Growth of the Franchise Industry in the Middle Eastern Region
Change is inevitable and this statement cannot be truer anywhere than in the business world, changes have occurred in almost all the business sectors over the past few years and hence in the franchising industry effectively. With a young and fast-growing population with high levels of disposable income, the middle east is typically viewed as a high-priority target market for various franchising arrangements. The franchise economy in Middle East and North Africa (MENA) is worth $30 billion! and is growing rapidly at a fast rate.
Gulf – The Leading Franchising Destination
The concentration of high net worth individuals and a young and upwardly mobile consumer market with favorable franchising regulations within this region are the key attractions for any franchisor looking to expand their business over the gulf. On the other hand, the driving factors for franchisees and local government include:
- Entrepreneurial opportunities presented by the franchising model
- Job creation
- The ability to inject international grade skills and processes into the economy
- Investors also feel more confident opening a store under the umbrella of a large, multi-national corporation
- Benefit from the well-established operating, marketing, and accounting practices of the franchisor.
GCC nations take the lead of growing the franchise economy in the Middle East, while Egypt is the leading franchising destination among African nations. With a combined population of 1.4 billion, a GDP of $1.9 trillion, relatively business friendly environment and an affluent customer base, the Gulf Cooperative Council (GCC) – Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Bahrain and Oman – presents the biggest opportunity for existing and potential franchisors and franchisees in the middle eastern region.
The Right Market for International Brands
GCC consumers demand exclusive and high-quality products, and therefore are the right target segment for international brands looking to enter into the region by franchising their business. This is clearly proven by the fact that more than 80% the retail sales are generated from international brands, hence most leading malls in the GCC are filled with international brands like Saks at Kingdom Mall in Riyadh, Bloomingdale’s at Dubai Mall, or Harvey Nichols at the Mall of the Emirates in Dubai.
Franchised and licensed business have permeated all sectors including education, transportation, tourism, F&B, retail, education, beauty service etc. However, food and beverage (especially fast food) has shown rapid growth in its franchise economy over the gulf. Let us get in a little more depth about the food and beverage sector.
Food and Beverage – The Biggest Beneficiary of the Growing Franchise Economy
The franchising industry has seen wide likability and acceptance in the food and beverage sector, within the GCC countries. Eating out has become a part of the region’s culture and tourism practices; in addition, the liking for U.S. style casual dining has further helped drive the entry and growth of international fast food joints in the region. There are arguably more branches of Western fast food chains such as Five Guys, McDonalds, Burger King, Hard Rock, Hardees, Pizza Hut, Pizza Inn, TGI, Chilies, Wendy’s and Tim Hortons than there are of local or regional chains. We are, however, seeing a rise of regional groups such as Kudu, Operation Falafel, Al Baik, Zaroob, etc.
Fast food only is expected to account for 40% of the franchising market overall; in Egypt, nearly 75% of franchises opt to represent retail and food brands. Particularly, international food and beverage sector has widely grown in the GCC region. While Just Falafel is the leading example of a Middle East-based fast food chain that has expanded rapidly in the region and worldwide over the past five to seven years.
Industry experts and leading franchising consulting firms expect the region’s F&B franchises to grow by >25% in the coming years, and maintain their dominance over other sectors like education, maintenance and health services, which are underdeveloped and are growing slowly.
MENA consumers have high disposable incomes, are perceived as luxury- and brand- conscious, and seem unrelenting in pursuit of the best. However, the region’s market is idiosyncratic and a strategic entry into the region must also take into account the legal, regulatory, cultural, religious and social norms that define the preferences of the governments and citizens of the region.
Adjusting the Product for Cultural Preferences and Customer Expectations
It is very important to adjust your product for cultural preferences, this is applicable to all sectors and countries, but is especially true for the F&B sector where companies can gain or lose market share based on their ability to adapt to cultural preferences, tastes, guidelines (including religious observance) and customer expectations.
The strategy to incorporate authentic dishes with global flavors like Emirati, Lebanese, Indian, Greek, Italian, Japanese, Mexican and American is one of keys to the huge success of several food chain franchises.
Choosing culturally appropriate ambiance is equally important, for example, café’s in Saudi Arabia generally have a lounge feel with segregated retail space – families and single men.
One can also build brand and goodwill by participating in philanthropic and corporate social responsibility activities. Franchises and franchisors should expand the brand by interacting with the local communities, considering geographic issues, political climate, linguistic and cultural nuances, and taking CSR initiatives.
Here at Francorp we help you with your business plan, analyze your presence in the market and measure you against your competitors; we take care of all the documentations stating the responsibilities of the franchisee; we develop a comprehensive operations manual with all the tasks required to operate the business; we create a marketing plan for you to generate sales leads based on your expansion goals; we make sure the franchisee has all the requirements to own your franchise.
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