December 4, 2013 — The food franchise industry first came into Nigeria more than 20 years ago with the establishment of the Mr Bigg’s fast food restaurants, at a time when it was wholly owned by the United African Company of Nigeria PLC (now partners with South African fast food franchise group, Famous Brands).
Since 1991 when Mr Bigg’s was established, it has grown to about 165 locations across Nigeria. But Mr Bigg’s is not alone in this market, other food franchises (both indigenous/home-grown and foreign) have entered and expanded into Nigeria by granting a regional license to a Nigerian company, which builds, owns, and operates units by itself. This article looks at how the franchise business model is quickly gaining strength in the Nigerian fast food market, challenges of this model and highlights 17 food franchise chains currently in the Nigeria market.
Mr Bigg’s is Nigeria’s first chain of fast food restaurants. Owned by the United African Company of Nigeria PLC, there are currently around 165 locations in Nigeria. Famous Brands recently bought 49% of Mr Bigg’s, giving the group its first direct stake in the Nigerian market, where it estimates significant potential for growth and development.
Food franchising is recognized as an important tool for consistent quality, brand recognition, international experience, job creation, transfer of know-how and technologies, and the enhancement of small and medium enterprises. But what really is food franchising all about? Food franchising involves using a firm’s existing successful business model in order to grow a business. It involves two parties, the franchisor and the franchisee. The franchisee purchases the right to use the franchisor’s business model, trademarks, associated intellectual property rights, proprietary knowledge and goodwill. For both parties to succeed, the franchising chain must be developed on the basis of a strong brand name or a trademark which is known and clearly identified by the public as well as substantial amount of know-how, and be compared favorably with the business systems of competitors.
Chicken Republic — is one of Nigeria’s indigenous food franchise system and has earned the reputation as one of the fastest growing chicken Quick Service Restaurant (QSR). It began its operation in 2004 and currently has over 65 stores within Nigeria and Ghana.
The new face of food franchising in Nigeria includes not only foreign brands but successful indigenous brands such as Chicken Republic, Tantalizers and of course, Mr Bigg’s. International brands include Barceló’s, Butterfields, Chicken Licken, Chicken Inn Fried, Church Chicken, Cold Stone Creamery, Creamy Inn Ice Cream, Debonairs Pizza, Domino’s Pizza, Kentucky Fried Chicken, Mochados Chicken, Nandos, St. Elmo’s, and Southern Fried Chicken, amongst a few.
So why the continual increase in fast food chains over the last 20 years and why are they so successful in Nigeria?
- Changing Demographics and Growth in City Life: The consumer class is expanding fast with an increase in the average disposable income of most Nigerians. Many more middle and upper-class consumers are entrepreneurs and often find it more convenient and affordable to eat out.
- International Travels and High Regard for International brands: The Nigerian market still largely unexplored and a distinct hunger for established international food brands exists. A lot of Nigerian consumers perceive International brands as providing better quality products, convenience, and customer service. Again, the high rate of international travel amongst Nigerians has exposed people to a lot of fast food brands and most people want to relive the experiences they have had outside the country.
- Infrastructural challenges especially power: Lack of power is a double edge sword for food franchises in Nigeria. On the one hand, it increases the costs of running such businesses but on the other hand, when the average Nigerian gets home and there is no power, they tend to go out to places where they are guaranteed regular power and good food and drinks.
Recognition of the fact that food franchises increase the wealth for all stakeholders and brings foreign capital into the Nigerian market: According to a 2012 World Investment Report by the United Nations Conference on Trade and Development, Nigeria was Africa’s biggest destination for Foreign Direct Investment (FDI) in 2011 with $8.92bn and recorded over 20 percent of the total FDI to Africa.
- Bank Financing: Banks in Nigeria are more willing to finance a global food brand as opposed to a totally new brand or business in Nigeria
Empowering local citizens and No Need to Reinvent the Wheel: The food franchise arrangement comes with some form of minimal assurance that while a person is going into the business for oneself, they are not going into it alone but they are backed by a proven model and brand owners who have invested years in perfecting the model (keeping in mind that each model may have a different impact or peculiarities in the Nigerian market).
Creates skills and builds investment in employment and innovation: Most Nigerian recognize that the average food franchise employs about 55 Nigerians per store and creates development potential for performing staff to move into senior positions, and as such many Nigerian are encouraged to patronize these businesses.
Established in 1997, Tantalizers Plc. has quickly become of one of the top leading fast food chains in the Nigerian market with over 50 outlets across the country. Tantalizers became famous for pioneering the integration of African menu into its fast food operations. Like most food chains in the country, Tantalizers currently provides direct employment to more than 1,200 Nigerians.
Like other businesses successfully doing business in Nigeria, food franchises must also overcome problems that are specific to the Nigerian market. Some of these include:
- Major challenges: Some of the major challenges include the high cost of equipment and shipping, double taxation, lack of relevant skills in the labor force, high costs of real estate, technology transfer issues, currency control, import and export restrictions, logistics, unwillingness of vendors to improve facility standards to meet new brand standards and labour and competition laws.
- Legal and Regulatory Framework: There is no specific franchise legislation or policy and while there has been significant growth in intellectual property awareness, there is still a lack of in-depth knowledge of IP Laws even amongst the judiciary and recurring violation of IP rights.
- Inadequate enforcement of Intellectual property, contract and anti-trust laws.
- Poor infrastructure: Port delays, strikes, short term funds, erratic electricity and water supply, bad drainage and roads, insufficient support structure, lack of satisfactory transportation, communication and basic utilities. With regard to electricity/power, most food franchises have resorted to using the public power supply as a back-up and run mostly on generators, which with the high costs of diesel is tasking on their business.
|Name||Number of Locations||Ownership|
|Chicken Inn Fried Chicken||2||Foreign Franchise|
|Chicken Licken||5||Foreign Franchise|
|Chicken Republic||65||Nigerian Franchise|
|Church Chicken||-||Foreign Franchise|
|Cold Stone Creamery||-||Foreign Franchise|
|Creamy Inn Ice Cream||2||Foreign Franchise|
|Dominos Pizza||-||Foreign Franchise|
|Kentucky Fried Chicken||17||Foreign Franchise|
|Mr Bigg's||165||Nigerian Franchise|
|Mochados Chicken Village||2||Foreign Franchise|
|Southern Fried Chicken||12||Foreign Franchise|
|St. elmo's||-||Foreign Franchise|
So what can a Franchise chain do to be successful in Nigeria?
The key is in modifying their business systems to suit the Nigerian environment! Franchises must adapt their products to the Nigerian markets and not just work off a boilerplate model. A clear example of this is the fact that franchises that have integrated the service of Nigerian foods into their menu tend to be very successful. So while most Nigerians are drawn towards franchises for their unique brand, there is the need to also pay close attention to the environment in which they serve and the needs of the average Nigerian consumer.