Franchising in Kenya
Interview with Benjamin Musau, Managing Partner at B M Musau & Co., Advocates, Nairobi, Kenya
How did you get started as a franchise consultant?
B M Musau & Co., Advocates is a leading commercial and corporate law firm in Kenya and in the Eastern and Southern Africa region.
Through the firm’s website and profile we have received client instructions on franchise services and that’s how we got started as a franchise consultant. Prior to starting the firm of B M Musau & Co., Advocates in 1999, Benjamin Musau, the firm’s Managing Partner was a Senior Partner in the Kaplan & Stratton where he was personally involved in franchise consultancies.
Who are your clients?
Our customers include multinational enterprises, The Government of Kenya, The World Bank and national and regional businesses and enterprises.
What are the current trends on the franchising market in your country?
(i) The franchising market in Kenya is steadily growing and evolving from single-unit owners to multi-unit operators employing professional staff of field and unit managers, while they focus on strategy and growth.
(ii) The use of the internet by prospective franchisees is a current trend in Kenya. The franchisees will browse the website of the franchisor to collect the necessary information to help them make informed decisions.
(iii) Diversification in the franchising market is being experienced in Kenya since major business growth has been noted in the livestock industry.
How many companies in your country offer franchises?
There are many franchise companies in Kenya that cover almost every industry, from well-known national brands to smaller and local opportunities.
Which are the best Franchises by growth, branch and demand? What makes them different?
Franchises in the food, restaurant and beverages industry can be said to be the best, ranking them by growth, branch and demand. The difference comes into play because due to the fact that Kenya is still a growing country and investment in the basic needs sector is lucrative business. Leisure and recreational facilities are also a good investment decision.
What's the average startup investment in money and time for a franchise?
This will depend on the nature of the industry as franchising in some industries will require more capital and time while in others it is the vice versa. The averages in some selected industries are as follows:
(i) In Food industry, average start up money is US$100,000;
(ii) In Accounting and Finance US$50,000;
(iii) In Advertising and Marketing US$10,000;
(iv) Business services franchise US$25,00;
(v) In Restaurant industry US$100,000.
The average startup investment in time will actually differ according to the terms in different companies.
Which branches experience a lack of franchises?
(i) The banking industry
(ii) Sports.
What is the profile of the people who choose to buy a franchise?
(i) People with adequate capital. This is one of the first hurdles encountered when trying to qualify for a particular franchise. Most franchisors have a minimum net worth and liquid capital requirement for their franchisees. While this may seem obvious, there are other demands on cash availability beyond the initial costs of the franchise such as the length of time The franchising market in Kenya is steadily growing and evolving from single-unit owners to multi-unit operators employing professionamay help one qualify if in short of capital. However, no good franchisor will want to see one start out business heavily in debt.
(ii) Outstanding personality. There are some personality characteristics that seem to be common in all successful franchisees. Other characteristics are specific to individual businesses. Some of the good personality traits of a franchisee are willingness to follow the systems set, people who enjoy working with others, focused, decisive and hardworking persons.
(iii) Franchising skills. Franchisee’s skills are closely related to the personality of the franchisee. For a franchisee who likes working with people, will be good at it. Other skills include being customer service focused, ability to lead a team of employees, ability to set and meet personal goals and having an understanding of financial concepts.
(iv) Business acumen. An important attribute required of most franchisees is that they should have business acumen and understand how the parts of a business contribute to the whole.
(v) Experience. Franchising is one area of business where ones specific experience is less important than other factors. This is because of the excellent training provided by most franchise companies. In truth, many franchisors prefer franchisees without industry experience because it is easier to train someone in a franchisor’s system than it is to ”un-train” a franchisee who has ideas that may conflict with the way a franchise system works. Again, it is the overall business experience attained through life that will make one stand out in a franchisor’s eyes.
What should a franchisor know before coming to your country? Any specific requirements, legal restrictions, etc?
(i) A Franchisor should first evaluate whether his business has a ready market in Kenya and what the prospects of getting potential franchisees are.
(ii) The market forces in Kenya in relation to the franchisor’s products since these will determine the possibility of getting willing franchisees.
(iii) The franchisor needs to be aware of the corporate tax applicable to the foreign companies which is 37.5 % of the taxable profit.
(iv) Immigration laws and work permits governing foreign investors.
(v) There are licensing requirements that are peculiar to particular businesses.
(vi) It would also be wise for the franchisor to protect his intellectual property by registering the patent, trade mark or trade name or any other intellectual property of the franchise.
