Last Updated on 24 June 2020 by Gertrude
If you want to own a franchise in Kenya, think food, diaries, fitness, hair, real estate.
A franchise is a business model in which independent entrepreneurs use the rights of a larger company like business name, logo and products.
Franchises in Kenya include KFC, Dominos, Pizza Hut among others. There are advantages of owning a franchise in Kenya including the name is established and the emergence of the new millionaire in Kenya who wants to eat like their ‘Mzungu’ counterpart. There’s a prestige there, right?
Before owning or thinking of owning a franchise, think of the cost of operation.
Franchises aren’t cheap and they come with a lot of rules and regulations.
Plus you must conduct market research to find out what the market needs.
Bear in Mind the 5 Pillars of Owning or Opening a Franchise in Kenya
Cost and Fees
You have to consider the fees needed for operation. We all know doing business in Kenya is so hard that multinationals complain because of the heavy tax fees and set up fees. Also, bringing in business from another nation can prompt a lot of scrutiny and debate, ask KFC and their chicken outsourcing saga. You have to consider the total fees, which includes the ‘hidden’ fees. Read in between the fine lines and dotted script and take your time.
Size and Growth
Before jumping into owning a franchise, make sure to check out the closure rate of the stores. Are the businesses going out or are they expanding? How many units are open and operating within your area of the country. For example, in Kenya, you cannot set up a KFC in Turkana. Is there a market, is it safe, are there franchises in Turkana are some of the questions you have to ask. In Nairobi, there is congestion, heavy fines and overcrowded, is it safe to set a franchise but there are many franchises there.
Is your franchise open to training you? How long is the training period before you set up a business? Will they send someone to train you or will you need to travel? Does your franchise offer marketing support or is the wagon all on you? Does your franchise have ideas on how you can out beat the competition and come up with acceptable local slogans? How can you make your market accept you and your product? A franchise needs to help with operation support, that means guiding you to success and not abandoning you. They should help you also have a backup financial plan for when things south and provide you with litigation whenever needed.
What are people on social media saying about the franchise you want to open? Are they praising it or is it dogged with controversy? Will the controversy help your business or drag it down? Pay attention to social media complains and praises it’s a way of knowing what will work and what won’t work within your chosen locale. Also, you have to ask how many years has your chosen franchise been in business? Is it doing well? Are there many franchises of the same kind and can you talk to the owners to find out a bit more. In Kenya, though meeting with business owners is like requesting an audience with Hitler, they won’t answer you. Kenyan business owners, majority anyway suffer from a scarcity mentality and would rather hide how they do their businesses. Don’t give up though, someone out there is willing to talk.
Financial Strenght and Stability
You have to check if your franchise to be is audited and what the auditors say. If there is a case of tax evasion or any scandal about money, skip. You don’t want to begin your business on scandals.
NOTE: Remember these costs are estimates, the prices increase after all the payments you have to make. Also know that these are franchise fee costs, meaning an initial payment you make to operate the franchise. The prices are in dollars, kindly convert them to shillings.
McDonald’s $ 1 – 2M or 200M
Dunkin $100K – 2M
School of Rock
Nothing Bundt Cakes
Right at Home
Papa John’s Pizza
How to Succeed with a Franchise in Kenya
If you want to begin a business with a franchise, look for a franchisor providing you support. There are many questions which arise as a beginner business owner and you need your hands to be held all the time. A franchisor must listen to your concerns and your worries as a newbie business owner. After all, you’re carrying their name and it is on the line.
Look around, has your franchisor been around long enough or are they just starting out? Are the businesses around being closed down or are they in operation? And the ones in operation, do they receive traffic or are they slow businesses?
In Kenya, food, fast food is gaining a lot of popularity and so is healthy food. Look for franchises which are popular. Fast foods rise in demand due to their convenience and also due to the rise of ‘New Money’ in Kenya. Make sure you conduct market research with your idea on Facebook, the social media with the highest number of Kenyans to date.
They say a business is made of its location. Due I’d love to refute this claim, a business location is determined by your target market and your marketing. They say also, a consumer doesn’t know what they need, you have to tell them what they need. If the location is a problem, find a way of attracting your targeted customers to your location. If you are opening a restaurant, what would make it attractive to your customers and curious passers-by? Again, the location of your franchise is answered by your target customer.
Niches are areas of speciality. What are you great at? Is it food or ice cream or cakes? Don’t get tempted by the idea of doing so many things in the premise. Focus on one and expand as you go, if providing fish and chips, cook the best. Add refreshments as trial then introduce them as accompaniments as time goes by. Also, it’s time to focus on your strengths.
Value for Investment
If your franchisor isn’t giving you value for the investment, wrap up. This means you have to see the value of your capital. You cannot invest 200M and wait a lifetime to recover your profits. Have ideas on how you will recover your money fast.
Determining the growth of your franchise means seeing into expansion. If five years ago you invested in a Dominos and ten years later you have one Dominos, there must be something very wrong somewhere. Ask yourself why are the units growing so slowly? How can you increase the market for your products? What are your competitors in Pizza Inn, for example doing that’s different from you?.
Franchise Success Rate
The success rate of your franchise is determined by its expansion. How fast are you expanding? How many customers do you need to keep increasing your revenue? Are you marketing enough to reach new customers?
Franchisor’s Financial Statements
Before signing in the dotted lines, ensure you pore your eyes on the franchisor’s financial statements. Why? You want to know how many customers you will need to break even and for how long you have to wait out. After all, they are your franchisors and cannot resist to show you the books.
Ask yourself is the franchise opportunity worth money?
The most important question before signing in to a franchisor is to ask whether it’s critical for you to start from a franchise. Because it costs money and effort though you’re beginning from an established business. There are pros and the biggest one is money. You have to keep paying for advertising, education and training where you take trips abroad. You also have to keep in mind the number of employees in your shop and how you will pay for them. After all, fast food franchises are notorious for poor pay.
Before buying into a franchise, ensure you know what you’re getting into. It may look too good to be buying a McDonalds or a Starbucks but are you ready to provide the effort. You must know the franchisor will not market for you, there’s no escaping marketing. You have to be creative and come up with creative ideas to outsell other franchisees to see expansion. You have to know that each franchisor has its own rules and regulations for business, read before signing. Take your time, a franchise is still a business that needs a lot of effort, in managing teams and people, customer service and ensuring customer excellence. All the responsibilities will fall on you. Get prepared to educate or market silly. Have extra money because franchises require a lot of money, to begin with.
Which of the franchises above are you interested to invest in as a Kenyan and why do you believe your chosen franchise is the best?