1 PRIVATE SECTOR DEPARTMENT Franchising as an SME Development Tool M Bourenane Enterprises Support Service by akh43592

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       PRIVATE SECTOR DEPARTMENT




Franchising as an SME
  Development Tool
                  M. Bourenane
            Enterprises Support Service
                Division Manager
             m.bourenane@afdb.org
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           PRIVATE SECTOR DEPARTMENT


I.   SMEs and economic
     development
II. Franchising as an SME
     development tool
III. Franchising in Africa
IV. Some Concluding Remarks
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                          PRIVATE SECTOR DEPARTMENT
I. SMEs and economic development
 • over 90% of private businesses are SMEs
 • main generators of employment
 • contribute to a more equitable distribution of income
 • contribute to local and regional development
 • promote a culture of entrepreneurship and other business-
   related skills due to their low entry barriers



   In Africa, SMEs generally lack technological and
   managerial capacities, leading to high failure rates
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                      PRIVATE SECTOR DEPARTMENT

II. Franchising as an SME development tool
    • Job creation: direct and indirect jobs
    • Wealth creation: contribution to poverty
      reduction
    • Skills transfer and business linkages
    • Improvement in standards and quality
    • Generate entrepreneurship

   Franchising has a significantly higher rate of
      success than independently run SMEs
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                  PRIVATE SECTOR DEPARTMENT

Some Examples
        Philippines: during the Asian crisis of
       1997 the failure rate of franchisees was
        5% compared to 75% for independent
                        SMEs

       Australia: the rate of success is 2.5
       times higher for franchised SMEs

       South Africa: the rate of success is
        80% for franchisees compared to
          15% for independent SMEs
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                        PRIVATE SECTOR DEPARTMENT

III.Franchising in Africa

Varying degrees of franchise activity were found to
exist in 22 African countries

        Evidence of the Existence
        of Franchising


        Adequate Environment to
        Support Franchising
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                          PRIVATE SECTOR DEPARTMENT

Factors that affect the development of franchising in African
countries:

             General enabling business environment

             Population and market size

             Proximity to larger franchising nations

             Level of urbanisation

             Literacy rates

             Corruption
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                  PRIVATE SECTOR DEPARTMENT

Constraints to the development of franchising:
   Poor awareness by the different
   stakeholders

   Lack of financing available

   No specific franchising regulation
   Disinformation as to existing business
   opportunities
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                    PRIVATE SECTOR DEPARTMENT


Other issues to be discussed:

         International vs. Indigenous
         franchising development


          Private sector support institutions:
          Franchise Associations
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                  PRIVATE SECTOR DEPARTMENT

IV. Concluding Remarks
1. Franchising can have a positive
   development impact in Africa
2. The potential should be assessed with a
   medium to long term perspective
3. It is important to bring all stakeholders
   together to address existing constraints
   with a Public-Private Partnership approach

								
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