[BLOG] Why Fast Food Brands In Africa Need To Consider Franchising
By:Goodman AMC
When most people think of a franchise, the first names that are mentioned have to do fast foods. Food related franchises are certainly the most visible type of franchise concept. Interestingly enough, they represent the largest percentage of franchised businesses in the world. There are more than 30,000 local McDonald’s restaurants serving nearly 50 million people in more than 119 countries each day.
Owning a restaurant in Ghana can be very hectic; the hours are ridiculously long, the HR issues are horrendous, and the way that food costs rise and fall makes for a sometimes unpredictable profit margin.
Ghanaian fast food chains are not really enthused by the idea of franchising, since most of the best fast food joints can be found in specific locations making access to them very difficult.
PAPAYE for instance which is a local fast food chain in Ghana has an annual turnover of about $7,300,000 but can only be enjoyed in only about 3 locations in Ghana; with all centered in Accra. With such a turnover from only 3 outlets in Accra, it attest to the fact that fast food brands like PAPAYE in Ghana have a huge potential of becoming global success stories like the McDonald's and the KFC’s of the world if only they can embrace the concept of franchising.
The following reasons go on to explain the merits fast food brands in Africa can derive from franchising:
PAPAYE for instance which is a local fast food chain in Ghana has an annual turnover of about $7,300,000 but can only be enjoyed in only about 3 locations in Ghana; with all centered in Accra. With such a turnover from only 3 outlets in Accra, it attest to the fact that fast food brands like PAPAYE in Ghana have a huge potential of becoming global success stories like the McDonald's and the KFC’s of the world if only they can embrace the concept of franchising.
The following reasons go on to explain the merits fast food brands in Africa can derive from franchising:
Lower Cost
Unlike employees, franchisees make an initial payment in return for becoming a part of your fast food chain and then they continue to pay you a percentage of their revenue, throughout the duration of their Franchise Agreement. This means that the costs of setting up the franchise, training staff and launching the restaurant are all covered by the franchisee rather than by the parent restaurant. Similarly, once the restaurant is up and running, it is the franchisee that will be rewarding you with a monthly income, rather than being paid by you as an employee. For these reasons, the franchise system can provide a very cost-effective route for business development.
Simpler Management
Franchisees are themselves responsible for the day-to-day running of their restaurant units and they must do this strictly in accordance with the Franchise Agreement and Operating Manual provided by the Franchise owner. As franchisees have invested their own hard-earned money, they do not require the detailed level of management which would be needed for employees. The objectives of the franchisee and of the franchising restaurant are therefore very closely aligned, with the success of the one depending to a great extent on the success of the other. As a result, the franchise network requires only a simplified and relatively low-cost management system. This is typically based on the close monitoring by the franchiser of the key performance indicators (KPIs) and the provision of motivational leadership.
Faster Expansion
The benefit of self-financing business units and a simplified management structure as described above usually means that franchised networks can be expanded more quickly than restaurant-run networks. Franchising is all about replicating a clear and successful restaurant formula and provided the franchiser is prepared to make a reasonable investment in marketing at national level, the brand can quickly be expanded nationwide. This will in turn generate increased sales volumes and stronger purchasing power, via which the restaurant can command greater discounts from its suppliers.
Better Local Market Penetration
Franchisees are normally well established as part of the local community, either on a personal level or as a result of their past business activities. This can give them a very significant advantage in gaining new business for the franchise at a local level. They will generally live within the franchise territory, be known there and will be seen as having made a permanent commitment. These are all attributes which generally do not apply to company employees and will be of enormous value in helping franchisees to penetrate their local market.
Greater Commitment
Franchisees have invested in their restaurant business and know that they can benefit directly from its success. Logically, for that reason, their commitment will be much greater than that of employees, who have made no such financial investment and are guaranteed to receive at least a basic wage at the end of each month, regardless of performance. However, money is not the only driving force for better performance. Since the restaurant is their own, franchisees will take real pride in the service which they provide and will ceaselessly strive to exceed the expectations of their customers. This commitment will also reflect in their loyalty to the franchiser brand, because it is also the franchisee's brand, and they are intent on building up a business which can be sold on for profit at some future date.
International Potential
The franchise system again has many advantages. Using a system called Master Franchising, you can quickly and simply replicate the whole of your African franchise model in another country, leaving the Master Franchisee to adapt the model to the local market – its language, business customs and legal requirements. This is a very effective method of expanding a business overseas without any need to create subsidiary companies or branches in your chosen countries.
About Goodman AMC
Goodman AMC is is an independent, creatively driven communications agency that helps create strong relationships between companies and their clients in Ghana and Africa.
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