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IFEJ calls for a Franchising Act to enhance business growth and development

Accra November 6, 2017. The Institute of Financial and Economic Journalists (IFEJ), at a stakeholders’ workshop in Kumasi and Accra has called on government to come up with a Franchising Act to facilitate business growth and development.

The two workshops organised by the Institute in partnership with Voltic Ghana Limited were aimed at enhancing awareness on the benefit of Franchising as a business model and how local business can take advantage of it.

Both workshops had the theme “Franchising, the key to small business mentorship, growth and development”. The Accra workshop brought together about thirty financial and economic journalists from various media entities and four entities who have various forms of franchising arrangements with Voltic Mineral Water. The Kumasi event brought host of morning shows and some journalists with five entities who have franchising arrangements with Voltic Mineral Water.

Current regulations and legal framework on franchising fall generally under the Company Code Act 179 which is limited in detailed and inadequate provisions 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.

To this end a Franchising Act and backed with the various legal instruments and the needed regulations, industrial and SMEs growth in the country can be propelled to greater heights taking into consideration government’s policies on one district, one factory.

A legal practitioner, Mr Kwame Jantuah, in a presentation explained that Franchising is 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.

Under this business model the risk of business failure is reduced as this business is based on a proven idea with the products and services already established in the market place.

Stressing on the challenges posed by franchising, Lawyer Kwame Jantuah said costs may be higher than what the Franchisee expects. In addition to the initial costs of buying the franchise, the franchisee pay continuing management service fees and the franchisee agrees to buy products from the Franchisor.

He said the franchise agreement usually includes restrictions on how one can run the business. “You might not be able to make changes to suit your local market”, he said.

The Head of Quality Control at Voltic, Mr Raymond Gbetivi, in a presentation outlined the requirements for obtaining a Voltic franchise. These include undergoing through a pre assessment, assessment, traceability, training, technical and quality management process.

Obtaining franchising with Voltic, he emphasised is free and outlined some of the benefits of Franchising with Voltic as Small and Medium Enterprises (SMEs) 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. This is 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. Potential companies that can benefit from franchising are pharmaceuticals companies such as Ernest Chemist, Kinapharma, Danadams as well as others in the hospitality, services, construction, financial and industries.

Franchising as a business model is good for developing countries with industrial deficiency. It is prominent in some key developing countries across the world such as Brazil, India, China, South Africa, Argentina and Malaysia where sustainable economic and industrial development have witnessed massive growth over a period of three decades.

Malaysia has a Franchising (Amendment) Act of 2013, and South Africa, Consumer Protection Act of 2011. Argentina, has a well-structured industry with laid down regulations and laws on franchising.

Source: Institute of Financial and Economic Journalists (IFEJ)

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