Survival and Growth: Franchising in Africa
The power and pitfalls of using a franchise model to grow your business in Africa.
What are the obstacles and opportunities of franchising in Africa? While this business model is still in its infancy there, entrepreneurs like Grace Munyirwa of Vine Pharmaceuticals in Uganda are embracing it to grow and scale, while experiencing significant challenges along the way. Hear a story of struggle and success and gain insights from Chiagozie Nwizu, a franchise expert in Africa who has dedicated his career to educating entrepreneurs and investors on the power and pitfalls of the franchise model.
Grace Munyirwa is a self-educated entrepreneur without any formal business training. But that didn’t stop him from growing his pharmacy business to 36 shops across the African continent. Unfortunately, overexpansion, credit mismanagement, and success got the best of him. “We were walking on water and everything we were touching was turning to gold; pride got ahead of us. And so we opened locations that were not sustainable. We opened locations that were not supposed to open at all,” Munyirwa recounts.
As a last ditch effort to save Vine Pharmaceuticals, Munyira turned to franchising. While franchising is hugely popular around the world, in Africa it’s still very early days, with little to no formal legal structures, franchise associations, training, or local history to build from. Chiagozie Nwizu is trying to close that knowledge gap.
“For us to make progress with the franchise model in Nigeria, we will need to begin to have the smart franchiser and the smart investor — and being smart is being franchise literate,” Nwizu explains.
Munyira had to build his franchise model from scratch in Uganda, adapting it to meet his specific needs. One way he did that was by taking on more of the financial burden than is usual for a franchiser. Instead of asking his franchisees to pay rent on their stores, he kept that responsibility. And he had to carefully choose the type of franchisees he wanted to work with — people who already knew and cared about the culture, instead of investors.
“Sometimes people with money don’t understand that you take a long time to make good money. They want to simply invest the money and maybe leave a son or the wife there and then expect this to grow. That couldn’t work. So I chose not to go that route,” he explains.
Nwizu calls Munyira’s approach a micro franchising model which allows franchisees to slowly build their equity in the business. Supporting franchisees is another key element to success, according to Munyira. “The team at headquarters is really a support team. Their role is not just to drink piña coladas. Their role is to look out and see what can really help the shops perform better. When these shops win, we win,” he explains.
Nwizu believes franchising is an important tool for the future of African business, where a high percentage of family-run businesses fail after the first generation. Franchising can change that. Munyira agrees. “What really, really hurts me, and that may be peculiar to this part of the world, is that many businesses die after the founder dies. I want to have a story that can really help the company survive way beyond its founder, that Vine is still existing way beyond my lifetime.”
Listen to Munyira’s first-hand experience with franchising and Nwizu’s insights on what it takes to build a franchise model that works for your business.
Grit & Growth is a podcast produced by Stanford Seed, an institute at Stanford Graduate School of Business which partners with entrepreneurs in emerging markets to build thriving enterprises that transform lives.
Hear these entrepreneurs’ stories of trial and triumph, and gain insights and guidance from Stanford University faculty and global business experts on how to transform today’s challenges into tomorrow’s opportunities.
Grace Munyirwa: Thirty-six stores. You have landlords who are really not happy with you. You have suppliers not happy with you. You have them talking to their lawyers. And the rumor mill was that Vine Pharmaceutical is bust. It’s just a matter of time.
Darius Teter: Okay, so this is a full-blown crisis.
Grace Munyirwa: Yes, and I knew it.
Darius Teter: Welcome to the second season of Grit & Growth from Stanford Seed, the show where Africa and South Asia’s intrepid entrepreneurs share their trials and triumphs with insights from Stanford faculty on how to tackle challenges and grow your business.
Back in August, we put out an episode about franchising in India where we talked with an entrepreneur named Vijay Kapoor. To succeed as a franchiser, Vijay needed to adapt his mindset to a much different business model than he was used to. But what happens when it’s the business model itself that needs to be adapted? In Africa, franchising is still in its infancy. There are plenty of global franchises on the continent, but far fewer local businesses that use the same model across Africa. And many of the structures that govern franchises across the world aren’t really set up. In their absence, entrepreneurs have had to get creative, so we wanted to do an episode specifically on franchising in Africa. What is the state of the African franchising ecosystem? What are the challenges for operators and how are they adapting? Now that’s a lot to cover, but we found the perfect people to do it: a Nigerian franchise expert working to build training programs and successful systems across the African market and an operator who has been running his business in Uganda for over two decades.
Grace Munyirwa: Grace Munyirwa, founder and CEO of Vine Pharmaceuticals. Currently, we run a chain of 15 shops in Uganda and have been running that for the last 23 years.
Darius Teter: Grace has an amazing story of how he came to franchising and how he adapted the model to meet his particular needs. But first, let’s set the scene. Grace lives in Kampala along with a mysterious creature who appeared throughout our interview. Is that a bird in the background?
Grace Munyirwa: No, I don’t know what it is, anyway, but I did hear it as well.
Darius Teter: Grace doesn’t have any formal business training, but he’s better read than a lot of MBAs — and me. You sound like a guy who’s read some books about business, about entrepreneurship. Is that true?
Grace Munyirwa: Yes, that one I’ll admit, I’ve done so.
Darius Teter: Can you tell us some of the books you’ve read that you would recommend to other entrepreneurs?
Grace Munyirwa: Principles by Ray Dalio. Very good book. Start With Why by Simon Sinek. Good to Great by Jim Collins. Seven Habits of Highly Effective People that’s a very seminal book. What Got You Here Won’t Get You There, by Marshall Goldsmith. Patrick Lencioni, The Advantage. Five Dysfunctions of a Team. Team of Teams, by Stanley McChrystal — a very good one.
Darius Teter: I’m humbled by the fact that you’ve read a lot more management books than I have. Some of the ones you mentioned are actually on the shelf right here in my office, but I haven’t read them, so I’m a little bit embarrassed about that too.
Grace Munyirwa: If I don’t read, I will make many mistakes. I want to treat people well and how else would I know how to treat people well if I don’t read? There are people who have made mistakes ahead of me, and so why shouldn’t I learn from those people who made the mistakes?
Darius Teter: Okay, now you know me. Now you said the word mistake. You said the word mistake, and this is supposed to be a podcast where people can learn. So what was the biggest mistake you made as you grew from one pharmacy to three to 36?
Grace Munyirwa: So we’d grown from one to three because we were known to be getting medications that were very hard to get. We were a go-to pharmacy and that gave us a lot of traction into the market. We grew so fast. I think every hour we’re doing six to eight acquisitions. Then we grew to 36. We are good and we’re selling. And then I ran promotions. I said, “Okay, if we hit this figure, we’ll go down to South Africa.” I took 17 people to South Africa. We had fun. Then I said, “Look, we hit this milestone again, we’ll go to Dubai.” Also went to Dubai. So even my incentive structure was really out of emotion. Later on I realized I was giving away our margin and I was actually making a loss. So I would instinctively say, “Okay, fine, we have a hundred million mark. If we go beyond a hundred mark, everyone gets 10 percent.” So we would go, people would shoot for 200, and then I would give out the big checks, and yet what I’m giving away is really capital. So no one was there to guide me and tell me, “Look, your margin is 15 percent and you’re giving it away.”
Darius Teter: I mean the thing is … but Grace, first of all, I mean you sound like you were kind of a cool boss. You hit your targets, you get a bonus check, you might get to go to Dubai, you might get to go to South Africa. Those are not terrible practices as long as they’re grounded in reality.
Grace Munyirwa: Exactly. But far from it, the words I was speaking were not calculated. They were not embedded in a logic, a mathematical model where it makes sense.
Chiagozie Nwizu: It’s not everyone that is cut out for the disciplines, for the demands required to build a successful, sustainable business.
Darius Teter: That’s the voice of Chiagozie Nwizu, someone who’s dedicated his career to today’s subject.
Chiagozie Nwizu: My name is Chiagozie Nwizu, managing director of Africa Franchise Institutes. I also am an executive director at a franchise association and I lead a consultant firm, Franchise Business Development Services.
Darius Teter: For all that he’d read. Grace was still inexperienced as an entrepreneur, something that Chiagozie had seen all too often in his previous life.
Chiagozie Nwizu: I was in the banking sector, an SME [small and mid-size enterprises] advisory consultant supporting hundreds of thousands of entrepreneurs with a particular leading Nigerian bank in SME banking. So during those years while advising these businesses and helping them to become bankable, something became very clear: that we have a very high rate of business failure among these businesses, that many businesses were folding up. So with that, I began to think, “Wait a minute. I think really we need to give many of these start-up entrepreneurs a chance to begin to leverage proven businesses so that they would do more of managing businesses with proven systems. They could leverage the brand that is popular and all of that, and we are able to get into business rather than struggling to get the business off the ground.” So that was when the idea of enabling franchising — that’s how it came about.
Darius Teter: In addition to bolstering a new generation of entrepreneurs, franchising offers a path to longevity that’s been elusive, even for successful businesses.
Chiagozie Nwizu: Another thing we also told them is that they have a chance of operating in a more structured way and also in a sustainable way. The businesses are good to outlive them because if you look around Nigeria and Africa, there are very few businesses that are trans-generational. So you see a few businesses that are second-generation or 10th generation businesses. So they get to understand that the business could scale, expand beyond the local region, maybe the country into some other countries because it has systems that help it to grow out as an entity.
Darius Teter: And this is supported by the research. As you said, family businesses tend to fail after the first generation across the African continent. I think the failure rate is something like 67 to 70 percent of family businesses don’t survive to the second generation and then a very small percentage survive to the third generation. And so “franchising is a way to give your business longevity” is a really interesting perspective and I appreciate that. However, in Africa, there’s still a knowledge gap about how the model works.
Chiagozie Nwizu: For us to make progress with the franchise model in Nigeria, we will need to begin to have the smart franchiser and the smart investor, and being smart is being franchise-literate. That is understanding the franchise model and how it operates. So I will categorize all these things under “knowledge gap.”
Darius Teter: That knowledge gap spans all sorts of franchising principles, including one of the most fundamental: the relationship between the franchiser and the franchisee.
Chiagozie Nwizu: One thing about franchising is that parties are coming together to bring values to the table. It is a marriage where both parties, any party that is not doing its own bids, it is going to notify the essence of their coming together. So some of the things we found was that, again, the support of those franchisers was not there. They were more vested in opening more locations than they were in seeing that their franchise partners get the required support to operate, not just even to operate profitably, but to be able to deliver and extend the brand goodwill and promises to the customers. So you begin to see situations where at certain locations the franchisee was early within the stage of adopting the franchise [and] begins to deviate from what the public or the markets knew as the quality of the brand. So for example, a food business which begins to test differently or maybe people begin to eat sour meals because they are cutting corners, people begin to cut corners to run the business and it begins to affect the quality of the products and the quality of the services.
Darius Teter: Although Vine Pharmaceuticals had not yet pivoted to franchising, the patterns of over-expansion and mismanagement were familiar to Grace.
Grace Munyirwa: So because we’re expanding fast, suppliers were coming to us and wanting us to sell their product. And so we kept expanding, but we managed our credit badly. And so the credit kept on ballooning and ballooning and ballooning.
Darius Teter: Credit from suppliers.
Grace Munyirwa: From suppliers, yes. And because we were walking on water and everything we’re touching was turning into gold, ego — pride — got ahead of us. We opened locations that were not sustainable. We opened locations that were not supposed to open at all.
Darius Teter: Part of the danger of over-expansion is that the business surpasses the management capacity of the founder, as observed by our franchise expert, Chiagozie.
Chiagozie Nwizu: The second thing is what we call the key man risk because, again, the second most critical challenge of the franchiser is that it cannot be everywhere. The oversight challenge — he’s not able to see what is happening at the many locations. So we’ve seen a lot of businesses in Nigeria that have done very well up until when the expansion reached to a level where the owner of the business is not able to have an oversight. Not just oversight by physically being there, but the demands of checking on the daily performance, keeping to the standards, the health check on the business.
Grace Munyirwa: I had an ROP [reorder point] system that worked after about 10, but beyond 10 there were so many moving parts that I was not really in control of. And so the way you throw so many balls in the air, some of them will come down. So I had an ERP [enterprise resource planning tool], but with many locations, we wouldn’t get the data in real time. So if you got data for sales, you didn’t get the data for inventory. So by the time you got the inventory data, the sales will have already changed. And so everything was just going south.
Darius Teter: So you’re accumulating a lot of debt. You don’t necessarily know which shops are profitable. You’ve got inventory and sales mismatch. Did you also have — was there fraud? Were people cooking the books?
Grace Munyirwa: There was a lot of fraud.
Darius Teter: Let’s hear about that.
Grace Munyirwa: They knew that we wouldn’t get real time data. So one shop would call for stock from another shop and they would sell it and pocket the money. And so if a customer came and needed stock from Shop A, Shop A would call Shop B and say, “Hey look, the customer needs two pieces of this. We only have one piece — send across another piece.” So they would send it over and that would be sold and pocketed. You wouldn’t have time to reconcile inter-branch transfers. Then we tried rotating the staff. So you say “Jen, who was in shop C, move to shop B, and Peter, who was in shop A, move to shop P.” And then all the bad habits that Peter had in shop A would be transferred to shop M.
Darius Teter: Yeah, you’re putting the one rotten apple back into the bag with the other apples.
Grace Munyirwa: Yes. So there was a lot of cross-fertilization of habits until you just had one ball of hell. I was really stuck.
Darius Teter: Well, tell me what stuck means. Stuck is 36 stores. What else?
Grace Munyirwa: Thirty-six stores. You have suppliers, all right, you have landlords who are really not happy with you. You have suppliers not happy with you. You have them talking to their lawyers.
Darius Teter: And you owe everybody money. You owe the landlords money, you owe the suppliers money.
Grace Munyirwa: And I owe the staff money.
Darius Teter: So you’re having trouble making payroll?
Grace Munyirwa: Correct.
Darius Teter: Wow. Okay. So that’s like fully stuck, you’re basically insolvent.
Grace Munyirwa: And the rumor mill was Vine Pharmaceutical’s bust. It’s just a matter of time.
Darius Teter: So this is a full-blown crisis?
Grace Munyirwa: Yes, and I knew it.
Darius Teter: Grace could feel the business that he had built slipping through his fingers. So he took drastic action.
Grace Munyirwa: So the first thing I did was to fire the entire management team. I cried. There are a few times I’ve cried, but that time I cried. I said, “Look, you guys, you all have to go.” And then I burst out into tears. They went. So I became the management team.
Darius Teter: To settle his debts, Grace started selling off profitable stores and closing unprofitable ones. In a short time, Vine gave up 25 of its locations.
Grace Munyirwa: I like to say that we grew them backwards to 11, but then the toll on me was really huge because I was literally hiring and firing and balancing the books and paying and doing payroll and training. And so I thought there must be a way around. So that’s when I thought to myself, “You know what? I think I need to try out franchising.”
Darius Teter: Does Uganda have clear franchising laws? Are there local Uganda franchises that are successful that you can look to for inspiration?
Grace Munyirwa: No, there’s none.
Darius Teter: There’s none. There’s no Ugandan restaurant chain?
Grace Munyirwa: No. You’ll have a small chain maybe of three or four, but then they’re not franchised. I don’t know whether that’s an advantage or not.
Darius Teter: The lack of a legal framework isn’t unique to Uganda. It’s true all over the continent.
Chiagozie Nwizu: The absence of the legal framework was a major deterrent to many really franchise-viable businesses in Nigeria who are yet to adopt franchising. Basically, their concern, if I may just put a bit of explanation to that, is that they wouldn’t want a situation where the franchisee brings their business to distribute and they are not able to bring in control. Or maybe they end up in a court trying to resolve issues which they didn’t have the time for. So what we had to do, that is what currently in the interim has begun to encourage a number of businesses to get into franchising. In the meantime, while we’re trying to put the regulatory system in place, is that we introduce what we call alternative dispute resolution, which means through small claims courts, arbitration, and all of that. So now at the point of developing the franchise, the franchiser is happy to know that he could create, in a contract, an avenue for him and a franchisee to resolve issues without going to the court.
Darius Teter: A legal framework isn’t the only support structure that franchises need to be successful.
Chiagozie Nwizu: In every country you look at where franchising is doing very well, you would realize that there are key institutions that have to be there. There has to be a franchise association, a franchise institution that provides the training. Some of the things like having access to the right funding to operate the business. So there were struggles among those early adopters that had gone into franchising because they had to do everything all by themselves. It is not so at other regions — the franchisers are supposed to have institutions that support them.
Darius Teter: So one of the key points you made here is the need to have a basic ecosystem there to support the growth of franchising as a business growth model in these countries. And I guess that’s the gap you decided you could fill in Nigeria by creating the various institutional bodies and frameworks that you’re responsible for. So I appreciate that.
Chiagozie Nwizu: I’ve not seen even beyond Nigeria at other regions where franchising is established. There’s no entrepreneur that develops a franchise model without the support of an expert. So it’s been much more catastrophic and a big mistake for an entrepreneur in this part of the world where that know-how is not there to want to develop a franchise model all by himself.
Darius Teter: In the absence of laws, these franchise associations can act as a regulator themselves.
Chiagozie Nwizu: Then in South Africa franchising has very much advanced. In South Africa, to my knowledge there is not yet a franchise law. However, they have a very functional franchise association. It is my opinion that the franchise associations have helped a whole lot more in regulating the franchise sector actually with regards to the relationship between the parties because these associations, just like FASA — FASA means Franchise Association of South Africa — does this regulation and has done a good job with that by putting codes of conduct ethics in place to say if you are going to operate as a franchiser, these are the ethics of conduct, these are the responsibilities, these are the qualifications, these are the roles you should play. So by providing those code of conduct ethics, the members of that very franchise association are mandated and they have to keep to these very ethics for the fear of being disenfranchised, of being removed as a member of that very body.
Because the moment that is done, it signals to other parties, that they would like to be in relationship with, that they are not doing well or probably they are not to be trusted as the case may be.
Darius Teter: Internal processes matter too. Grace has created a similar system of checks and balances within Vine Pharmaceuticals.
Grace Munyirwa: I think sometimes I’m a little bit too fast in action. So what we have recently done, we decided to form a committee of franchisees that can help keep them following a set of rules, but also let it not be a “me versus one,” a small group of franchisees who will protect me from them and them from me. And so if I have a problem with, let’s say, one of them, I say, “Hey, look at Steven, this is wrong, that is wrong. Please talk to Steven and see that they are able to rectify that before I step in with my guns blazing, so I want to be able to ask you guys to talk to your colleague and see if they can shape up before things go south.”
Darius Teter: When we left off, Vine Pharmaceuticals was at its lowest and downsizing significantly. Grace was running everything. So Grace, what I love about this story is that you were the victim of your own management style. You built this team, you built all these systems and processes, you had an epiphany.
Grace Munyirwa: Yes.
Darius Teter: And the epiphany was driven by the fact that you were about to go out of business.
Grace Munyirwa: Yes.
Darius Teter: Franchising was Vine’s last hope. But think about the business ecosystem that we just described. Uganda had no laws, no franchise association, no history of local franchising to build from. Without those external supports, Grace had to construct his franchise model from scratch.
Grace Munyirwa: So I — actually, I didn’t know it was even going to be franchising. I said, “Look, suppose we actually do this, this, say, is a store, store A. If I gave it to you and you run it, can we do an open book in a way that you benefit, I benefit, and everyone is happy? That’s step number one.”
Darius Teter: Grace had to adapt the franchise model to fit Ugandan realities. And one way he did that was by taking on more risk than is typical for a franchiser. For example, a Vine franchisee doesn’t sign the store’s commercial lease, Grace does. I think this is a really key difference between what I think of as a franchise here in the United States and the model that you’re practicing. Because one point of a franchise is to be asset-light. You grow with other people’s money, which means other people signing those leases with those landlords, not you. And their failure at the end of the day doesn’t affect your business, at least on the bottom line. So that’s what I’m really curious about this model, because it’s not really asset-light. You’re still the owner of the assets.
Grace Munyirwa: I have to have an advantage I bring to the table. It’ll become asset-light when I get an optimal number and given brand visibility, then it’ll become asset-light. But at this level I have to be asset-heavy. And then this is one of the advantages I bring to the table. I think at about 50, then I’ll begin being asset-light where I can give you the name and then you put up the infrastructure.
Darius Teter: So that’s really interesting. So this is almost a transition model to build the systems and processes and discipline and understanding and your own team. But the long-run vision would be a more traditional franchise model that’s asset-light.
Grace Munyirwa: Correct.
Darius Teter: Whereas the balance of responsibilities tends to be more established in other parts of the world. Flexible structures are something Chiagozie sees often in his work.
Chiagozie Nwizu: There are models where we have a couple of franchises in the agricultural sector where we realized it was going to be better for franchise fees not to be paid because the type of people that are to become the franchisees would not appreciate intellectual property because the franchise fee largely is demanded for what we call the brand, good word, intellectual property, the investment that the franchiser had made in building the top brand that’s the sales. So now in such models, we had created a system in a way that the franchisee would pay ongoing fees over the lifetime of the franchise, which is usually an average of five years.
Darius Teter: Grace also had to rethink the kind of franchisees that he would work with. Instead of approaching investors with capital, Grace asked existing managers to purchase the stores that they were already running, sometimes at a steep discount.
Grace Munyirwa: The thing was, there was a balance between the people I wanted to get and I could have gotten that had the money, but then there was a way we were doing things within our Vine culture that they understood how we run and the ethics that we keep, but they didn’t have the money I wanted. So there were people who offered me the money I wanted, but then I had to reject it because I couldn’t take them on. They wouldn’t understand how we run. But then on the other hand, I couldn’t give away the store to these people free. So I had to find a hybrid, a model that worked.
Darius Teter: That’s really fascinating. So the people with the money, what is it that they … Franchising in the U.S., it’s a highly structured business. So you almost imprint the culture on the investor. You didn’t feel like you could pull that off with these deep-pocket potential investors?
Grace Munyirwa: No. So there’s a bit of the population that has to understand what franchising is and the advantage, and so that is why you continuously teach even the people that you work with that this is what franchising is, and this is what it’s not. Sometimes people with money don’t understand that it takes some long time to make good money. So they have short-term goals. They don’t want to be fully deployed there. They want to simply invest the money and maybe leave a son or the wife there and then expect this to grow. That couldn’t work. The risk was very high, so I chose not to go that route.
Darius Teter: Usually, money and management experience are prerequisites for opening a franchise, but in an environment where both are scarce, you may have to compromise or at least prioritize. In our previous episode on franchising, Indian businessman Vijay Kapoor said that when it comes to his franchisees, passion is more important than payment. That means lowering the financial barrier for potential partners who don’t have the upfront investment capital. And this trend is mirrored in Africa. Across the continent, franchisers are creating models to make it easier for people to join up despite their limited capital, Chiagozie even has a name for it.
Chiagozie Nwizu: There’s also what we called the “micro franchise model,” which I know you definitely have been interested to know more about. So in the micro franchising model, the franchisee, who is usually poor people who do not have a lot of money to invest, they are not required to bring in all of the capital. The franchiser would make part of that investment and then the franchisee would be working. And from what you may call his wages, he’ll begin to buy back his interest and ownership of that very business. So these are some of the variances in the franchise model that have been created, especially to work in Africa and other places where people are also exposed to a structured system so that it could still deliver the dividends and opportunities of franchising and still enabling the knowledge transfer from the franchiser to the franchisee.
Darius Teter: This question of micro franchising is very interesting to me and it reflects the fact that sometimes the people with money may not necessarily be good operators and managers and the people who have maybe grown up in your business and who have learned to become managers of your specific business might actually be really good franchisees if not for their lack of capital. So the micro franchising model allows them to slowly build their equity in the business. But what you’re really getting with them is somebody who actually understands the brand, they understand the model, the business model, they understand how to make that store or that premise function. Without defined structures in place, it’s imperative for franchisers to keep an eye on their franchisees and offer creative support when needed.
Grace Munyirwa: One of the mistakes initially we made was we didn’t have controls on the finances so people were not fully banking the sales that were being made. So the franchisees we’d gotten were rewarding themselves at the cost of the employees. I’ll give an example. So when we said the franchisees should pay the employees, then we said by the first week the employees should be paid and some were going into the second and third week without being paid. So then we said, “Oh no, let’s ensure all the employees are paid.” So now what we do is, okay, let’s say you have four employees, their pay is X amount, a thousand dollars. Remit the thousand dollars to us, and we will give it to the employees. So we’ll just be a collection point and then remit it to the employees so that we know that the employees’ payroll is done.
Darius Teter: So they’re covering the cost of payroll, but you’re managing payroll centrally.
Grace Munyirwa: Yes.
Darius Teter: And in an environment where franchising is so new, perhaps the biggest shift is philosophical: changing the focus from growing yourself to supporting your franchisee.
Grace Munyirwa: The team at headquarters is really a support team. Their role is not just to drink pina coladas. Their role is to look out and see what can really help the shops perform better and how do we know we’ve done a good job? We’ve done a good job when the sales go up. When the shops win, we win.
Darius Teter: So what’s next? Well, in Nigeria, some of the informal structures around franchising are becoming official.
Chiagozie Nwizu: Currently we have a franchise bill. It was introduced sometime in 2016, but currently, interestingly, the Nigerian Economic Summit Group, they have come in and they brought stakeholders together and significant progress has been made with regards to the bill where a very good representation of the stakeholders had come together. So we are quite hopeful that the franchise bill is going to be passed to law.
Darius Teter: But Chiagozie’s work won’t stop with the passage of a law, because he sees franchising as an important tool for the future of African business.
Chiagozie Nwizu: We have quite a number of models in Nigeria that have done incredibly well, which we will need to begin to bring to the forefront. So it begins to encourage African business entrepreneurs to take off franchising because the risk that African businesses run is a risk of not having a transition. You see many successful businesses that do not outlive the business owner. If they had gotten franchised, the case would’ve been different. We need to begin to see businesses that have potential for scale and expansion to export their products and services to other regions even beyond Africa. They don’t know how to do that. The franchise model would definitely help them to become global brands if they would only have access to this information.
Darius Teter: Franchising is a complex business model. It relies on established structures, laws, standards, knowledge bases. In large part, these aren’t prevalent across Africa, but people like Chiagozie are working to change that. And entrepreneurs like Grace are forging their own path. To succeed, African franchisers will need to be adaptable. It’s not the plug-and-play option it is in other parts of the world. They may need to take on more risk or spend more time supporting their branches. They’ll need to lean on associations and to share with and learn from their peers. But even though franchising might take more work in this environment, the primary benefits — growth and survival — are still extremely valuable. Franchising could be the difference between a company that ends with you and one that gets passed down for generations — and for Grace, that’s worth it.
Grace Munyirwa: What really, really hurts me that may be peculiar to this part of the world is that many businesses die after the founder dies, six months down the road or one year down the road. Their businesses are no more. So that’s not a story I want to write. I want to have a story that can really help the company survive way beyond its founder, that Vine is still existing way beyond my lifetime.
Darius Teter: I want to thank our guests, Chiagozie Nwizu and Grace Munyirwa, for sharing their efforts and their stories.
This has been Grit & Growth with the Stanford Graduate School of Business, and I’m your host, Darius Teter. If you like this episode, leave us a review on your podcast app. It really helps us to share the stories of these incredible entrepreneurs with as many people as possible. To learn how Stanford Graduate School of Business is partnering with entrepreneurs in Africa and Asia, head over to the Stanford Seed website at seed.stanford.edu/podcast. Grit & Growth is a podcast by Stanford Seed. Erika Amoako-Agyei and VeAnne Virgin researched and developed content for this episode. Kendra Gladych is our production coordinator and our executive producer is Tiffany Steeves, with writing and production from Andrew Ganem and sound design and mixing by Alex Bennett at Lower Street Media. Thanks for joining us. We’ll see you next time.
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