Steps to franchising your business

Having a great business idea is not enough to secure your financial future in the world of franchising. Read on to find out how you can prepare for the journey

  
Image used for illustrative purpose. Franchising has found a fertile ground in the Middle East and North Africa region, where the industry is valued at more than USD 30 billion.

Image used for illustrative purpose. Franchising has found a fertile ground in the Middle East and North Africa region, where the industry is valued at more than USD 30 billion.

Getty Images/Xavierarnau

Franchising has often been described as one of the most successful business models ever invented, and for obvious reasons. It allows people with capital to become business owners without having to come up with their own concept and business model by simply replicating an already profitable venture.

Building a successful and recognisable brand in the hopes of eventually franchising their business model – and reaping the financial rewards that come with it – is a goal many entrepreneurs share. But an excellent business idea alone is not enough to ensure a sustainable and strong franchise brand, according to Imad Charafeddine, chairman at franchise business consultancy Francorp.

“A business must also establish a proper process for developing their franchise programme, not to mention their leadership and commitment, as well as maintaining constant support and supervision towards their franchisees,” he said.

Franchising has found a fertile ground in the Middle East and North Africa region, where the industry is valued at more than USD 30 billion, with annual growth at an impressive 27%, Charafeddine pointed out.

“The Middle East markets are lucrative in terms of volume with a presence of more than 400,000 high-net-worth individuals, each with liquid assets of more than USD 5 million to invest in new businesses,” he explained. “That means over 13% of the population are very rich and together have available funds of more than USD 2 trillion. Developing proven business franchise opportunities and encouraging investment in the domain can go a long way in sustaining the MENA economic future.”

GCC franchising issues

As a global consultancy, the US-based Francorp has been operating since 1976. But realising the growing potential of the Middle East, the company set up its regional office in Dubai more than a decade ago.

In the Gulf region, Charafeddine said despite promising growth prospects, the lack of an official franchise association, which can support and provide the legal framework for a region-wide industry progress, is an underlying issue facing the sector.

“For entrepreneurs, some of the challenges are lack of knowledge on their strategic decision and specifically goals and objectives, which will define all their plans of action and execution of their franchise programme; lack of proper legal structure that allows them the full protection on their brand and any proprietary products; and failure in choosing the proper franchisees that sometimes might affect their brand or expansion plans,” he said.

Nevertheless, opportunities still abound in the regional franchising sector, according to the Francorp chairman.

“One of the greatest aspects of franchising is that it is not specific to any particular business,” he said. “We have franchised everything from clinics and real-estate companies to spas and, of course, food and beverage concepts.”

Based on Francorp’s experience, F&B represents the lion’s share of franchising activity in the GCC at 60%, followed by retail at 25% and services at 15%. But Charafeddine claims that they are starting to see more developments in the service and retail sectors, with beauty and spa services, child enrichment, property management and B2B services becoming popular.

There is also a growing trend of regional franchisors from the GCC and Levant exporting their brands within the region and internationally.

Things to consider

Some considerations that entrepreneurs must take into account when planning their franchising journey are the markets they want to enter; the franchise formats that are suitable to their development goals; their target franchisees; and the fee structure such as franchise and royalty fees, advertising and marketing funds.

“Furthermore, they need to decide what type of legal structure they should have; how they should protect themselves and their franchisees in the market they operate; how they should deliver the proper know-how transfer; how to monitor it and provide constant support; how to market their franchise business and how to evaluate potential franchisees,” Charafeddine added.

The Francorp chairman offers the following tips to entrepreneurs planning to start a franchise:

  1. Always align your goals and objectives before starting any franchise business programme.
  2. Always plan a proper expansion that start within your inner circle then expand regionally or globally.
  3. Plan your fee structure based on technical decisions rather than norms or common practices.
  4. Have a proper legal structure in place that protects and differentiates the company that owns the trademark from the one that sell or sign franchise agreements.
  5. Always choose franchisees that fit your criteria or profile.
  6. Never partner up with your franchisees.
  7. Have the commitment, dedication and involvement from day one or else the franchise model would fail.

Note: This article was originally published on Accelerate SME and it has been republished on Zawya with full copyright permission.

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

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