Wefranchiz

14 December 2022
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Franchising in Africa

Africa is one of the most promising continents for franchise brands. Indeed, countries such as Nigeria, South Africa, Rwanda are at the top of the lists of countries with the strongest economic growth in the world.

In addition, the continent offers international retailers a positive demographic curve, rising purchasing power and modernizing consumer habits.

Experts estimate that Nigeria’s population will be 413 million by 2050, coming after India and China

The franchise market in Africa is a market estimated at nearly 60 billion USD with nearly 300 active networks.

Social franchising, replacing the lack of presence of state services, is one of the sectors experiencing the fastest development in the most remote areas of Africa (photovoltaic panels, infrastructure and water surveys, etc.) , often funded by donors.

The development of international franchisors in Africa often involves development in South Africa, the gateway for international brands such as Burger King, Mac Donald, Eric Kayser and KFC. The country alone has nearly 850 franchise networks and 48,000 points of sale, 91% of which belong to franchisees. Nearly 72% of franchises are local concepts.
Moreover, the franchise sector now accounts for nearly 13% of the country’s GDP, not to mention the number of jobs created.

It should be noted that 39% of the brands present in South Africa have developed in neighboring countries such as Botswana, Lesotho, ESwatini (formerly Swaziland) and Namibia, and 13% have a reach beyond Africa, including the Middle East, Mauritius, the United States and the United Kingdom* (Source South African Franchise Association).

For example, the famous Nando’s brand is a brand from South Africa, to name but one.

However, franchise icons such as Starbuck have not been successful in South Africa. So what to understand in general?

  1. First of all, Africa is not a single large market, but a mosaic of 54 countries, some of which by tribal heritage are composed of several ethnic groups and speak different languages. English, French, Portuguese, Germanic, Belgian, Dutch cultures, etc. marked the populations along the lines of colonization. You must therefore make sure you know the country and its different specificities well in order to adapt to the needs of consumers and communicate well.

 

  1. The legal framework of a country, the intellectual property law which is the dogma of franchising, the existence of a regulatory framework on franchising in order to settle disputes between franchisor and franchisee, the level of corruption in the country, the exchange regulatory framework to ensure that royalties are received, etc. are all points to consider. It should be noted, however, that franchisors will often be supportive and flexible when the size of the market becomes very large or the level of growth very significant. Some countries such as Ethiopia, Nigeria or Libya fall into this scenario.
  1. Concept development costs can also weigh on the profitability of the project, as is the case in South Africa (rent of commercial leases, price per square meter built, acquisition of equipment, etc.). It would also be necessary to study the supply chain of the products and decide according to the local availability if it is a question of importing and the profitability of this option.

 

  1. The consumer habits of a country, strongly linked to culture, purchasing power, level of urbanization and literacy are also important factors. The similarity of cultures and language facilitates the development of concepts. Some neighboring countries are considered extensions of our local market. They also serve as a springboard for the brand in a snail-shaped regional development. In Tunisia, our brands favor the Algerian, Libyan and Ivory Coast markets as a priority. We will soon have to prepare for a new stage, outside their comfort zone, that of the English-speaking African countries, located further east.

 

Africa is certainly the largest development market for franchises in the next 20 years, but it is also a playground where it is good to recognize the issues before launching. Tunisia, by virtue of its geographical position and its cultural proximity, is very well placed to embark on the challenge. And like Lebanese groups such as AZADEA, which have acquired entire territories in order to develop international brands, Tunisian companies could have greater ambitions.

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