Africa: LexNoir Publication Featured in Article on Franchising in Africa

From fried chicken to ice cream and body-building supplements, international franchises are making inroads into Africa, tapping into consumers’ hunger for their brands as developed markets stagnate.

 

Hilton Hotels, owned by asset manager Blackstone, Yum Brands’ Kentucky Fried Chicken and the fashion retailer Mango are some of the companies driving the growth of franchising in Africa. Others in the fast food, automotive and education sectors are also expanding into the continent.

 

Franchising creates opportunities for African entrepreneurs and provides jobs in the formal sector, while for brands it is a chance to enter a new market at a lower cost and with a business partner who is familiar with the terrain.

 

“It’s an inexpensive means to expand using the money of others,” said Kendal Tyre, editor of a new book on franchising in Africa. “You have a franchisee who is coming in and paying a franchise fee to have access to your system that you’ve developed over some period of time.”

 

However, weak judicial systems, corruption and poor infrastructure are still deterrents for potential franchisors. The repatriation of profits from some African countries can also be difficult and there are concerns about the protection of intellectual property.

 

Until recently, franchising in Africa had only taken hold in the continent’s more advanced economies, such as South Africa and Egypt. South Africa’s 300 billion rand ($36 billion) franchise sector accounts for 12 percent of GDP, according to Standard Bank.

 

The industry employs around 500,000 people directly. Nearly 700 brands operate franchises, including KFC and McDonald’s, and home-grown businesses such as Nando’s, a chicken restaurant.

 

But as Western brands face slowing growth at home they are paying closer attention to the rest of Africa, encouraged by legal and economic reforms and governments keen to spur the growth of small businesses, said Tyre, who edited Franchising in Africa: Legal and Business Considerations.

 

Click here to view full article published by Reuters.

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