Up to 150 regional family-owned companies may franchise their brand outside of their home market in the next three years as they look to grow their regional footprint, a leading franchising consultant has said.
Restaurants and service businesses are most likely to look at the franchising model but many are being held back by a reluctance to lose overriding control of the company, Michael Seid, founder of MSA Worldwide, told Arabian Business.
“There’ll be a lot of companies in this next year who express an interest [in franchising]. I’ll be surprised if in the next three years between 50 and 150 companies haven’t expanded,” he said.
“Restaurants, service businesses, anything to do with professionals will take off very well,” he added.
“There are some extraordinary restaurants that if they were in any other part of the world and people had an entrepreneurial spirit they would be leaping to it.”
The Gulf has long been a magnet for retailers and restaurants looking to expand their business through franchise thanks to its wealth and large numbers of foreign workers.
Dubai, home to the Middle East’s most lavish malls, is the second most popular city for American retailers to expand outside of their home market, according to a recent study by global real estate consultants CBRE.
Dubai-based BinHendi Enterprises established 7Franchise Group last year in a bid to sell its local food and beverage concepts to investors across the GCC and wider Middle East. But very few family-owned businesses have expanded their geographical reach through franchising, said Seid, who this month opened MSA Worldwide first Middle East office in Dubai.
“The whole concept of running a good family business but letting someone outside of the family run the branches and giving away day-to-day control is a very odd concept [in this region],” he said.
“You are looking at a market that is in my opinion prime for finding itself as an entrepreneurial market again. I truly believe that the market is right now ready for some very strong indigenous growth.”
The low cost involved in franchising coupled with increased brand recognition is likely to encourage more family-owned business to consider the franchising model, added Seid.
“Every time a franchise is opened, the company that franchises that company [see] their brand value go up, it gets a revenue stream from the sales and it may get a revenue stream from the sales of products and goods. It didn’t risk much because it wasn’t its capital that went into opening that location.”
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