Growth | February 2013 | By Laurel Nakkas

Africa: The Final Frontier?

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Brands like McDonald's are opening restaurants in African nations like Morocco.
Quick-serve restaurants, like this McDonald's in Morocco, could become a more common sight in African nations. ISTOCKPHOTO.COM
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Brand awareness is another major challenge in Africa. Though KFC is ubiquitous in the U.S. and has locations in many African countries, only a very small percentage of the population has seen or heard of it, Layzell says.

“You quickly learn that the brand equity you carry in many parts of the world does not necessarily carry you in Africa,” he says. “As a result, you need to establish all your brand credentials from scratch, which is both challenging and extremely rewarding.”

For Cinnabon, challenges to doing business in African countries—aside from political strife—have included the need to adjust operating procedures, build the brand to each market’s local personality, and conduct more vigorous training procedures.

“There are some aspects of our hygiene and cleanliness standards that are part of our concept that require some more in-depth training. … We have to teach that a little bit more thoroughly there,” Shattuck says.

The good news for brands looking to grow in Africa is there is mutual interest from residents in launching businesses. A 2011 Gallup study showed that 20 percent of 15–24-year-olds and 29 percent of 25–35-year-olds said they planned on starting a business, with the most intent expressed by Africans from low-income countries.

Layzell says Africans have expressed great interest in KFC’s business opportunities. “It has been encouraging to see many of the African Diaspora contacting us for jobs and franchise opportunities as they look to return to their countries of birth,” he says, referring to people who emigrated from Africa. KFC also tries to promote from within, enabling employees to work their way up and learn skills they will be able to apply to their own business some day, Layzell says.

But Maritz believes financing and lack of business skills are still major restraints for Africans looking to own a business.

“On the one hand, the African market is less saturated, so in that sense it is probably easier to start a business because there is less competition,” he says. “On the other hand, a lack of financing makes it more difficult.”

He adds: “Things are, however, changing.”

One thing U.S. brands should be careful to remember, Maritz says, is that businesses will not immediately be profitable in Africa. He says it could take 10 years before any brand starts to see substantial profits.

But Shattuck says growth in Africa can depend on how well established the brand is. “I think that the window for the opportunity where you start seeing much greater expansion will probably depend on the brand, because well-established brands can go in earlier, typically,” he says.

Two African nations have already proved to be successful markets for quick-service development: Egypt and South Africa. Burger King announced plans in November to roll out its first South African location this year. The company has 25 locations in Egypt and Morocco.

Baskin-Robbins has 29 locations in Egypt and has been in the country since 1993. Cinnabon has 17 locations in South Africa, as well as 20 locations in Egypt.

With so many brands already in South Africa, the most advanced economy on the continent, Maritz says the market has become saturated.

“It is, however, important to note that most of these brands are expanding into Africa through their South African operations,” he says. “I think it is easier for South Africans to do business in the rest of the continent, since they understand the environment a bit better.”

Layzell and Vaidya have practical advice for brands ready to jump feet-first into Africa. “The road to success in Africa can be challenging, and you need strong belief, a clear vision, a long-term view, and support from the very top to take the first steps,” Layzell says. “Nigerian businessman Aliko Dangote once said you can’t operate in Africa from the boardrooms of the U.S. and Europe. This is a fundamental truth—you need to be on the ground to understand the complexities of each country in Africa.”

Vaidya adds that in order to be successful in Africa, franchisors need to be flexible in creating a local-friendly version of the brand. “There is no point parachuting an American brand into Africa just as it is in California,” he says. “Every global brand must act local without losing any core essence of the brand.”

Vaidya also stresses that regardless of the market, a brand cannot survive without strong franchisees who possess unchanging loyalty to the brand.

“I believe the most important quality any franchisee should have, and I seriously mean this, is to have unflappable integrity to stay true to the brand he or she has franchised,” he says. “Often, we see franchisees cutting corners outside the knowledge of the franchisors and, gradually but surely, the brand equity starts getting eroded, steadily losing customers.”

If franchisees can prove to be successful brand ambassadors in Africa, the continent’s business future will be bright. But while Layzell believes KFC will eventually set up locations in every African country, he’s uncertain what the timetable for doing so would be.

“Our vision is to be the defining restaurant company in Africa, and as such, we see no country as being out of bounds—it is just the timing of our entry that will differ,” Layzell says. “We need to ensure we can build sustainable businesses, which means we look at elements such as affordability, disposable income, supply-chain availability, and of course, political and economic stability.”

Quick-service restaurants should act soon on an Africa strategy, Vaidya says, and be aware of the shifting market.

“It is important that major chains realize the potential of this emerging economy and make serious inroads to come out stronger in about 10 years’ time, when Africa will very likely be a strong economic block in the world,” he says.

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