Strategy of Franchise Subcontracting and Sustainability of Small and Medium Enterprises in Selected Counties in Kenya

Abstract

Whereas the strategy of franchising is hundreds of years old in the global market, until recently, the franchise business model has been slow to take hold in Kenya because local investors know little or nothing about its potential rewards. It is therefore on this basis that this study sought to address the question; “Can Strategy of franchise subcontracting mitigate or eliminate the sustainability challenges faced by SMEs in the selected Counties in Kenya?”. Specifically, the study sought to determine the extent of adoption of franchise subcontracting as a strategy by SMEs and to determine the viability of such a strategy in the sustainability of small and medium enterprises. This study was descriptive in nature and a survey design was applied. In this study the target population was about 300 SMEs operating within the franchise subcontracting strategy in the major urban centers in Laikipia, Embu and Meru counties. This study used the stratified random sampling technique to draw a sample of 100 SMEs. The target respondents was the business owners of the sampled enterprises or the top manager in the enterprise where the owner of the business may not be available to respond. Data was collected through structured questionnaires. The qualitative data was analyzed manually by first summarizing the information gathered followed by categorization and coding into emerging themes. The study found that the number of new small and medium businesses operating under a franchise subcontract arrangement was increasing in the previous two years prior to the study and there was a high likelihood that more small and medium business men will start new businesses within a franchise subcontracting agreement in the following two years. It was also found that apart from gaining competitive advantage and increasing profitability, most small and medium businesses operating under franchise subcontracting agreements were known to have survived the lifetime of their owners. In addition there was a very high likelihood that the business they were operating then would survive its 20th anniversary. It was therefore concluded that adoption of franchising subcontracting strategy is gaining high adoption among small and medium enterprises in the market. In addition, the study concluded that sustainability of SMEs operating under franchise subcontracting strategy is high. The study recommended that more companies should adopt the franchise strategy to increase their profitability. This is because the number companies currently operating franchises in Nyeri, Laikipia, Embu and Meru Counties is low compared to the total number of companies in the country.