Demand for international branded products is rising in Nigeria where income spend is increasing

Multinational food retailer Spar recently announced it would open its flagship store in Lagos in August. The company reportedly plans to eventually sell licences to local investors, who as franchisees will have benefits such as brand recognition, quality products and skills transfer.

Franchising is an ideal way to tap into the business potential of the huge Nigerian market. The sector is growing quickly and attracting the attention of both local and international established companies.

Franchising opportunities in Nigeria go beyond retail and restaurants – the traditional industries associated with franchising – to include sectors such as downstream oil and gas, telecommunications, banking, hotels, and information technology. The possibilities are limitless, and the returns on investment are lucrative in some cases.

Globally, franchising has shown remarkable resilience in weathering hard times, and remained a significant force in the face of the global financial crisis. It is a low-cost and low-risk alternative to wholly-owned operations, which some investors may shun due to the challenging business environment in Nigeria.

The Nigerian International Franchise Association (NIFA), a trade body that supports franchising in Nigeria actively promotes the development of the sector. ‘The scale and strength of the Nigerian franchise sector means that we can no longer overlook it as one of the boosters of our economy,’ says executive secretary Michael Babalola.

NIFA mobilizes the Nigerian franchise community through organising seminars and providing services such as consultancy expertise, feasibility analysis, financial and marketing advice, market research and franchise recruitment.

‘The trust earned from an established and respected brand name promises immediate credibility in the huge market base that exists in Nigeria,’ says Babalola.

Nando’s, the South African-based fast-food outlet is one of the many foreign companies with franchises in Nigeria. KFC also ventured into the country eight months ago. These are among the group of companies, particularly from the US and Europe, which are expanding in African countries, attracted by the small capital outlay and the franchisees' knowledge of the local business environment.

‘Franchising not only allows expansion but is also an empowerment tool, which can benefit start-up companies and develop Nigeria’s small and medium enterprises (SMEs). The expertise gained through the franchise model guarantees the success of a business,’ says Babalola.

Research by the African Development Bank shows only 15% of franchised SMEs fail compared to an 80% failure rate among other independent businesses.

Indigenous companies are also in the business; franchising is driving their expansion in Africa. Lagos-based Food Concepts and Entertainment, which owns Chicken Republic and Butterfield Bakery says that South Africa, where it opened its first outlet outside Nigeria in 2007, is a springing board to the rest of the continent. Other local companies offering franchises include retail food chains Mr. Biggs and Sweet Sensation.

Business opportunities are constantly emerging in Nigeria where income spend is increasing, and demand for international branded products and franchises are rising - thanks to Nigerians who have been empowered by the fortunes attained from opportunities in lucrative sectors such as oil and gas, telecommunications and financial services.

For those foreign investors still battling with the effects of the global crisis and depressed markets, franchising in Nigeria could be a sure way to transform businesses. Engaging with highly experienced Nigerians, who have returned home due to loss of jobs abroad, not only provides a potential source of top notch managers but an opportunity to follow customers.