ECONOMY - 23 JUL 2017

Micro-Franchising in Nigeria

Micro-Franchising in Nigeria
Online Sports betting is growing in Nigeria, but has remained outpaced by the need for physical stores to capture 'unbanked' Nigerians.

MSMEs thrive on their ability to adapt and innovate quickly while large corporations succeed through mass productions and strong brand awareness. The strengths of one are often the weaknesses of the other. In recent years, sports betting in Nigeria has showcased both the flexibility of MSMEs and the scalability of big corporates. Their secret? Micro-Franchising. While franchising is by no means a new concept in Nigeria, when taken in a bite-size form it is a tool that can catapult the MSMEs economy. 

 

Nigeria’s Franchising Industry

Franchising put plainly is where a company leases part or all of their proven business model to another party for them to replicate elsewhere. Franchising first appeared in Nigeria in 1951 when the Nigerian Bottling Company acquired the right to sell Coca Cola products and used the brand's strength to monopolise the beverage market. Contrasting from the former's product-orientated franchising, Duraclean is considered to be the first company to have franchised their brand, products and operating model. By providing more of the proven formula, the latter made it easier for a franchisee to get their business off the ground, a key aspect of Micro-Franchising.

The Nigerian Franchising sector is considered to be in its infancy, particularly when compared to likes of South Africa where the sector accounts for 12.5% of GDP. Currently, the dominance of international franchises is visually evident in Nigeria through Shoprite and Game in Retail, Exxonmobile and Total in Petrol and, more recently, Dominos and KFC in fast food. With few exceptions like Mr Biggs, growth through the franchising model has been less apparent for Nigerian businesses and is in part due to the concept being relatively underdeveloped in Nigeria. Micro-franchising through its simplicity is one way Nigeria can better harness the franchising framework. Cue the unexpected Micro franchising role model.

 

Micro Franchising: The sports betting Case Study

Micro-franchising is a subset of franchising where the focus is on MSMEs. Strong emphasis is placed on low capital requirements and sustainability through easy to replicate business models and technology. Despite advances in online gambling, the large number of unbanked Nigerians has made physical betting shops integral to the industry. Even though the internet has made significant strides to reach rural parts of the country, sports betting companies still need outlets to tap into those areas. Through significantly scaled down start-up costs, sports betting companies have made franchising opportunities available to the lower income population and thus made it possible to house shops throughout the country.

Nairabet has a user-friendly video, which highlights the industry standard requirements for potential shop owners, which is summarised below:

  • ₦25,000 registration fee
  • A shop premises or kiosk
  • A computer or a GSM phone
  • A Thermal printer, and A4 printer or a mobile printer 
  • Internet access

Once you have satisfied these conditions and additional paperwork, Nairabet will provide you with the necessary software, training, and banners to display outside the shop. Complete these steps, and you can have your very own betting shop up and running within 24 hours.

 

Competitive trickle down and scalability

The potential to run a sports betting business through your mobile phone highlights just how far reaching a sports betting company can become. Additionally, just as KFC franchises offer pounded yam on their menu, franchise owners are given the flexibility to modify their shops towards local preferences. The fact that franchisees spend less time focusing on creating a business model and more time on meeting customer needs has meant both the number and quality of betting shops have grown in tandem over the years. Adaptability is of particular importance here as low start-up costs can lead to multiple shops opening in the same area forcing franchisees to differentiate. The competitive pressure forces shop owners to make further investments into their shops such as including a bar or offering televised sports. This has many trickle down benefits within the local economy such as employment. Although trickle down economics is not unique to Micro-Franchising, it enables this economic phenomenon to reach even the most remote areas of the country.

Furthermore, boosted flexibility is not limited to the individual shop owners. Given that all shops must log their bets through the central system, sports betting companies collect vast amounts of consumer preference data that can be used to tailor mass marketing efforts. More informed marketing strategies that improve the company’s brand imagine benefits all franchised shops whether stationed within a Lagos Mall or an outdoor kiosk in a Jos market. In essence, leveraging the micro-franchising framework with the power of the internet and data has made the sports betting industry smart, scalable, and flexible.

 

Sustainability is the key

Micro-franchising is by no means unique to the sports betting industry and is usually attributed to more socially impactful businesses like Vision Spring’s eyeglass franchise in India, and Sunny Money's provision of clean energy in Kenya. Both examples show how local business acumen combined with industry expertise can lead to better and more sustainable businesses. Leaning on the fact that the AFDB found only 15 percent of franchised SMEs fail compared to an 80 percent failure rate among independent businesses, the more Nigerian companies incorporate Micro-Franchising into their business model, the more sustainable the MSMEs economy can be. A sector like agriculture which needs rural Nigeria to move from primary processes to owning the whole supply chain is an example of where replicating sustainable business solution across the country could be more effective than waiting for local innovation. 

One factor that plays a major role in the sustainability of franchising is the regulatory environment.  Given the nature of franchising, clarity is needed to address the inevitable conflict between franchisees flexibility, and franchisor’s control. Currently, Nigeria, unlike other countries, does not have a specific piece of legislation on franchising. The National Office for Technology Acquisition and Promotion is considered the umpire of franchising in Nigeria, but their focus is on foreign franchisors. In fact, one must study 11 pieces of legislation, and consult 6 agencies to get a thorough legal view of franchising in Nigeria. Consolidating this into one act and one agency is essential to ensure effective legal coverage for franchising in Nigeria.

 

Copying and pasting the copy and pasters

The rapid growth in Nigeria's sports betting industry serves as an excellent case study for the power of Micro-Franchising. The framework de-risks aspects of entrepreneurialism, while simultaneously enabling successful businesses to replicate their success in all corners of the country. In summary, the micro-franchising copy and paste model is a simple phenomenon that more industries should consider copying and pasting.

Keleenna Onyeaka

Keleenna Onyeaka

Read Latest

Nigeria's Trade Facade

COLUMNS - 16 AUG 2017

Nigeria's Big Short

FINANCE - 15 AUG 2017

The Nigerian Principle of Federal Character

GOVERNANCE - 14 AUG 2017

Culture of Poverty: Why poor people remain poor

COLUMNS - 11 AUG 2017

Advertising