CAIRO: Why start a business from scratch when you can franchise? Franchising has over 90 percent chance of success – unlike starting one’s own business – according to speakers at the first Regional Franchise Development Conference recently held in Cairo.
“If you want to start your own business; if you are smart enough and know your business well, the chances you will survive on the market for a long time are 10 percent, [nothing like] franchising, said Samir Farag, vice president of Coldwell Banker in the Middle East.
Recent figures show that there are currently more than 350 franchising concepts operating in Egypt across the board in the food business, retail stores, sports and hospitality, among others. They represent some $4 million in cumulative investment and employ more than 4,000 people.
“In Egypt, franchising has developed quite extensively, especially in the fast-food sector with over 60 international franchise businesses on the market today, pointed out Shahira Magdy Zeid, vice chairperson of Egypt’s International Economic Forum (EIEF). “Seven of these are American brands and 20 are in non-food sectors.
The US Commercial Service – in cooperation with the Ministry of Trade and the EIEF – organized the conference and the exhibition, which brought more than 20 American franchisors together with Egyptian entrepreneurs to explore business opportunities. Attendees also included regional entrepreneurs from nine countries including Saudi Arabia, the Emirates, Lebanon, Morocco, Tunisia, and Qatar.
“Our [objective] is to build bridges between American and Egyptian companies, and that sort of conference will cement bonds of cooperation between the two countries because franchising is truly a partnership, said Stewart Jones, deputy chief of mission at the US embassy.
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.
According to the Financial Times, if sales by US franchise businesses were translated into national product, they would qualify as the seventh largest economy in the world. There are currently more than 150 US franchise concepts in Egypt.
“Franchise can be superb for economic development because [franchisors] bring in proven concepts and business models that help raise the bar for quality standards and services, explained Amer Kayani, the US embassy’s counselor for commercial affairs in Egypt, Lebanon, and Libya. “They also help develop skills of the young generation who work with them because each franchisor offers a comprehensive training package.
Kayani believes that Egypt offers a lot of wealth and opportunities for the franchising business model to grow, and that’s why it was chosen as a location for the first conference of its kind in the region.
“Being the largest Arab country in the MENA region makes it also by default the largest consumer market, he clarified. “When you look at the tremendous achievement of the current economic team and high growth rate [7.1 percent], the message from Egypt is that it is ready and open for business, and American investors are coming in.
In order to start a franchise, speakers pointed out, a prospective franchisee should conduct extensive research on the brand and develop a business plan before presenting him/herself to the franchisor.
“A franchisor is looking for someone who has experience in running the business and financial capability to [further] grow and expand the business, said Bachir Mihoubi, CEO of FranCounsel Group.
In contrast, a franchisor offers technical and marketing assistance, access to supply chain, as well as training for the staff.
However, statistics reveal that Egypt’s franchise business represents less than one percent of the world’s franchise market, which implies that there are some obstacles along the way. Several franchisees referred to lack of regulations and legislations that govern and organize the franchise market in Egypt, which could complicate the start-up process.
“Egypt does not have specific franchise laws, and most of the franchise business is handled through contractual arrangements, stated Kayani. “Still, not every country has franchise laws. But as the sector grows, perhaps Egypt will consider adding laws that will help develop the business.
