FRANCHISING IN GHANA

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					FRANCHISING IN
GHANA
           Presented at Seminar on

  How to Support and Conduct Franchising for
       Effective Economic Development
                      By
                  Abena OTU



                  Abena OTU,
               EDC Consulting Ltd
•   Introduction
•   Background information on Ghana
•   History , nature and extent of franchising in Ghana
•   Challenges to Franchising in Ghana
•   Opportunities for the franchising sector
•   The role of EDC Consulting Ltd
•   Conclusion



                         Abena OTU,
                      EDC Consulting Ltd
Introduction

• I will be discussing the status of
  franchising development in Ghana
  from my perspective.
• I will also discuss the current and
  envisaged role of my organization
  within the franchising sector.


                   Abena OTU,
                EDC Consulting Ltd
Location

• Ghana is located on the west coast of Africa
• It is bounded on the north by Burkina Faso,
  on the west by La Cote D'lvoire, on the east
  by Togo and on the south by the Gulf of
  Guinea (Atlantic Ocean).
• Tema, the industrial city, adjacent to Accra,
  the capital city making Ghana the closest
  landmark to the centre of the world.

                    Abena OTU,
                 EDC Consulting Ltd
GHANA




    Abena OTU,
 EDC Consulting Ltd
Demographics
• Population of 22,409,572
• 0-14 years: 38.8% (male 4,395,744/female
  4,288,720)
  15-64 years: 57.7% (male 6,450,828/female
  6,483,781)
  65 years and over: 3.5% (male
  371,428/female 419,071)
• Literacy 74.8 % of age 15 and over
• can read and write
   male: 82.7%
  female: 67.1%
                   Abena OTU,
                EDC Consulting Ltd
Government Policy
• The President of Ghana has committed himself to
  creating Golden Age of Business for Ghana
• The Ministry of Trade and Industries and Private
  Sector Development and President’s Special Initiative
  has been created.
• To strengthen the private sector to effectively
  serve as the engine of growth and prosperity.
• To facilitate the development and growth of a
  competitive and vibrant private sector
• To help reduce the cost of doing business in Ghana.

                       Abena OTU,
                    EDC Consulting Ltd
Business Law

• Sanctity of contracts ensures respect for
  commercial rights and obligations.
• Damages are compensatory, not
  punitive, and an independent court
  system ensures equitable protection of
  rights.
• Mediation, arbitration and other forms
  of dispute resolution are routinely used.
                   Abena OTU,
                EDC Consulting Ltd
Attitude of private Sector
•   The private sector has been assigned a leading role in the economic
    development process. The Private Enterprise Foundation (PEF), an
    advocacy institution is co-ordinating this role.
•   Ghana Investment Promotion Act, 1994 (Act 478), provides
•   guarantees to all enterprises,
•   free transferability through any authorized dealer bank in freely
    convertible currency of dividends or net profits attributable to a foreign
    investment;
•   payments in respect of loan servicing where a foreign loan has been
    obtained;
•   Remittance of proceeds (net of all taxes and other obligations) in the
    event of sale or liquidation of the enterprise or any interest attributable
    to the investment.
•   100% foreign ownership permitted



                                 Abena OTU,
                              EDC Consulting Ltd
Economic Environment
• Well endowed with natural resources,
• Gold, timber, and cocoa production are major
  sources of foreign exchange.
• Cocoa accounts for about two-thirds export revenue
• The domestic economy continues to revolve around
  subsistence agriculture, which accounts for 34% of
  GDP
• Agriculture employs 60% of the work force, mainly
  small landholders.
• Receipts from the gold sector helped sustain GDP
  growth in 2005 along with record high prices for
  Ghana's largest cocoa crop to date.

                      Abena OTU,
                   EDC Consulting Ltd
Economic Environment

• Ghana has a well established industrial base.
• Industries include textiles, garments, food
  processing, steel, tires, oil refining, flour
  milling, beverages, tobacco, simple consumer
  goods, and car, truck, and bus assembly.
• Business in Ghana is dominated by SMEs
  operating in the informal sector which holds
  80.4% of total employment

                    Abena OTU,
                 EDC Consulting Ltd
Economic Environment
• Informal sector has potential for creating
  large numbers jobs .
• Bedeviled with a manifold of problems and is
  unable to keep pace with modernity.
• Most women are employed in the informal
  sector.
• High incidence of business failure in the
  informal sector , roughly 50% of the
  businesses failing in the first 3 years of start
  up.

                      Abena OTU,
                   EDC Consulting Ltd
History, Nature and Extent of
   Franchising in Ghana

• Multi national oil marketing companies,
  automobiles and accounting firms are
  examples of pioneers in franchising in Ghana.
• The multi national oil marketing companies
  started by establishing branches which were
  later offered as franchises.
• Franchising is gaining momentum in Ghana.


                    Abena OTU,
                 EDC Consulting Ltd
History, Nature and Extent of
   Franchising in Ghana

      Name              Sector               Origin
      Papaye            Fast Food            Ghanaian
      Frankie’s         Fast Food            Ghanaian
      Bus stop          Fast Food            Ghanaian
      Uniglobe Travel   Service- Travel      Canada
      SFC Express       Fast Food            British
      Mr. Biggs         Fast Food            Nigerian
      SEAM/GSMF         Health Care          International
      Woolworth         Retail               South Africa




                           Abena OTU,
                        EDC Consulting Ltd
History, Nature and Extent
of Franchising in Ghana
• Apart from the oil marketing companies most
  of the other franchises cater to the high
  income groups and do not serve the majority
  of the population.
• Awareness of franchising as a business
  strategy relatively low among entrepreneurs,
  banks and management consultants.
• Franchising industry is still relatively
  immature in Ghana despite its long history
                    Abena OTU,
                 EDC Consulting Ltd
History, Nature and Extent of
Franchising in Ghana
• Although awareness is low, franchising is picking up
  momentum and showing commercial potential
• Ghana is the first West African country to form a franchise
  association in 1998. By Paul Takyi as president and John Kojo
  Quartey as chairman.
• The association applied for World Franchise Council (WFC),
  membership in 2000 but application was denied because it did
  not meet WFC membership requirements.
• Ghana Franchise Association applied to join the Franchise
  Association of West Africa in 2002.
• The application and Ghana Franchise Association died with the
  founder Paul Takyi in 2002.




                          Abena OTU,
                       EDC Consulting Ltd
Opportunities for Franchising
  in Ghana

• Golden Age of Business with the President’s
  full support to private sector development.
• Very predictable legal and regulatory
  environment with out uncertainties
• Transparent judiciary
• Efficient Banking system
• Reasonable high level of urbanization
• Proximity to larger franchising nations since it
  is the closest landmark to the centre of the
  world.
                      Abena OTU,
                   EDC Consulting Ltd
Opportunities       for
  Franchising in Ghana

• There is a clear demand for the application of
  franchising practices to businesses serving
  the majority of the population who are not in
  the high income levels.
• Low capitalization businesses that could be
  more easily financed with smaller amounts of
  unencumbered cash.
• Retail concepts catering to low demographic
  markets
                     Abena OTU,
                  EDC Consulting Ltd
Challenges to Franchising in
   Ghana

• Very limited knowledge of franchising
  especially of business format franchising in
  the Ghanaian business and financial
  community.
• Inadequate information about franchising in
  Ghanaian and financial community in areas
  such as:
  • Its functioning
  • Benefits and costs
                      Abena OTU,
                   EDC Consulting Ltd
Challenges to Franchising in
   Ghana

• Financing of the initial investment by potential
  franchisees is a great obstacle to launching a
  franchised business.
• Poor management systems and structures of local
  businesses
• Big informal sector
• High illiteracy levels
• low income,
• High proportion of the populations living in rural
  areas
• Relatively low participation of women in formal

                        Abena OTU,
                     EDC Consulting Ltd
 EDC Consulting Ltd (EDC)

• EDC is a business development firm
  targeting the SME sector and women’s
  enterprises in particular
• Provides training , consulting
  ,counseling ,advisory and research
  services


                 Abena OTU,
              EDC Consulting Ltd
Current Activities/ Role

 • Provide training among which is:
 • Start up training - Discuss business
   opportunities and franchising including
   their advantages and disadvantages
 • Making franchise and business opportunity
   selection
 • Business growth training – Discuss
   franchising as a strategic option

                  Abena OTU,
               EDC Consulting Ltd
Current Activities/ Role
• Provide consultancy and advisory services (
  few occasions )among which are :
• Advice on franchising and business
  opportunities
• Help clients to evaluate their options by
  looking at the advantages and disadvantages
  of franchising and other business
  opportunities.
• Provide information on who to seek for help

                    Abena OTU,
                 EDC Consulting Ltd
Future Activities/Role

• Collaborate with business and financial communities to :
• Organize workshops to create awareness of franchising as a
  business strategy and to provide information on franchising.
• Develop strategies to develop local franchise that target the
  majority of the population.
• Develop strategies to develop local franchise that target
  franchises that do not require high capital outlay such a second
  hand clothing and targets the majority of the population.
• Collaborate with business and trade associations to advocate for
  government to privatize some traditionally public domain
  functions such as health care, education.




                           Abena OTU,
                        EDC Consulting Ltd
Conclusions

• Ghana has a positive investment climate
  and this period in Ghana History is
  called the golden age of Business.
• Franchising has had a long history in
  Ghana but it is still in is infant stage.
• In recent years however it is gaining
  momentum and there is a great
  potential for its development
                   Abena OTU,
                EDC Consulting Ltd
Conclusions

• The challenges however facing it is the lack
  of awareness in the financial and business
  community of the opportunities it offers.
• There is also the high initial investment costs
• EDC consulting ltd has been providing
  business development services in the sector
  and intends to continue to do so.


                     Abena OTU,
                  EDC Consulting Ltd