FRANCHISING DEVELOPMENT FOR SMES IN NIGERIA: THE ROLE OF VENTURE CAPITAL

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Framework Of Presentation. Foundation To SMEEIS The New Venture Capital IndustryBenefits Of Venture CapitalWhy Franchising Is Good For SMEsFinancing Franchising With SMEEIS fundsBenefits To Franchisor

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Diversifying DEVELOPMENT FOR SMES IN NIGERIA: THE ROLE OF VENTURE CAPITAL Presented by : Mr. Kayode A. Ayeni MD/CEO, First Funds, Nigeria. At the International Seminar On Franchising by the Joint Africa Institute, Rabat, Morocco November 13-17, 2006

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Outline Of Presentation Background To SMEEIS The New Venture Capital Industry Benefits Of Venture Capital Why Franchising Is Good For SMEs Financing Franchising With SM E EIS stores Benefits To Franchisor &Franchisee Benefits To SM E EIS Fund Manager Conclusions How To Contact Us

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Background to SMEEIS was presented by Bankers Committee in June, 2001. SMEEIS obliges banks to set aside 10% of PAT for interest in Small and Medium Enterprises (SMEs).  SME Investment Sectors : Every lawful business action is secured except for exchanging/promoting and money related administrations. A SME add up to resources < N 1.5billion (barring area and working capital) Funding gave might be as value or advances, where credits are single digit (max of 9%). Maximum breaking point of 40% value financing by banks should apply. The venture can be stripped after a base time of 3 to 5 years. Assets can be utilized for new businesses, development, working capital, administration purchase out, pivot of hopeless organizations, and so forth

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The New Venture Capital Industry Introduction of SMEEIS has brought forth another Venture Capital (VC) industry in Nigeria. SMIEIS is set up for interest in value, which has constrained the securing of value venture aptitudes by banks (unmistakable from loaning abilities). Many banks have either set up a unit in-house or set up VC backups (independently or together with different banks) to deal with venture of their SMIEIS reserves. Some different banks have connected with autonomous VC finance supervisors to contribute their assets .

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Benefits of Venture Capital Impacts teach and greater responsibility in organization. Dangers are shared similarly by all shareholders. Wellspring of medium to long haul capital . Speculation is not secured (no requirement for guarantee). No intrigue is paid on Venture Capital assets. Institutional accomplices loan believability and goes about as a positive flag to different partners. Investor includes an incentive in giving budgetary, specialized, consultative and administrative support .

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Why Is Franchising Good For SMEs By nature & cause, business game plan outlined by business visionaries for SMEs . Brisk replication of a decent business thought Easy start-up circumstances . Encourages systematization of business . Worldwide achievement gives an account of diversifying being developed of independent companies 17,500 establishment frameworks, 1.2 million franchisees & 12.5 million workers in establishment business all around. In USA, half of all retail deals produced through diversified chains; 550,000 establishment outlets utilizing 7.1 million specialists .

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Why Is Franchising Good For SMEs (contd) U.S diversifying industry assessed at US$1 trillion in 2001 . Industry developing at rate of 10-12% for each annum . MC Donald's : 1998 – 16,000 establishments; 2002 –22,000 establishments . Evaluated disappointment of establishment outlets in U.S. under 5%. Assessed disappointment by fifth commemoration of new organizations in Nigeria over 80%.

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Financing Franchising With SMEEIS Funds SMEEIS Funds can bolster diversifying. Each establishment outlet – a SME-constrained obligation organization with at most N1.5 Billion resource base (barring area and working capital). Coming about advantages to Venture Capital Fund. Benefits additionally to Franchisor/Franchisee (Promoter).

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Benefits To Franchisor Quick business rollout conceivable Easier start-up circumstances Creation of model outlets Possibility of boundless development Strong institutional accomplice Upon exit of Venture Capital Funds, shares can be sold to Franchisee (s)

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Benefits To Franchisee Leverage existing establishment goodwill. Decrease in expectation to absorb information. Simpler break into generally hostage showcase affirm/keep up (instead of assemble) existing establishment notoriety. Preparing & innovation exchange by Franchisor . Solid institutional accomplice . Attempted and tried frameworks in addition to freedom of independent work .

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Benefits To SMEEIS Fund Manager Facilitates organization of assets. Encourages geological spread of speculations. Lessens danger of business disappointment. Gives great leave openings .

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Conclusions Link between Franchising, SMEs and Venture Capital (SMIEIS) Funds set up. Diversifying is a decent technique for accomplishing quick development of SMEs. Investment (SMIEIS) subsidizing is helpful to SMEs The blend of diversifying and SMIEIS financing for SMEs is a formula for SME achievement.

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How to Contact Us All enquiries ought to be coordinated to: MD/CEO First Funds Limited Bull Plaza (ConOil Building) 9 th Floor 38/39 Marina Lagos Tel: 234-1-2665211, 2665214, 2665250 Fax: 234-1-2660784 . Site: www.firstfundsltd.com

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