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How to take advantage of franchise opportunities in a trillion dollar market

Why is this important?

Franchising in the Middle East and North Africa (MENA) is worth more than $30 billion and growing at approximately 27% annually. At the heart of the MENA region is the economic and political block of Gulf Cooperative Council (GCC) which is made up of the six countries of Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Bahrain and Oman.  Dubbed as the energy powered economies, they geographically access a combined population of 1.4 billion people with a staggering GDP of $1.9 trillion.

These are global markets that have gone under the radar of available opportunities to Australian SMEs. Western brands and tastes are prominently from Europe, USA and certain parts of Asia. High brand recognition generally targets the bourgeoning young consumer population. It thrives amongst these consumers who are socially and internationally mobile with a rapidly increasing disposable income.

Popularity of franchises

In the retail space, franchising is a proven vehicle for rapid regional expansion and dominance in niche markets. Once established a franchise has a strong market presence and high recognition, rapidly filling in the market gaps with proven product and services.

What to do

Expansion of franchise systems can be either straight forward or may require rethinking and strategic tweaking prior to launch - particular for new concepts in unfamiliar markets. Regardless, new entrants have to put in the hard yards, do their research and introduce the brand in a way that resonates with customers’ needs and expectations.

Here are some very simple tips to consider:

Adjust the menu for cultural preferences, tastes, guidelines, including religious observance, and customer expectations if franchising in the food industry.  For example, Herfy a large fast food restaurant chain in Saudi Arabia and one of the largest in the Middle East, has done just this. The chain has woven itself into the fabric of the Gulf kingdom with its signature fast food surpassing major international corporations in terms of local size. It knocked KFC from its dominant position as fast food outlet in Saudi Arabia to be the No.1 fast food chain, with over 170 hugely popular outlets.

Implement culturally appropriate ambiance. For example Herfy and other public eateries, including the wide variety of U.S. brands already open in Saudi Arabia, must provide designated areas for women and families. On another front, female intimate apparel retailers have to comply with the Saudisation requirement of employing only women shop assistants, and had to put up decorative partitions as well as employ shop security personnel to restrict access to female shoppers only.

Comply with law of the land. To operate in a foreign country, trademarks, IP, property real estate law, transport, warehousing, logistics, health and safety, construction codes etc. are serious issues that impact entry and growth.

Choose the appropriate franchise agreement model and partners. For example, choose master franchisees and area developers in preference to single-unit owners. Consider infrastructure setup, logistics, and franchising systems (multi-unit franchisees may offer the best model for rapid international expansion).

Choose appropriate real estate locations.  Considerations include the lack of new properties, high cost of occupancy, quality of the location (physical and environment) etc.
Look for opportunities in older properties that require innovative remodelling and renovation since developers in this region lose interest in anything that is not new.

Research, research and do more research to get close to your customer and capitalise on growing the brand. Above all, do not just knock off cross border success because each case is unique and success factors are not always evident.

Build goodwill by adopting fresh perspective to expand the brand. Take into account geographic issues, political climate, linguistic and cultural nuances, legal complications, franchise structures and economic considerations.

Where to go for help

Entering the Middle East markets is not difficult, but it does require specialist assistance from organisations with experience and understanding of how business is really done internationally. Engaging with Australian Business Consulting & Solutions gives you access to professional advice, mentoring, briefings, and business partner identification, screening, introductions, market visits, licencing and professional legal advice.
If you are considering a business venture in the Gulf contact Camil M. Gereis
Phone: +61 2 9458 7428  Mobile: +61 457 103 963 Fax: +61 9955 8914 
Email: camil.gereis@australianbusiness.com.au  www.nswbusinesschamber.com.au | www.globalinsights.com.au

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