Companies seeking to further expand their brands need to keep a few things in mind when opting for the franchising route especially small and medium scale enterprises (SMEs).
Nigeria is Africa’s most populous country, and according to the Nigerian International Franchise Association (NIFA) its franchise market has the potential to produce over one hundred billion dollars in annual revenue from products and services.
“That is already happening with manufacturers using SMEs to distribute their products, that is already a popular model, followed by the version on the business franchise – where businesses grant rights to SMEs to utilise a business model and their name and brand and this is also the next popular one,” said Lois Sankey Group Head of MSME and Agrifinance at Diamond Bank.
However Sankey does mention that despite the growth of SMEs in Nigeria, she feels franchising is not catching up as fast as it should.
Alternative to SMEs franchising, there is also the manufacturing franchising type which is fairly limited in growth, as the country is not very big on manufacturing.
To go into franchising, a company should look at the potential of the franchisee, Sankey says, look into their skill sets currently; managerial skills and how much interest they have in the product on offer.
“There is a lot of administration to be done, there is a lot of human resource management and relationship management required of a franchisee as a success factor.”
Sankey says Nigeria has shown a lot of success, especially with the fast moving goods, for example Dangote Cement, Shoprite, NBL Distributors, but in the same breath she believes it is not growing at a fast enough rate.
“A lot of franchises don’t like the control that comes with a franchise model, a lot of SMEs still have this ownership mentality so even though they are only investing into the franchise – a lot of them do not want to comply to the terms of the franchise contract.”
She suggests some form of legislation that could guide the process because that would help minimise areas of conflict.