Reinventing Business Growth through Franchising in Developing Economies : A Study of the Nigerian Fast Food Sector

Business generation has taking a new dimension in the developing Nations considering the inflow of Foreign Direct Investment (FDI) through the process of Franchising. This study therefore examines the place of Franchising in the developing economy with emphasis centered on the Nigerian fast food sector. The study was conducted in different parts of Nigeria with the use of research questionnaire and observation to gather relevant data that was statistically analyzed. Franchising was generally accepted in Nigeria and yielded good profits for the local operators. Thus, franchising in the Nigerian fast food sector is a booming business that is meeting the need of Nigerians in terms of job creation and revenue generation. In view of this, we recommended that the government should strengthen the Nifa and NOTAP toward effective and efficient regulations and that more foreign fast food should take advantage of the Nigeria marketing environment to boost competition.


Introduction
Global competition is intensifying because, domestic companies that dominated the local market at home now find foreign competitors to contend with based on their influx through franchise as a distribution strategy in other to gain entry into new markets.Franchising according to Om sai Ram in Haiying (2005) is a powerful vehicle for the marketing and distribution of goods and services employed by franchisors to market their products.Alon (2007) posits that international franchising has grown significantly since the 1960s because of push and pull factors.Domestic saturation, increased competition and diminishing profits at home have pushed franchisors to examine their opportunities abroad while, favorable macroeconomic, demographic and political conditions abroad pulled them into specific markets.Franchising has been observed by industrial watchers as the key strategy adopted by multinationals to promote and expand their trade in other untapped markets and this cut across different sectors including the fast food sector which is our area of study.It is therefore our intention to focus on the introduction of fast food franchising and its acceptability in Nigeria.
Over the past 53 years when Macdonald opened her first fast food in Chicago till today, Emerson (1979) claimed fast food franchising in the developed economy has increased geometrically.America has net over 521, 215 outlets in fast food stores alone according to Om sai Ram in (Haiying, 2005).He observed further that, franchising is well established in most developed countries today with over one third of all retailing is franchised -related.In recent years however, opportunities have diminished in these countries as well, and international franchisors have begun to seek development opportunities in developing economies such as China, Brazil, South Africa and Nigeria.Chay et al (1990) in agreeing with Alon argued that over 75% of the expected growth in the world's trade over the next decades will come from developing countries.It was not surprising therefore, that franchisors are assessing the economic potentials in this market.With China's 1.3 billion people, 200 million of which are within the growing middle class and a Gross Domestic Product (GDP) that is above 40%, Ordish (2006:30) described China has the "mother of all franchise markets".
The continued growth (33-49 percent) of China's consumer base provides a potentially lucrative opportunity for foreign franchisors and Nigeria with a population of over 140 million people, growing middle class in major Cities and Gross Domestic Product (GDP) that is put at 30% is primed as Africa's largest emerging market expected to be a sought -after market by multinational firms especially in the fast food sector.Matanmi and Awodun (2005) described it as a juicy market with an estimated worth of about N190 billion ($760 million).Yet, the multinational fast food organizations are yet to take advantages of the immense opportunity solely, enjoyed by local fast food firms like MR. BIGGS, Tantalizer, chicken licken among others with a total of about 480 outlets.The Nigerian fast food and restaurant industry has undergone phenomenal growth over the past six years, averaging 40% per annum (Chamberlain, 2006).Despite the economic offer and ease of entry into the Nigeria market, foreign franchisors except South Africa with few entries have shunned the Nigeria market.Our point of departure is stemmed from the facts recorded in other developing countries where the western-styled fast food dominated their franchising marketing world and the need for Nigeria with her unique opportunities to benefit from this global trend rather than enjoying the monopoly of local franchisors.It is therefore the purpose of this study to empirically analyze franchising in developing economy visualizing the Nigeria fast food sector.

Limitation of The Study
A study of this nature is global, since marketing take place across borders, most especially as it concerns the service industry where franchising takes place.It is therefore, pertinent to note its constraints by research factors such as coverage, cost, time and other environmental factors.As such, our study is restricted to some fast food firms operating in Lagos and Port Harcourt.Further, the study intends to cover mainly the aspects relating to the application of franchising in the Nigerian fast food firms with its implications on the socio-economic values of the service Business environment.

Review of Related Literature
In recent times there has been a growing interest in the concept of franchising as a new distribution paradigm and new market entry strategy in the marketing environment.This growing interest has given birth to diverse views and literature by authors, scholars and practitioners.It is on this basis that we present a review of related literature in the basic concepts and theories that are essentially connected to the research problem and questions.

The Concept of Franchising
Franchising is an agreement between organizations where a producer of product or service grant rights to independent business men to conduct business in a specified way, designated place and at a certain period of time.It is a very specific method or way of distributing goods and services.Gates (2000) argued that franchising is not a business itself, but a way of doing business.No wonder she draws a conclusion that it is essentially a marketing concept and franchising as a concept is an innovative method of distributing good and services.The franchise council of Australia (FCA) viewed franchising as a business relationship in which the franchisor assigns to the franchises the right to market and distribute the franchisors goods and services, and to use the business name for a period of time.
Meanwhile, the International Franchise Association defines franchising as a continuing relationship in which the franchisor provides a licensed priviledge to do business, plus assistance in organizing training, merchandising and management in return for a consideration from the franchisee.Om sai Ram in (Haiying, 2005) posits that in the past 50 years "business format" franchising has come to be predominant in the developed economy like USA and in more than 80 countries, Generally, franchising in the business environment is composed of three elements viz: the franchisor (owner of business and name in the system); the system (the business in which investment is made) and franchisee (the investor who purchase the right of ownership).The interaction between these elements is carried out under a contractual agreement (Preble, 1992).
It is pertinent to identify the different types of franchising, these include: (1) product franchise where a producer granted a right to sell its products to the franchisee (2) Name and process franchise is a situation where the franchisee is granted the right to use the name and process of the business and (3) we have the business format mode where the franchisee is not only granted the rights above but, involves the transfer of ways of doing business by the franchisor.Bassuk (2000) concluded that, business format franchising is what franchising is all about today and essentially why franchising is the most successful method of distributing goods and services in the business world.This is evident in the number of business models among which we have manufacturerretailer, manufacturer -wholesaler, wholesaler -Retailer and retailer -retailer.These models helps to make franchising as the fastest growing marketing strategies in our in our business today.

History of Franchising
Few historians believed that the word franchising comes from old French meaning privilege of freedom from servitude (Bassuk, 2000:8).Franchising has been traced back to the middle Ages, when the Catholic Church granted franchise to the tax collectors.They would receive a portion of the revenue and turned over what remained to the Pope.This was also noticed during the feudal times.Gates (2000:8) posits that, individuals were also given franchises to sponsor markets and fairs, and observed further that, in 18 th century England, royalty and parliament awarded franchises to noblemen who agreed to meet specific responsibilities.Risner (2001: 18) reiterated further that this concept was extended to the kings granting a franchise for all manner of commercial activities and over time the regulations governing franchise became a part of European common law.The concept of franchising dates back to the middle Ages, but the widespread use of franchise strategies began in the United States around 1850 when Singer Sewing Machines, located in New England, decided to market its products throughout the United States.At the time, the "franchising" element (Product and Brand) consisted only of the right to use the brand name at the store and sell the product.Towards the end of the century General Motors and Coca-Cola began to use the franchising concept to expand the markets to which they could sell their products.Throughout the twentieth century, franchising expanded gradually into other industries.In 1917 the first franchised grocery store, the Piggly Wiggly went into business while Hertz began franchising automobile rentals in 1925, the first fast-food franchise, A & W opened in the same year.
The largest expansion of franchising occurred in the late 1940's at the end of World War II when many veterans returned home desiring to open their own businesses.In the1950's, major fast-food chains like Burger King, McDonald's and Dunkin Donuts began to appear.By the 1960's onward, these and other American fast food chains began their expansion into international markets.

Benefits of Franchising
The concept of franchising is ensured when the franchisor sells a proven business package to the franchisee that then duplicates the business.It is pertinent to conclude that franchising is conceived on dyadic benefits: the franchisor achieves rapid expansion with limited capital outlay; the individual franchisee equally benefits by owing and operating a business which utilizes proven methods and procedures; because the franchisor makes his expertise available in a multitude of areas.In line with this, JAI (2004:3) highlighted the following advantages and disadvantages of franchising.
Other benefits of franchising as a way of growing your business are; the capital needed to expand the business is provided by the Franchisee; Trained, motivated management is part and parcel of franchising; Franchise units tend to be better run, therefore more efficient and profitable than company owned units; Rapid Expansion; Achieve optimum size -maximum profits are realized by getting very large.Great buying power -The large number of units allowed by franchising enables the company to buy for the entire system and at great savings to the individual franchisees.This greatly enhances profit margins and gives the franchisees a very strong advantage over all competitors; Maximum income Franchise fee through franchise royalties, equipment sales, supplies, materials sales, sales of Services, and property Rental.

International Franchising
International franchising has grown significantly since the 1960s because of both push and pull factors which Alon ( 2006) described as domestic saturation, increased competition and diminishing profits as the push factors while, favorable macroeconomic, demographic and political conditions abroad are the pull factors that influenced foreign franchisors.Franchising in developed economy is most pronounced in U.S.A.They have experienced an explosion in business format franchising in the last two decades since, this is the most efficient business model for the distribution of goods and services.Bassuk (2000:5) argued that with the fall of communism and the move away from socialism and towards free market economies, the world is becoming franchise driven.Om sai Ram in (Haiying, 2005) observed that one-third of all retailing in U.S.A. are franchise-related and that there are more than 3,000 franchise companies, trading in about 521,215 outlets.In view of this success story in U.S.A, the companies choose to franchise abroad and today the developed economies have not only adopted franchising but institutionalized it through regulations.

Franchising in Developing Economies
Assessing the economic potential in developing economies is important for international franchisors who wish to prioritize markets for expansion, choose an appropriate mode of entry, and select a proper fee structure for their franchise system.The economic rate of growth, level of population and G.D.P per capita are variables considered while entering emerging markets (Bassuk, 2000 andFrantino, 2006:28).China with a population of more than 1.3 billion people, Brazil with a population of over 500 million and Nigeria (140 million) is the most populous black Nation in the world.Franchising is a relatively new model in these countries where it was first noticed in the early 1970s.Today, China has about 2,500 chains using franchising through more than 50 industries including fast food and employed about 1.8 million people in almost 170,000 stores.On the other hand Brazil is the fifth largest country of franchises.
The Brazilian market has revenue worth $12 billion dollars and generates 22,000 jobs through 894 franchisers and 46,534 franchise units (Risner, 2001).She revealed further that 94% of the business format franchises are Brazilian while, 6% are foreign.Gunasrkara (2007:49) argued that, franchising was the primary guarantee of success for a foreign brand in Brazil but, due to the complex business environment, more than 90% of them failed in the 1980s.This was also true of china where difficulties with quality control, weak legal system, uncertainty of regulations and Intellectual Property (IP) risks are stumbling blocks to foreign franchisors.Ordish (2006:31) reiterated that franchising is a new business model in developing countries and thus, requires a great deal of education at all levels.Despite the great success recorded today in Asian countries most especially fast food franchising which Risner (2001) concluded to be the largest sector in the franchising industry; African market is yet to fill the impact of this job creation and money spinning distribution concept.While, South Africa is said to have enjoyed from this global trend Nigeria with the largest population in Africa and the 6 th crude oil producing Nation in the world is still grappling in the dark.Hoffman and Preble (1993:38) posits that franchising has until recently been an uncommon world in business lexicon in Nigeria hence, the conspicuous absence of foreign franchisors in the country.The earliest form of franchising in Nigeria had been product marketing franchising through Texaco, Total, Agip, Coca cola, and Peugeot etc. But, the earliest business format franchise in Nigeria according to Olumide ( 2007) is through Duraclean U.S.A. in 1980s.And since then business format franchising has grown significantly, especially in the fast food sector.This is as a result of the sensitization efforts of the National Office for Technology Acquisition and Promotion (NOTAP) and the Nigeria International Franchise Association (NIFA).Today one could conclude that franchising is steadily becoming understood and accepted as attractive business model in Nigeria.
Suffice to say that, while the developed market is becoming saturated with franchising model that of developing economies is just opening up and even with its attendant challenges, the emerging markets are potential pot of opportunities.Franchise in the food sector is adjudged the largest area of investment in the developing or emerging markets.

Fast Food Franchising in Nigeria
Franchise in the food sector came into the National focus in 1970s when giant companies like Kingsway snacks in Broad street, Leventis snacks marina, UTC snacks among others established their in the Nigeria market.JAI (2004) revealed that the trend changed in 1986 when UAC Lunched her fast food unit called MR. BIGGS.The Nigerian fast food industry has been growing rapidly since then, judging from recent report which had shown that the Nigeria fast food sector had a growth rate of 40% per annum within the last six years (Chamberlain, 2006:6).Table 1 is some of the fast food companies in Nigeria and the status of their market share.Some in the list that made up the 25% are Big Treat, The Kitchen, Charlies, Kas Chicken etc which are family owned.Nigerians according to Olumide (2007) embraced the MR.BIGGS concept wholeheartedly and this has made them to open branches in different parts of the country.MR.BIGGS bought into the theme restaurant concept by providing good ambience and a relaxing family atmosphere.They went a step further to combine cultural and local food in their menu especially, jollof rice, moin-moin, salad and chicken, pounded-yam, Eba among others, unlike other operators MR.BIGGS had put into consideration the cultural mores of the country hence, the success story recorded.Unarguably, Lagos, Port Harcourt and to a degree, Abuja are currently the prime targets of these emerging markets.It is difficult to escape noticing the colourful edifices and billboards of these fast food outlets.One is probably just around the comer of your street.The list is endless; Mr. Briggs, Tantalizers, Tastees Fried Chicken (TFC), Sweet Sensation, Big Treat, Favorites, Kas Chicken, Frechies, Chiquita, Gina's Fast Food Delite, Kigstine Jo Snacks & Burger, Friends, The Kitchen, Charlies and new entrants like Quarter Jack in Ogunlana Drive, Surulere, The Triangle along Kodesho Street, Ikeja, Trendy's and Domino Dina both in Sabo, Yaba, Choppies in ojuelegba among others too numerous to mention.Nworah (2006) argued that due to the competitive nature of the market, many of the outlets have started to blend their menus with African cuisines like Pounded Yam, Amala, Moin Moin, Eba, Semovita, Fufu etc.Other unexplored areas are in core Nigerian 'fast food' and snacks (possibly covering the over 300 varied ethnic nationalities within Nigeria).These include Boil (roasted plantain) & Epa (ground-nuts), Isu Sisun (roasted yam) & Epo (palm oil) with dry pepper, Dundun (fried yam), fried plantain (Dodo), boiled and roasted com, Eko 9congealed, unflavoured custard) & Akara (beans cake), Ogi (unflavoured custard) & Moin Moin, Eran Igbe, Asun (barbecued goat meat), Suya (grilled cow meat) and many others.Ibru (2007:10) posits that these records has placed Nigeria in a vantage position with its economic potential worth $220 million which only local franchisors are enjoying with less than 20% from South Africa.There are three distinct segments in the Nigerian fast food market: the indigenous brands led by Mr. Biggs; the international franchises led by South Africa with brands such as Steers, Chicken Licken, and St. Elmos; and myriad neighborhood outlets.Chamberlain (2006) observed that franchising fast food companies from the developed countries -McDonald, KFC, Pizza Hut etc. had deliberately avoided Nigeria market unlike other developing economies or emerging markets.Olumide (2007:8) argued that many of the consumers expresses desire to buy American fast food franchises but the franchisors are not willing to do business with the Nigerians.
Chamberlain ( 2006) reiterated the reasons for the inability to attract American fast food franchises to include relatively newness of franchising, lack of understanding of the concept and techniques of business format franchising, high cost of acquisition, and culture.Ibru (2007) adding to these challenges highlighted competition, franchise discipline and failed contracts, legislation and registration networks at developing stage, corruption, bad image and of course capital (considering the exchange rate).Considering the above findings in the body of knowledge (literature), we thus, made the following hypotheses: HO1: Fast food franchising is not accepted in Nigeria.
HO2: Fast food franchising does not yield good profit in the Nigeria business environment.HO3: Adaptation does not influence the propensity of fast food franchising in Nigeria.

Research Design and Sample Size
The survey approach provides wider information that characterizes all organizations in the population from which the sample was selected.It is therefore a more beneficial design for theory building.Since this study was designed to investigate franchising in a developing economy thus, the survey approach was selected for use in this study.This avails us the opportunity of reliable, generalization and growth (Ahiauzu, 2006).
The population of study includes all franchised fast food restaurant business operating in Nigeria.Nwankwo (1999:6) noted that the population of any research study is the universe of such group of people or objects which a researcher is interested.In order to obtain our sample size from the population, we had recourse to the Nigeria franchise association (NIFA) report and through a random sampling exercise had 10 firms selected for the study.We had in these firms obtain a sample elements of 250 respondents which also means 25 respondents from each selected fast food company through a probabilistic sampling techniques.Our primary data were acquired through the use of questionnaire, personal observation and interview.

Research Instrument and Technique
The primary instrument used for gathering data for the study is the questionnaire.The questionnaire were designed in open and close ended patterns and administered directly on the operators of the franchised fast food companies directly.Furthermore, in order to ensure a reduced possibility of questionnaire missing in transit or misplaced the questionnaire were retrieved in same manner, which they were administered.The data so obtained were presented in tables and analyzed using non-parametric simple percentages and the chi-square (x) statistical technique was apply in order to confirm the stated hypotheses.

Validity and Reliability of Research Instrument
The validity of an instrument refers to the extent to which it measures what was intended to measure.The validity of the scales utilized in this study was assessed for content and construct (convergent) validity.The correlation among the components of the performance scale and the correlation among the components of the market orientation constructs provide evidence of convergent validity to the extent that they are high, that is they are converged on a common underlying construct.After the survey had been completed the reliability of the scales was further examined by computing their coefficient alpha (Crombach Alpha).All scales were found to exceed a minimum threshold of 0.7 suggested by Nunnally (1978).

Research Findings and Analysis
In the course of this study 220 questionnaire were distributed to both the franchisors and franchisees in order to elicit the success of franchising in Nigeria vis-à-vis the developing markets most especially in the fast-food sector of the economy.Overall, the contribution was obtained from franchised respondents operating within Nigeria main cities like Lagos, Port Harcourt, Enugu, and Ibadan among others.A total of 192 of the questionnaire were returned out of which 185 was found to be valid and useful for our study.This represents 84% which is good enough, as it is reliable and generalizable.The questionnaire was analyzed after which the stated hypotheses were further analyzed for confirmations.

Research Hypotheses Testing
Our hypothesized statements were tested using the chi-square statistical tool as earlier stated.The tests are conducted at 95% confidence interval and 0.05 significant levels while, the degree of freedom of each stated hypothesis was determined appropriately and came up to be 4. Following the decision rule of accepting or rejecting null hypothesis i.e. if calculated x 2 is less than the critical x 2 ,we accept, if not we reject, we thus hypothesized as follows; Ho 1 : Fast food franchising is not accepted in Nigeria, As shown in table 2, the calculated x 2 = 42.596 is greater than the critical x 2 = 9.488 using a degree of freedom (Df) 4. We thereby reject the null hypothesis, in order words; the fast food franchising is well accepted in Nigeria.

Ho 2 :
Fast food franchising does not yield good profit in the Nigeria business environment.
In testing this hypothesis, table 3 was drawn, it was discovered that the calculated chi-square (x 2 )= 54.539 is greater than the critical chi-square (x 2 ) = 9.488 and at a degree of freedom of 4. This therefore made us to reject the stated hypothesis, that is, fast food franchising yield good profits in the Nigeria business environment.This finding was supported by literature and further buttressed in our discussion of findings.

Ho 3 :
Adaptation does not influence the propensity of fast food franchising in Nigeria.
Table 4 has proved our stated hypothesis to be wrong by revealing that, the calculated chi-square (x 2 ) = 114.919 is greater than the critical chi-square (x 2 ) = 9.488 at a degree of freedom of 4. In view of this result, we hereby reject the stated hypothesis it thus, means that adaptation does influence the propensity of fast food franchising in Nigeria.

Dicussion and Conclusions
The result of our research work as regards fast food franchising in Nigeria revealed that fast food franchising began in the late 1990s when MR. Bigg's due to its high level of patronage expanded into many cities outside Lagos where it started from.The franchise quickly grew and branches sprang up with many other brands like Tantalizer, chicken licken, chicken republic and many more entering the franchising business model thereby increasing the number to a well over 480 outlets today.The result goes to prove that there is enormous interest in fast food franchising among Nigeria entrepreneurs.Ibru (2007:10) posits that MR.Bigg's success story has inspired late entrants into this business and claimed that there are over 100 different indigenous fast food franchises in Nigeria.Matanmi and Awodun (2005:18) as corroborated by our study showed that out of the 100 branded players in the Nigeria fast food industry, only 10 could said to be major players which accounted for about 75% of the market with MR.Bigg's having the majority market share of 45%, and Tantalizers coming second with only a 10% share.
In the course of investigation, we discovered that foreign franchisors in the fast food sector in Nigeria were less than 20%.Some of these are chicken licken, Domino, Chicken Republic, Tetrazinni among others.They are mainly located in Lagos and Abuja with a number of outlets, increasing brand visibility, equity, turn over and number of customers that stands them out as major competitors.Hoffman and Preble (1993:38) concluded that fast food restaurants could easily use their brand reputation as leverage and expand their operations.The study revealed further the acceptability of fast food franchising in Nigeria.Fast food restaurant is springing up everyday in Nigeria; due to its acceptability, franchisees are taking the restaurants to their local government areas hence, the presence of MR.Biggs at ughelli in Delta -State, Owo and Ore both in Ondo -State.This acceptability has led to a high level of competition among players in the market in a bid to attract new customers while planning retention of old ones.Matanmi and Awodun (2005:22) highlighted competitive weapons employed in Nigeria to include taste, prices, environment, class sensation, visibility and availability of parking space.Suffice to say also that this high level of awareness was not unconnected to the economic benefits associated with fast food franchising in Nigeria.Ibru (2007:12) argued that the potential market for fast food franchise alone in Nigeria is about $220 million, our study revealed that the Nigeria fast food industry is a profitable market largely due to her population and other economic indices such as profitability, wealth creation, employment generation among others.This impressive record is enjoyed due to the high level of patronage, professionalism, and brand reputation associated with franchised fast food companies in Nigeria.It is pertinent to appreciate the fact that foreign franchisors have avoided Nigeria market despite her huge economic gain unlike, the presence of fast food giants like McDonalds in other developing countries such as, China; Brazil and South Africa.This absence is largely due to poor regulations, political instability, corruptions among others as revealed by our study.
Conclusively, fast food franchising in Nigeria is a booming business that is yet to be fully exploited most especially foreign franchisors like McDonalds, Pizza Hut and KFC.Local franchisees are smiling to the banks daily as the few foreign franchisors from South Africa could not compete with local players like MR. Biggs and Tantalizers who are markets leaders and whose brands are house names in Nigeria.The fear of the foreign franchisors could be allayed with the recent government fight against corruption, the new democratic structure and the economic reforms of the present government.The entry of these franchisors will not only give the teeming Nigeria population an opportunity to make choice between foreign and local fast food it will also help create heavy competition that would lead to quality and better services.

Recommendations
Based on the findings of the study, we recommend as follows; that government of Nigeria should strengthen the Nigeria International Franchise Association (Nifa) and NOTAP towards efficient and effective regulations of the sector.There should be legislation that would provide rules and laws for the franchising industries.Foreign franchisors should be encouraged to enter into the local market by creating conducive atmosphere and giving tax holiday, just as in the case of the newly established TINAPA business resort in Cross River state.The process of adaptation and standardization should be made easy and attractive.Foreign franchisors should take advantage of the Nigeria market by relating with Nigeria business men and women.Nigeria government should encourage her business citizen to franchise with foreign franchisors in the fast food industry by creating loan facilities with the Nigeria banks.
A study of this nature usually gives rise for further research toward a better understanding of the franchising business model.It is thus, recommended that a work is carried out to further ascertain the influence of culture on foreign franchising.Emphasis could also be paid on comparative analysis of foreign franchising and local franchising in Nigeria.This is to ascertain influence of international and local experience as input in the franchising of fast food in the developing market like Nigeria.As well as, a comparative analysis of company owned and franchised fast food in Nigeria with focused placed on their economy of scale.
Table 1.Some fast food companies and their market shares