In mid-April of 2016, the Starbucks coffee company launched their first ever South African based store in Rosebank, Johannesburg. Their arrival was met with much excitement as queues formed overnight prior to the opening. People rushed in to purchase the coffee of their “Tumblr” dreams. With all sorts of big and famous brands such as Burger King and Starbucks making their way to South Africa, it’s exciting to think that these huge franchises are helping South Africa build a bigger platform of recognition on the global market. Critics however, are unsure as to whether or not the arrival of such franchises are knocking down local businesses.
When it comes to franchising in developing countries, there are advantages and disadvantages. It does appear however, that the benefits outweigh the disadvantages to some extent. The biggest hindrance is that larger companies end up taking clients away from the smaller local businesses. It could be said that this is a small price to pay for everything else franchises bring with them.
First and foremost, franchises expose citizens to new products and services. This factor alone creates a chain reaction that stimulates economic growth within a country. For these products and services to be provided, the franchise opens up countless amounts of job opportunities and training for individuals who work for them. Above that, the introduction of new products and services into a country stimulates entrepreneurial activity due to the fact that people create competing products. To put this into a Grahamstown perspective, let’s compare the Steers franchise to that of Oscar’s Country Café. Although Steers is based all around the country and everyone is familiar with the type of burgers that they make, one would prefer going to Oscar’s to have a really nice homemade meal.
In addition to this, franchises more often than not make use of the country’s raw products to construct their own newly introduced product. Starbucks for example, used local materials, artists and carpenters for the décor so as to create a more South African feel in the store. They are also integrating our very own Rooibos tea into the menu to create familiar favourites for local customers. This franchise is therefore making use of the country’s resources and when we look at it in the bigger picture, it is helping South Africa to develop economically.
Overall, large franchises do not just monopolize every country they can get their hands on. They provide a list of benefits, and although the introduction of franchises might disrupt smaller, local businesses, it provides a space in the market for many more to rise.