Lack of franchising association a major hurdle for local entrepreneurs says Competition Commission
The Namibia Competition Commission said that the development of local franchisors has the potential to drive growth and create opportunities for local entrepreneurs, however, entrepreneurs are at a disadvantage as there is no governing body for franchises in Namibia.
Namibia’s franchising market is largely characterised by continued entry of overseas franchising systems looking for global expansion, largely seen in fast food services, automotive products and services as well as financial services.
Director of Economics and Sector Research Division at the Commission, Bridget Dundee said a 2016/17 study shows that the franchising model offers business opportunities for local entrepreneurs in the realms of social and micro franchising, as these markets offers huge potential for the development of sustainable small businesses and the creation of job opportunities.
Dundee stated that the major concern for the Commission is the practises of master franchisors that restrict potential Namibian entrepreneur’s from acquiring franchise opportunities, especially in food services, retailing, automotive after care and car dealership markets.
She added that social and micro franchising is attractive due to low market needs and reduced set up costs. Of interest are the development of franchising in plumbing, shoe repairs, electrical services and related trade services.
“There seem to be assertion that the market is too small for more than one franchisee in these markets, an assertion that is not based on conclusive evidence. Other concerns raised by the franchisees relate to relationships between franchisors and franchisees and point to the absence of a franchise association in Namibia,” Dundee said.
Dundee stressed that not only is a franchise association important to promote ethical business practises and encourage ethical corporate governance amongst competitors, it also has the potential to protect consumers.
She noted that some franchising agreements are characterised by restrictive clauses that prevent franchisees from purchasing goods locally, even though they could obtain goods of the same quality at significantly lower prices in Namibia.
“Moreover, a strong case is made for Government to adopt a regulatory framework of co-regulation, particularly wherein it set a regulatory framework such as a franchising policy, which would complement the development of the franchising industry in Namibia. Such a policy is envisioned to assist in reducing barriers to entry in the market, ease access to franchise brands for local entrepreneurs, encourage ethical conduct of master licensees amongst others,” she said.
Dundee said, the Commission will engage stakeholders in respect of its mandate through various tools and interventions. Meanwhile, the Franchise Association of South Africa estimated that the South African franchising industry generated an estimated turnover of N$587 billion in 2017.