Exploring Franchise Opportunities In The Finished Leather Goods Sector – Highlights of FBDS Findings: The franchise business model is globally known for its key principles of transfer of proven business system, knowledge transfer, training, hand-holding support, and leverage of brand goodwill for quick market patronage to mention a few. The franchise business model has delivered best results in business sustainability, with global record of over 85% success rate. Franchising is proven to be the most rapid business expansions model, with results from most widely spread brands across the world.
One notable industry sector that perfectly fits in the franchise business model is the Finished Leather Goods (FLG) sector. Almost every home in Nigeria and the world at large make use of leather products. The aesthetic appeal of wallets, shoes, bags, clothing, furniture and other finished leather goods (FLG) remains a desire for most of us which is a great Franchise Opportunities for everyone. According to the International Trade Center, leather and leather products are among the most widely traded products worldwide. It has been estimated that the international trade exceeds US$ 80 billion annually, this is expected to continue growing alongside the increase in population and urbanization of developing and emerging countries.
Franchise Business Development Services (FBDS) in a recent study have explored the Franchise Opportunities in finished leather goods (FLG) sector in Nigeria, considering that recent studies have shown that over 80% of SME businesses shutting down in less than 3 years of doing business. Nigeria have a large market with a population of over 175 million people.
In the FLG sector, there are over 100,000 experienced artisans operating from the Aba cluster and a number of other clusters, which have been existing over the past three decades. Despite the lack of automated assembly line production processes, informal studies indicate that artisanal producers are still able to churn out significant numbers of finished leather goods, with an estimated minimum daily production value of NGN 45,000,000 from at least 75,000 finished leather product items and these goods are often traded through informal trade routes to domestic and neighbouring regional markets – over 60% of products are estimated to flow to the foreign markets.
A huger potential is however foreseen through interventions that would increase domestic consumption of locally produced items, by linking the outputs from the artisans to be marketed and retailed by high-end retail chain brands which had indicated vested interests, such as: Roban Stores, PEP Store, David Wej, School Kits and Mr. Price. These Franchise Opportunities would create the needed structure for the items to be accepted, marketed and sold competitively in the country. And the best proven sustainable method of rapidly expanding these businesses with almost 0% failure rate and with guaranteed revenue growth is through franchising.
Below are 7 key highlights of our findings while exploring franchise opportunities in the finished leather goods (FLG) sector;
There is a common understanding among all interviewed stakeholders that there is a major opportunity created in the FLG sector, especially with the foreign exchange rate which has made locally produced goods more price competitive; government increased support; and awareness of the need to patronise locally made products to strengthen the local economy.
It was widely observed that most MSME business owners in Nigeria have little value for building enterprise development and management capacity. Where there is knowledge transfer through some sort of franchise or technical partnership between such entrepreneurs and an established corporate brand or foreign technical partner, without further hand holding or on-going support, there are alarming cases of high rate of eventual business failure due to the failure of the new owners to apply discipline in diligently maintaining the set standards and procedures. This is the key reason why the franchising business model is probably the most ideal for actualizing sustainable change and growth in the sector.
Limited capacity to make finished leather goods that compete with the foreign ones in quality, finishing and packaging, limited access to suitable finance, lack of accessibility of the few good quality products, trust issues due to fear of watering down brand standards by franchisees, and limited awareness of the franchising concept were mentioned as key challenges to employing Franchise Opportunities in the FLG value chain. The actors in the value chain are mostly fragmented, consequently, there is much loss of opportunities that would have been secured if there were necessary collaborations and linkages.
The majority of operators in the sector being micro and small business owners, have difficulties meeting up the requirements for bank funding, most of these operators fund their ventures with own funds from personal savings. There is a wide expectation that franchising would widen the opportunities for funding interventions from local and international financial institutions, FDIs, and government special funding interventions.
Franchise business (Franchise Opportunities) model is barely known among the targeted artisans in the sector, however with illustrations, the respondents who could relate with the franchise concept from their knowledge of some common franchise brands across different industries, indicated excitement and willingness to benefit from the opportunities of knowledge transfer, and perhaps securing licenses to operate as franchisees of the franchisor. All franchisors and potential franchisors engaged during the study had either already initiated franchising arrangements or confirmed the idea would provide immense relief to their current management, growth and expansion challenges.
There are several aspiring entrepreneurs in Nigeria who currently work in the public and private sectors of the Nigerian economy. Most Nigerians with potential investment capacity are out looking for an opportunity to make more money in a sustainable manner and would rather buy a franchise than take the risk of venturing into an unfamiliar business terrain. There were also indications of significant interest in proven and well established local brands rather than the foreign ones.
The government of the host Aba shoe cluster indicated readiness to embrace initiatives to enable the growth of the FLG sector through promotion of relevant schemes, support for off-tacking of products through contract productions, and perhaps deployment of infrastructures. In addition to the ongoing Made-In-Aba campaign, the government agreed that the efforts invested in the initiative has produced less than expected results, as the direct interference with the value chain actors has been misunderstood by the artisans. Hence this study was welcomed as an intervention that would rightly engage the stakeholders, and deliver the desired results. Franchise Opportunities are everywhere and not just in FLG sector.
Would you like to buy a finished leather goods franchise? Or do you have a thriving business in the FLG sector that you would like to franchise? Contact Franchise Business Development Services (FBDS) today. We are the pioneer franchise consulting company in Nigeria, the country representative of World Franchise Associates (WFA) and a supplier member of International Franchise Association (IFA). We are on a mission to making franchising the preferred business venture model in Nigeria, as a strategic means of building sustainable businesses that operate best practices(Franchise opportunities). You can also visit Africa Franchise Institute to learn more about franchise business model.
