In previous articles, I canvassed the idea of the government putting in place policy prescriptions to deepen Ghanaian involvement in the economy.
Thus, I have recommended that the government takes a serious look at encouraging local firms to enter into strategic alliances with foreign firms in an effort to correct the imbalances in the economy. In a previous article, I recommended licencing as an option to correct our balance of payment problems stemming from our high import bill.
I proposed that considering the high appetite of Ghanaians for foreign goods, it would be appropriate for the government to encourage local firms which import high volumes of goods for which Ghanaians have acquired an addictive taste to set up plants here to manufacture them under licence.
This is because, Ghanaians are not likely to make a distinction whether or not such goods are foreign made or locally made. This policy, if implemented successfully is likely to bring the obvious advantage of halting the depletion of our forex reserves and most especially correct our balance of payment difficulties.
In my article today, I have the pleasure to recommend to the government the option of encouraging the building of franchise relationships between local and foreign businesses as a means of building the entrepreneurial capacity of Ghanaians and also increase local participation in the economy.
The current regime on indigenisation
The Ghana Investments Promotion Centre Act, Act 678 reserves certain areas of economic activity solely to Ghanaians. These include operation of taxi services, hairdressing saloons, retail trade among others. Also in the local content law LI 2204, certain economic activities have also been exclusively reserved for Ghanaians. All these are aimed at increasing local participation in the economy.
The case for franchising
Franchising as a form of business development offers a lot of advantages. Particularly in the turbulent Ghanaian business environment, franchising offers an avenue to develop local entrepreneurial talent.
This is because, most people are wary of identifying with new businesses by way of patronising their products. The typical Ghanaian attitude to new businesses or new products is the expression of disdain.
It is a typical Ghanaian attitude not to patronise new Ghanaian products because of the perception that the new products are not tried and tested or they are outright inferior. Sometimes, some of our compatriots also carry the rejection of made-in-Ghana products and services to the extreme by rejecting them outright because of the very fact that they are local.
The other reason why franchising could also be a viable tool for economic development is the prospect of new and budding entrepreneurs having the opportunity of being mentored by established business operators. It must be emphasised that in the present era of graduate unemployment, there has been much talk of graduates becoming their own employers by developing an entrepreneurial spirit within them.
However, it must be stressed that the business terrain is fraught with a lot of difficulties particularly for newly established businesses. In the circumstances, it would therefore be appropriate to encourage the development of franchise relationships between new businesses and well established businesses.
What is a franchise?
A franchise is a business relationship where a business operator pays fees and royalties to a business which is normally the parent operator in return for the right to be identified with its business set up by way of identification with its trademark, business system and also to sell the products and services of the parent company which is the franchisor.
Lori Kiser-Block, a franchise consultant remarks of a franchise relationship as a franchisor having climbed up the learning curve and sharing with franchisees the secrets of the successes they have discovered in the industry.
Benefits of a franchise
It is estimated that in the United States, where franchising has taken roots as a model of economic development, almost a million franchises have been created by about 3,000 franchisors and they employ one in every 12 workers.
The estimated contribution of franchises to the US economy is about 4.5per cent of the Gross Domestic Product (GDP).
Most importantly, US companies such as Mc Donald’s, Kentucky Fried Chicken and Holiday Inn have entered into extensive franchise arrangements with entrepreneurs outside the US where they have developed their brands. In Ghana, the notable franchises are the Holiday Inn Hotel at the airport city and the Tulip Hotel at Shiashie, East Legon.
Franchising and entrepreneurial development
I have been told stories of old that UAC, the predecessor of Unilever created a lot of entrepreneurs among the womenfolk at the time through the passbook system. With this system, women traders were supplied with wax prints by UAC in UAC branded shops which they sold at a commission.
In the present era, I can also envisage the creation of a number of franchise relationships. The McDonald style of franchise creation could be replicated by big manufacturing and retail companies such as Melcom, Fan Milk, Unilever, and PZ Cussons as well as motor firms such as Japan Motors, Auto Parts, Tata etc. With McDonald franchises, sites were secured and built up into restaurants and then handed over to the franchisees who equipped them, did the décor and landscaping.
Likewise, companies like Melcom, Unilever, PZ Cussons etc could build small mini shops across the country, brand them and hand them over to franchisees to operate after negotiating and signing franchise agreements with them.
Also, vehicle merchandising companies could set up franchise operations in cities outside Accra with significant populations like Cape Coast, Sunyani, Koforidua and Tarkwa.
International hotel operators could also be encouraged to grant franchises to local hotel operators to operate hotels and guest lodges at major tourist sites.
With this, it will be easier to market tourist packages to tourists who could be made to believe that they could stay at facilities which are operated by brand names with which they are familiar. This is likely to increase patronage of such tourist sites.
It must be stressed that the benefits of franchising like the use of the brand name of a franchisor with a global appeal sharing in the business format already developed by the franchisor, management training and support, standardised quality of goods and services and advertising support all make the concept of franchising as an option of business development very appealing.
It is also a viable option to adopt in building the entrepreneurial capacity of indigenous start up businesses.
Government Support for franchising
In view of the fact that franchising, as a form of strategic alliance holds a lot of promise for economic development by means of building up entrepreneurial capacity of local business people, indigenising the economy, and above all contributes to halting capital flight, it behoves the government to fashion out appropriate policies to lend support to franchising.
The government could set up a secretariat at MOTI to co-ordinate policies on strategic alliances. It could also set up a special fund to aid franchisees, grant tax holidays, give exemptions on import duties for equipment, liaise with GIMPA and MDPI to organise training programmes for managers of franchise operations etc.
Furthermore, as a policy prescription, the government could prescribe the granting of franchises to local businesses by foreign businesses in the retail and merchandising sectors after about ten years of operations.
• The writer is a lawyer with specialisation in international business law.
email: guymilo@ yahoo.com