Franchise focus: Middle East

The Middle East today has a $30 billion franchise sector posting 27 per cent growth annually in the Middle East and North Africa region. These statistics come from the Middle East and North Africa Franchise Association (MENAFA) and the growth shows little sign of slowing.

Some $25 billion was spent on new business in the Middle East in 2012, a large per centage of which was within the franchise market.

There are many reasons why the Middle East is becoming such a ripe area for franchising. With a large young and ambitious population, many are keen to take on the challenge of owning their own business, or expanding the ones they have already built.

Managing Director of Franchise Development Services Lebanon, Mahmoud Chahrour, comments: “The population of the Middle East and North Africa is over 200 million, and if you include Turkey, Iran and Pakistan, which in many cases are considered part of the Middle East, then you have a population of over 500 million with a huge percentage of young people well aware of franchising.”

The table (to the right) shows, by country, the Middle Eastern nations with the greatest interest from the population in becoming franchise owners, and their average available capital.

Rapid development

The increasing affluence of several Middle Eastern nations has led to massive infrastructure spend, which has, in turn, made these parts of the region a great place to do business. The Doha Metro for example, as part of the Qatar Rail Development Programme, is amongst the world’s largest infrastructural construction projects, along with Saudi Arabia’s Riyadh Metro, providing vital trade links and cutting journey times considerably.

Recent reports put construction projects in the pipeline in the GCC at more than $1 trillion, $428bn of which comes from the United Arab Emirates (UAE) and and 417 billion from Saudi Arabia.

Construction of course, is known to boost the economy and business. While the Middle Eastern economy is largely driven by the oil and gas sector, in recent years, tourism and services have become ever more significant industries in these countries, and these sectors, with others that relate to them, are standing out as the kind of growth markets that can and are benefitting from the franchise model.

Mahmoud continues: “Food represents the top franchising opportunity due to demand; all major food brands are already existing in the Middle East and plan to grow even more. There are serious investors everywhere and there is lots of money available for investing.

“There are excellent opportunities available in the retail, clothing and hotel sectors, with tourism being an important industry in Middle Eastern countries.”

Markets

We are well aware of the Middle East’s economic powerhouses, with the wealth of the UAE, Saudi Arabia, Kuwait, Qatar and Bahrain all well-documented, but there are a number of rising stars like Oman, Egypt, Turkey, Pakistan and Morocco, and solid prospects for the more distant future, which can look forward to increased development and stability, like Iraq.

Of Iraq, Mahmoud comments: “Iraq would be a great market for franchising once peace is achieved. This is a very rich country with lots of resources and a virgin market for franchising.”

Dubai has made a name for itself as the region’s retail capital on the back of the ever-increasing number of shopping malls open or under construction.

The enormous $6.8bn ‘Mall of the World’ development, announced last year, has been marketed as the first indoor city, and will become the globe’s largest shopping centre, boasting a floor space of some 4.5 million square metres: a perfect home for diverse franchise businesses, and one that will further boost the tourism industry. Indeed, the Dubai Vision economic plan has set a goal of 20 million tourists per year five years from now.

Population

The Middle East is an investor-friendly region, comprised of diverse demographics. It enjoys good support from governments in business matters, with attractive tax schemes and rates backing up the aforementioned outstanding modern infrastructure.

Importantly, there are also large numbers of high-net-worth individuals: estimated at some 400,000 with liquid assets of $5 million or more.

The increasingly youthful population of the region are increasingly affluent, and love to spend on leisure activities and consumer goods. The growing numbers of these malls offer them a dream environment, and their spending power is a boon for business owners.

Middle East: key franchise facts

  • $30 billion franchise sector.
  • 27 per cent annual growth.
  • A huge young population adapting to and adopting western culture.
  • Large and increasing demand for western franchise businesses.
  • Fast food and retail sectors account for more than 60 per cent of the market.
  • All major franchise brands operating; most profitable and growing.
  • Government support of entrepreneurship through franchising and government grants and small business loan programs like ‘Sandook Khaliafh’: a fundnamed after the UAE president to encourage citizens into going into small businesses rather than government jobs.
  • Good understanding of franchising and its systems.
  • Great growth potential for any successful business.