Franchises on rise in Zimbabwe, but . . .

News Café, Pizza Hut, Panarotis, POS Hardware Solutions, Kentucky Fried Chicken, Roco Mamas, Spar, Ocean Basket, Mugg & Bean are some of the more popular franchises that currently operate in Zimbabwe.

There are numerous other less known franchises around the country. But that’s just the problem . . . we just don’t know.

In 2011, the Zimbabwe National Chamber of Commerce (ZNCC) sought to revive the Franchise Association of Zimbabwe (FAZ) — which in its heydays had run under its ambit, but the revival quickly fizzed out due to funding challenges.

All things being equal, the FAZ would promote and protect the interests and general welfare of franchisors and franchisees in the country, as well as maintaining a “code of ethics and business practices” to which its members would be obliged to subscribe.

The association would likely facilitate potential franchise arrangements, as well as function to collect and disseminate information on franchising in the country.

To the extent of facilitating potential franchise arrangements, such an association would contribute in a significant way to the growth of the local economy in respect of the anticipated employment generation that new franchises would bring.

But what is a franchise?

According to the International Franchise Association “a franchise generally exists when: The franchisor licences a franchisee the right to use its trade or service mark; To identify the franchisee’s business in marketing a product or service using the franchisor’s operating methods; … The franchisee pays the franchisor a fee.”

With Zimbabweans increasingly becoming more entrepreneurial, franchises have over the last decade or so become a viable option for starting and running a business.

But the problem for franchises in Zimbabwe lies in the very concept of a franchise.

Typically, franchises pay subscription or licence fees (on stipulated periods), circa 5 to 7 percent of turnover depending on the brand and what it offers, to the franchisor. But with Zimbabwe facing significant foreign currency shortages, franchises in the country are always at risk of losing their licences.

Since 2016, foreign currency payments outside Zimbabwe are guided by the Reserve Bank of Zimbabwe (RBZ).

The central bank has determined a payment list for foreign payments in a move aimed to control to control the seepage of hard currency from the country.

And payments for franchises are not a priority list for foreign currency allocations. This is in addition to the fact that the companies themselves are struggling to get forex for raw materials (especially for food franchises) or important imports.

However, the issue of foreign currency shortages raises wider questions about the importance of foreign franchises to the local economy.

Notwithstanding the very potent issue of job creation, some types of franchises can negatively affect the country’s balance of trade.

Some observers have however expressed concern at the potential of increased importation of products (through franchises) at a time when the country is facing is a huge trade deficit resulting from a high level of imports compared to constrained exports.

Others says the impact of a growing number of foreign franchises in the country on trade would be negligible.

“It will not change much because the majority of products in our local shops imported anyway.

“As a matter of fact, consumers will benefit in terms of low cost insofar as international franchises profit from huge volume discounts when they purchase their products,” said economist Rongai Chizema.

Currently, imported products dominate local shelves on, at least, an 80:20 ratio, although Zimbabwe’s new Industrial Development Policy is targeting a 70:30 ratio in favour of local products as the country is focusing on industry capacity recovery.–businessweekly