UAE fertile ground for franchising by Asian firms

Dubai: Given the UAE's demographic mix, brands from Asia, particularly India, have the potential to create franchising opportunities.

"When Indian companies look at growing outside, the first market they see is the UAE," said Gaurav Marya, managing director of Franchise Middle East.

"We have a large population who love living in the UAE, but who would also like to consume Indian brands."

Of the 50 brands exhibiting at Franchise UAE 2011 — which opened last Thursday and closed on Saturday — 85 per cent were of Indian origin. These included Gitanjali Lifestyle, Derby, Café Jubilee, Tie rack, Satya Paul, Siyaram's, Funland, Strands Salon & Spa, and Cocoberry.

According to a recent report by CB Richard Ellis titled How Global is the Business of Retail, Dubai was a top target for Asian retailers targeting markets outside their home region and second only to London. "Notably, these are the only two cities [outside of Asia] where more than 10 per cent of Asian retailers have a presence, which reflects the fact that most Asian retailers have yet to leave their own region," the report also said.

Along with Indian brands, local ones are also turning to franchising to fund growth and expansion. "At least 10 per cent of our brands are UAE brands," said Sary Hamway, CEO of FranExcel, a franchise consultancy company.

"The most successful of our home-grown brands are London Fish & Chips, Choco'a, Heritage of Henna and PropahT."

Noodle House, owned by Jumeirah Restaurants, is an example of a homegrown brand that has expanded across the Middle East. Just Falafel, another home-grown food retailer, is looking at expanding into the GCC and Europe.

"The future is great for the regional franchising industry. Demand and growth are consistent and there is awareness of the benefits of franchising in the Middle East," said Chirine Ajami, senior consultant and director for FranCorp Middle East. "There is a lot of scope for homegrown brands to go international."

European domination

So far, the Middle East franchise market has been largely dominated by American and European brands. One of the reasons for the slow uptake of homegrown franchise expansion is the mindset of regional entrepreneurs.

"Franchising for this region is new and when it comes to the subcontinent we're just tapping into it," said Abdul Basit Al Janahi, CEO of Dubai SME.

"Culturally, people like to do things on their own and on what they have created. It's difficult for us to let someone else take over."

"The licence we issue through the Department of Economic Development called the Intilaq licence, which is for home businesses, has passed 5,000. There are a lot of people doing business from home and they make a lot of money."

"What we're trying to do today is to push them to go out and expand their business that way."

According to the International Franchise Association, the industry is currently valued at $30 billion and is set to grow 27 per cent annually.

Traditionally in the Gulf, franchise opportunities are dominated by the fast food and retail categories, which make up almost 60 per cent of the market. One success story is Subway, which entered the market in 1998 and expects to finish this year with over 125 stores.