The Promises of Franchising in Africa: The Need for a Critical Examination

‘‘For Franchisable Nigerian Micro Small Medium Enterprises, it is in your best interest to start your franchise plans now! The future is: You either franchise or die! ’’ (Nigerian International Franchise Association, 2008, p. 4). This rather apocalyptic statement, attributed to a vice president of the Nigerian International Franchise Association, illustrates the widely-held belief among informed African business leaders and policymakers that franchising must become a driving force in the creation, modernization, and development of businesses in Africa (Sigué, 2002). Indeed, despite its extraordinary success in both developed and emerging countries where it has been a steady engine of business growth and often accounts for up to 50% of retail sales, franchising remains a marginal force in retailing in most African countries. South Africa is the high-flying exception where the development, vitality, and economic impact of franchising are noticeable. As a matter of fact, according to the Franchise Association of South Africa (2012), the franchise sector contributes about 11.8% of South Africa’s GDP. The number of franchise systems increased from 156 in 1994 to 551 in 2010. In 2010, these franchise systems operated a total of 30,000 outlets, mostly owned by franchisees as independent small and medium enterprises (SMEs), and employed 478,000 people (Franchise Association of South Africa, 2012). Expected socioeconomic benefits from franchising in Africa are numerous and include job creation, development of SMEs, economic growth, increase of local entrepreneurship, alleviating poverty, and improving managerial capabilities and skills of the labor force. It is no surprise that African governments and other development stakeholders are increasingly promoting franchising as an effective alternative to stimulate business development and speed up the growth of African economies. For instance, the African Development Bank (AfDB) committed $USD 40 million in 2009 to support the development of franchising in Egypt, hoping to create 375 franchised outlets and over 7000 direct jobs and to increase the number of SMEs operating in the Egyptian formal sector. Gradually, more nongovernmental organizations (NGOs) also acknowledge that franchising principles via microfranchising can apply to microbusinesses and help to alleviate poverty and enhance individual economic self-reliance at the base of the pyramid (Kistruck et al., 2011). Although the socioeconomic expectations of franchising are high, scholarly works focusing on the motivations that can lead a firm to adopt this form of organization in Africa remain surprisingly very sparse (Olotu & Awoseila, 2011). Governments and their development partners seem to assume that the economic success of franchising in other regions of the world could easily be replicated in Africa. In the business literature, franchising is portrayed as a miraculous solution for African SMEs, which struggle to cope with national and international competition. In such a context, there is a need to go beyond this promotional literature to understand what franchising can effectively bring to those whomight consider this organization form in Africa. This editorial calls for further academic research on franchising in Africa and urges investigation into whether or not theories that have been used to explain the successful development of franchising in North America and elsewhere can apply to African countries. Particularly, some premises of the resource scarcity and agency theories are discussed as examples to provide a basis for a comprehensive critical examination of franchising in Africa. Before that, however, the concept of franchising is briefly introduced.