 deadline to clear roads

Ndilito takes early lead in race to succeed Ndejembi in Chamwino

Tanzania brings forward school closing date over El Niño rain concerns