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Franchising May Be The Solution To High Business Mortality Rates

By Denis Jjuuko
A friend set out to start a business. He went out to do a business plan and all those things they teach at business school. He saved his ka-money and went on to implement his ideas. Like almost all business plans, his too showed profitability at some stage. Whenever he was discouraged, he remembered what motivational speakers usually say — winners never quit. He persevered.
What probably business plans don’t tell you is that there are things you will simply learn on the job. Stuff that come with doing something. After a few years and millions of shillings down the drainage channel that his business had become, he decided to defy the motivational speakers and quit the business. With money lenders on his back, he thought it was time to return to formal employment. He is happier today than when he was doing business. Sometimes winners quit!
If you have lived long enough in Uganda, you know somebody like that. Usually, the diagnosis of why the business failed leads to the usual stuff apart from one many don’t talk about. Doing business (at least for profit) in Africa is largely new, starting with the Arab traders. Still many Africans didn’t become businesspeople. Trading was for the Arabs. We were onlookers.
As you read this article, you may actually be the first person ever to do business in your large extended family. There is hardly anyone to learn from. Mentorship is a new thing. And many businesspeople simply keep up appearances. Failure is the norm and not the exception.
However, there are still many businesses that have succeeded at least by our Ugandan standards. Over the years, they have understood what it takes to do business in their sector and can withstand most shocks. They have established useful contacts such as supply chains and created a brand that people trust. Sometimes, they have kept the business small deliberately so that they don’t rely so much on external debt or they are simply happy with the status quo.
Those looking at them from the side and see how successful they are and dreaming of becoming the next big thing in the same sector simply start like my friend and the majority end up failing. We have heard that the majority of Ugandan businesses don’t live long enough to celebrate their fifth birthday.
All entrepreneurs don’t necessarily have to start a new business from scratch all the time. They also don’t have to use their capital or borrow at high rates to expand. Actually, business expansion is one of the reasons some Ugandan businesses that seemed to be doing well with a single branch start experiencing difficulties once they open several other branches. Lack of supervision due to poor systems affect them, poor knowledge of the local environment and of course the high interest rates on loans.
Businesses in the western world, Asia and some parts of Africa like South Africa understood this. One owner doesn’t have to directly operate all their branches in every small town or even big city. They look for entrepreneurs they can partner with to run some branches. They call it franchising. The entrepreneur doesn’t start from scratch like my friend, learning every little thing on the job, which is many times euphemism for losing money.
The franchisor deploys their systems and experience in ensuring that the new business can survive. The franchisee uses the brand nameplate of the franchisor thereby not spending any much money in creating a new brand, employing people that may not necessarily know how to run the business and stuff like that.
Things that may look mundane can be the difference between success and failure. For example, on which side of the road a supermarket is located may be key for such a business surviving. Opening hours for some businesses may also lead to success or failure. A franchisee doesn’t have to suffer with such decisions. The franchisor already knows what works and what doesn’t.
The franchisor doesn’t have to do so much to supervise every aspect of the business once the franchisee is good to go. The franchisor doesn’t have to look for capital to expand and relies on the franchisee’s local knowledge to even try out new products that may specifically appeal to people in that particular location.
For example, an international restaurant chain may introduce rolex or Luwombo in Kampala, stuff that may not work in another country. The franchisor earns either a percentage of the franchisee’s net income or a set amount of money while leaving the bulk of operational supervision duties to the local business owner. The franchisee doesn’t have to spend money on research and development.
It is perhaps high time successful Ugandan businesses considered franchising as an expansion model while those starting out look at it as a model for business success.
The writer is a communication and visibility consultant. djjuuko@gmail.com

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