FRANCHISE: Managing a franchise system effectively

Although it has barely taken root in East Africa, franchising, as a business model, is a world phenomenon. We continue discussing how franchisors and franchisees manage and contribute to the management of a franchise system.

Second, a strong management team. Both staff and directors must understand the particular industry in which the franchise operates. It also includes the legal and business aspects of franchising as a method of branding and expansion.

The franchisor is the senior more-experienced partner here. Franchisor’s management team must therefore understand franchising and be ready to change their corporate culture from an owner-managed system to embrace a franchising culture. The management team must have interpersonal skills and ability to work with other people (franchisees). They must be competent in what their responsibilities are, trustworthy and committed to providing support when needed.

The task of the management team is also to monitor the environment within which the franchise operates and to provide leadership. They also control the franchise system through for instance, reporting and reviews. Management must also ensure franchisees have the skills to manage their franchise outlet.

Third, sufficient capitalization to launch and sustain the franchising programme is needed.

It is important that the franchisor ensures that capital is available to provide both initial and ongoing support and assistance to franchisees.

For the first year of franchising, it is advisable not to include in your capital expenditure projections income you receive from franchisees when you grant them franchises. That means you need alternative means to finance the entire franchise roll out in year one which will ensure that you have enough capital to finance the roll out in subsequent years.

It is for this reason that at the East African Business Council Franchising Project, we have put in place a pool of equity funds where local brands seeking to franchise can access equity investments from over twenty large equity funds in Europe and North America. The funds are also availed to franchisees to acquire your franchises.

The investors exit after five years-typically through the stock exchange-leaving your business to grow further using cheap capital from the public. More details are available on request.

Fourth, a distinctive and protected trade identity. This includes amongst others a registered trademark and/or business identity/name, uniform signage, slogan, trade dress and overall image. For restaurants, overall image extends to include menus, infrastructure designs and table layouts.

Fifth, proven methods of operation and management. This is usually reduced to writing in a comprehensive Franchise Operations Procedures and Training Manual which will maintain their value to the franchisee over an extended period of time, and which can be enforced through clearly drafted and objective quality control standards. Since the market is dynamic, your business operating systems and the manual need constant upgrades.

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The writer is a Franchise Consultant helping indigenous East African brands to franchise, multinational franchise brands to settle in East Africa and governments to create a franchise-friendly business environment.

E-mail: [email protected] or [email protected]