One Of The World’s Most Franchise Friendly Regions
It has been well documented that the Middle East North Africa (MENA) Region is a region in which development was growing and is now slowing due to oil and certainly there is no question that many countries in the region have been impacted by the volatility in the oil market and declining oil revenues. However, the franchising sector in the MENA region remains buoyant and represents a significant opportunity for international brands including those from Southeast Asia.
How do you define the Middle East North Africa (MENA) Region?
While definitions of MENA vary depending on the source, the region can generally be broken into 3 distinct territorial blocks, with definitions that also vary by source, as follows:
- Gulf Cooperation Council (GCC): Bahrain, Kuwait, Oman, Qatar, Saudi Arabia & United Arab Emirates
- North Africa: Algeria, Egypt, Libya, Morocco, Sudan & Tunisia
- The Levant: Iraq, Jordan, Lebanon & Syria
Why Southeast Asian Brands Should Consider Development in the MENA Region
While there are many reasons why Southeast Asian brands should look at development opportunities in the MENA region, some of the key reasons are as follows:
- An amalgam of favorable demographic & commercial factors
- A total population of 297 million people
- A population growth rate of 3%-5% per year
- Total Franchise sector sales of $US30Billion (source MENAFA)
- An investor friendly environment
- A world-class infrastructure in many countries
- A number of franchise industry players with reach across the region
- A significant pool of high net-worth Individuals
- A young and upwardly mobile consumer market
- A common language, similar culture and habits across the region. This is in contrast to SEA where languages, culture and habits vary more dramatically from country to country
Consider GCC Countries as Your Gateway Into the MENA Region
With both Dubai and Abu Dhabi becoming truly global cities, the UAE is typically considered as the logical first step in to the GCC and broader MENA region. However, the Kingdom of Saudi Arabia (KSA) with a population exceeding 30 million is home to more people than all of the other GCC member countries combined. KSA also has the 2nd largest land area in the MENA region and offers commercial opportunities in a number of well-developed cities across the various regions of the country.
The GCC and its 6 member countries are the economic engine of the MENA region and all have a well-developed infrastructure and a sound commercial and IP legal framework. Additionally, all member countries continue to experience positive economic growth despite the negative impact from the oil industry.
All 6 GCC countries rank in the top 50 globally in terms of GDP per capita with Qatar having the world’s highest GDP per capita and with the region having the world’s highest average GDP per capita.
Dos & Don’ts to Consider When Entering the MENA Region
There are many important issues for Franchisors to consider when looking at developing a brand in the MENA region. Some considerations are of course the same or similar to those for other international markets. However, there are a few that appear to be more relevant to the MENA region than in other parts of the world, such as:
The Dos
- Do ensure that your trademark registrations are properly filed across the region.
- Do understand the local commercial and IP laws in each country
- Do create realistic and achievable development and performance targets
- Do prepare to build a long term relationship with your franchisees, based on integrity and trust
- Do develop an understanding and sensitivity to the cultural differences
- Do use capable professionals with regional experience to help with identification and qualification of potential franchisees
The Don’ts
- Don’t grant rights to multiple countries or large areas (e.g. North Africa) unless the franchisee is established and has proven operational success in the area
- Don’t enter any country without an agreement that conforms to local law
- Don’t grant exclusivity without clearly defined and measurable franchisee performance guarantees
- Don’t enter the market without a clear understanding of supply chain and logistics issues. If you are in an F&B business that is not Halal in your home market, modifying your menu offering will be a key area of consideration.
- Don’t expect a master franchise/sub-franchise model to work in all countries
- Don’t expect transactions to conform to the time-frames you experience in other international regions, in terms of the pre-opening time frame from finalizing your agreement to getting the business up and running
Evaluating and Qualifying Franchise Partners in the MENA Region
As with all international franchise agreements the arrangements you reach with franchisees in the MENA region will be long term in nature. Remember, it is virtually impossible to build a good business on the foundation of a bad business relationship, therefore carefully consider the following issues when selecting your partners in the MENA region:
- Do they have existing business relationships internationally and an international attitude towards doing business?
- Do they have Access to adequate growth capital and reserves?
- Do they have tangible access to good locations in their country?
- Do they have relevant experience in your franchise segment (e.g. Food, retail or services)?
- Do they have the necessary infrastructure and distribution channels?
- Do they have an entrepreneurial spirit and are they an enthusiastic supporter of your conceptual positioning and operational standards?
- Do they have the ability to recruit or develop a management team based on your criteria and recommendations?
Some Common Misconceptions & Misunderstandings about the MENA Region
In addition to the dos and don’ts and other advice on selecting franchisees there are a few common misconceptions that we have identified as we have helped many of our clients develop across the MENA Region some of which may bring either a smile or a smirk to you as your read them:
- Everyone in the GCC is rich
- Everyone is related to a sheikh or a prince
- Foreigners are unwelcome (approximately 48% of the GCC population is made up of non-nationals)
- Labor is cheap and readily available
- International trade is heavily restricted
- Market entry is overly complicated
- There are no taxes and cost of living is low
- There is no diversity in population and culture (see population statistics above)
World Franchise Associate’s (WFA) Experience in the MENA Region
WFA has assisted over 50 brands from all over the world to enter the MENA region and has a database of more than 15,000 Middle East franchise operators and investors. WFA understands the challenges and opportunities inherent to developing a franchise business in the region. All of our key directors and shareholders have many years of franchising experience in the region and internationally. Additionally, WFA has a regional office in Dubai headed by Sary Hamway a WFA Director and Shareholder and one of the region’s leading authorities on franchising.
Conclusion
The MENA region represents a significant development opportunity and for brands considering international expansion we highly recommend you take a close look at the opportunity in this region. In doing so you should develop an understanding of the competitive landscape for your business segment and brand and carefully consider your entry strategy, franchise model and terms structure. Having done your home-work you will be in a position to Decide; Commit & Succeed.
Wishing you all the best with your franchise development activities in the MENA Region and Internationally.
