The Institute of Financial and Economic Journalists (IFEJ) has urged government to promulgate a Franchising Act to facilitate business growth, especially for small and medium enterprises (SMEs).
The Institute said the lack of a comprehensive legislation on Franchising put local SMEs at a great disadvantage, as the globally growing franchising industry presented many opportunities for their growth.
They made the call at two workshops in Accra and Kumasi, organised by the Institute, in partnership with Voltic Ghana Limited, aimed at enhancing awareness on the benefits of Franchising as a business model and how local businesses can take advantage of it.
The workshops were on the theme “Franchising, the key to small business mentorship, growth and development”.
Current regulations and legal framework on franchising fall generally under the Company Code Act 179 but is limited in detail and its provisions inadequate to manage the globally growing franchising industry. “The lack of a comprehensive law and regulations for the industry put many small and local businesses into grave disadvantage particularly in the negotiations of terms and references,” the institute said in a policy brief copied to the GNA. It added that a Franchising Act will propel growth in industry and SMEs sector, especially in light of government’s policy on One District, One Factory. Countries like Malaysia and South Africa as well as Argentina, have Franchising legislation in place. The workshops brought together financial and economic journalists from various media organisations and entities which have various forms of franchising arrangements with Voltic Mineral Water. Mr Kwame Jantuah, a legal practitioner, explained that Franchising was an arrangement where one party (the Franchisor) grants another party (the Franchisee) the right to use its trademark or trade-name as well as certain business systems and processes, to produce and market a good or service according to certain specifications. The Franchisee usually pays a one-time fee plus a percentage of sales revenue as royalty and gains from name recognition, tried and tested products, standard building design and décor, detailed techniques in running and promoting the business, training of employees, and continuous help in promoting and upgrading of the products. He noted that this business mode reduced the risk of business failure as the business was based on a proven idea, with the products and services already established in the market place. There were, however, some challenges in franchising, which included higher costs than what the Franchisee expected.
This, he said, was because the franchisee had to pay other costs aside the initial costs of buying the franchise, such as continuing management service fees and purchase of products from the Franchisor.
He said the franchise agreement usually included restrictions on how one can run the business. “You might not be able to make changes to suit your local market,” he said. Mr Raymond Gbetivi, Head of Quality Control at Voltic, outlined requirements for obtaining a Voltic franchise, including undergoing a pre assessment, assessment, traceability, training, technical and quality management process. He stressed that obtaining a franchising with Voltic, was free and came with benefits like SME development, high level of employment, economic empowerment and technology transfer among others. Voltic (GH) Limited, producers of Voltic Natural Mineral Water (Voltic), has two registered water brands; Voltic Natural Mineral Water and Voltic Cool Pac 500ml sachet water, which are produced, distributed and sold throughout the country by regulated franchises.
“Voltic Ghana Limited currently has thirty-seven (37) Franchisees across the country with Forty-Eight (48) sales points creating over 4,000 jobs. With an average daily production of quality sachet water to serve the needs of the market, Voltic Franchisees, mostly Ghanaian establishments employ more than 2,400 permanent workers directly and indirectly over 1,700 sales persons”.
The franchise agreement enables SMEs across the country to produce, package and sell Cool pac sachet water under stringent quality control measures where each production facility is monitored against the company’s quality criteria including frequent, unannounced inspections, continuous product testing and quarterly audits.
Other businesses operating under franchising contracts in Ghana includes but not limited to KFC, Vivo Ghana, Swiss Alisa Hotels, and Fiesta Royal. Other companies like those in the pharmaceutical, hospitality, services, construction, and financial industries can potentially benefit from franchising arrangements.