It is not uncommon to witness students spooning ice cream along walkways at the mall. Riders also walking in and out with the KFC fried chicken and chips take-out packs or even mothers with their ecstatic children in line at Big Square food shopping trends have seen a huge shift over the years. But the big question is, what effects do these incoming franchises have on the homegrown establishments?
The positive uptake of international brands such as Java, KFC in Eldoret town has prompted more incoming fast-food franchises such as Galitos, Pizza Inn, and Chicken inn to open. Meanwhile, others are expanding to more than one outlet in town. As of now, Eldoret hosts almost ten fast-food franchises with the number increasing each day. As much as these franchises are boosting economies and improving living standards, there are concerns about the fate of home-grown fast-food joints.
Incoming franchises’ Positive Effects
How humbling is the word competition? When I think about it I feel like it raises the bar for business people because all business people strive to deliver quality to their customers, but on the other hand how easy or hard is it to make a profit and maintain customers when you have 10 other service providers selling the same product.
Tim of Duara pizza had me at “this competition has legitimized my business as well as created product awareness.” To have started by specifically serving chicken wings and pizza as the main food items was quite bold of him. Not to mention how hard it is to convince the people that it is the actual thing, good quality and even better tasting in some cases. It was not until incoming franchises set foot that the appreciation for it started to show. Incoming franchises and their vast market research are also proof of the existence of a potential market in Eldoret and a validation of his idea.
That same competition will help you discover your strengths. What are you good at? And what do your customers identify with the most in your store? And yes, thinking about it, knowing what is keeping you relevant in this competitive market is another reason to push through another day in business.
From a well-to-do, local fast food, the right customer service is everything.
“Engage your customers, apologize for late deliveries, and give them quality products that they’ll enjoy. As much as I don’t cast as big a net to the market as the incoming franchises, these 40 loyal customers will give me value for the service for longer in comparison to the 100 who walk into a franchise and probably don’t get the same attention.” Says Tim.
Incoming franchises Negative effects
However, competition from a bigger player always impacts the smaller player. The ability of the incoming fast-food franchises to procure their stock in bulk lowers their operating costs compared to local fast food that buys in smaller quantities. This poses a challenge, especially with the tough economic times.
“It is called the economies of scale. They are therefore better placed to offer cheaper prices or bigger offers than what we can afford to.” Says Tim.
In addition to that, the marketing strength that franchises have does not compare to the local fast food. “You cannot compare a local fast food poster to their two to three billboards on major roads. Our marketing has to be more intentional. Either through our products, services we offer and also through our customer relations together with analyzing feedback to keep improving.” This, therefore, is a drawback to local fast foods.
Even more surprising from what I’ve gathered, food delivery apps tend to charge more commission on local fast foods compared to the bigger franchises. It creates a clear discriminatory gap within the local fast food. In the case of local fast food service, they were charged a commission of about 16%; a figure incomparable to the 4-5% Percent they charge franchises. For even smaller homegrown fast-foods, they can charge even up to 20%. What then do these locals set to gain from the online orders?
With the incoming of more and more franchises, the environment is now turning into a survival of the fittest. A guide through the four Ps (product, price, place, promotions) of a business by an established home-grown show that, ‘Not every business can achieve the four Ps whereby franchises take advantage of promotion and price. They have the money to run big promotions and hire the primmest of premises. They also focus on the market share rather than profit share. As for the homegrown, they tend to focus on localization which leans towards profit share rather than market share because they don’t have that financial muscle. I believe if I cannot achieve the price and promotion. I can try to achieve the people and the product.’
The franchises’ money power and sometimes ridiculously low prices (because they can afford it) spoils the market to a greater extent.
Real-life effects of franchising
Whatever happened to Malindi? As much as franchises build an economy and improve livelihoods, too many kills off small business and lead to the collapse of the same. And that’s what happened to Malindi in the hands of Italian investors. The incoming franchises also eventually downsize or completely move away. It is therefore government’s (county) responsibility to ensure balance.
Other references are Unga Ltd and Maize milling. Thanks to importation from Uganda! These are just but some of the outcomes of too much infiltration and lack of balance.
“Also, remember, when you buy Eldoret, you build Eldoret. Local fast foods lead to the sourcing of local products, job creation for local people, and money circulation among the locals. “ Tim, Duara pizza.