Franchisors Look to Branch in the Region

Franchisors look to branch in the region

By Sherine El Madany

CAIRO, June 4 (Daily News Egypt): If you are seeking over 80 percent chance of success in your enterprise, then franchising is the answer for you, according to experts at the MENA International Franchise Exhibition (MIFE) 2008 held on Wednesday.

“Franchising is a very effective business tool that passes on expertise of giant business enterprises with renowned trademarks to small investors by virtue of a contractual agreement between both parties,” said Hany Seif El Nasr, managing director of the Social Fund for Development (SFD).

That is why, he explained, the SFD is going to introduce new services tailor-made for franchising, which will amount to LE 220 million with the maximum amount of LE 1 million for each granted loan.

According to statistics released by the Egyptian Franchise Development Association (EFDA), there are currently more than 320 franchising concepts operating in Egypt across the board in the food business, retail stores, sports and hospitality, banking and financing services, telecommunications, tourism, among others. They represent some LE 40 billion in cumulative investment and employ more than 45,000 people.

“Franchising business is growing substantially in Egypt, and figures speak for themselves,” pointed out Moataz Al Alfi, chairman of EFDA.

He explained that franchising concepts have grown by approximately 7 percent from 210 in 2004/5 to 310 in 2007. Investments in the sector have almost doubled in the last two and half years from LE 22 billion to currently LE 40 billion. Size of annual sales is also on the rise, from LE 5 billion in 2004/5 to LE 9 billion in 2007.

“Franchising also plays an important role in tackling unemployment in Egypt because it is an intensive labor sector,” he added.

By definition, franchising is a method of doing business wherein a franchisor licenses proven methods of doing business to a franchisee in exchange for a recurring payment, fees and a percentage of sales or profits.

Expertise in management systems, marketing and training are commonly made available by the franchisor. By virtue of the contractual agreement, a franchisor may require audited books and may subject the franchisee or the outlet to periodic and surprise spot checks. Failure of such tests typically involves non-renewal or cancellation of franchise rights.

On the other hand, a franchisor offers technical and marketing assistance, access to supply chain, as well as training for the staff.   

Business experts dub franchising a superb tool for economic development, as franchisors bring in proven concepts and business models that help raise the bar for quality standards and services as well as develop skills of labor force through offering a comprehensive training package.

Being the most populous Arab country with a heavy consumer culture, Egypt stands out as a magnet for franchising in the entire MENA region.

“Egypt is a very good market for our business to grow. It is the biggest in the Middle East, and that is why it presented a perfect opportunity for us to come in,” Sharif Wagdy, director of operations of Wataniya Restaurants Egypt, told Daily News Egypt.

“We plan to bring 10 different franchising concepts into Egypt [within the next few years], and this is just the beginning,” he added.

Based in Qatar, Wataniya Restaurants is an owner and master franchisor of 22 portfolios of renowned brand name restaurants such as NY Deli, Outback Steakhouse, Le Cirque and Rainforest Café. The company made its debut in Egypt with the launch of its Rainforest Café in beginning of this summer.

“Egypt is now open up for business, and we didn’t have any trouble [franchising]…or getting our license in Egypt,” said Wagdy adding that simplified business procedures encouraged Wataniya Restaurants to pour in total investments worth a hefty $11 million in only one restaurant.

This year’s MIFE brought together exhibitors from 16 Arab and foreign countries including Canada, Jordan, Saudi Arabia, Italy, Greece, the US, Spain, Malaysia, Ireland, Kuwait, the Emirates, France, England, Turkey and Brazil.

Among the list of exhibitors are Americana, Planet Africa, Mo`men, FedEx, Cilantro, Farm Frites, Heinz, Sarar, Quicksilver, McCain and RadioShack.