A few years ago, an unusually succulent bun from Southeast Asia was introduced to the UAE market. The franchised concept was an instant hit, with tens of its branded stores springing up in the country within a relatively short time span.
In their country of origin, however, the buns are far from unique, with around half a dozen other franchisers selling an identical product. Curiously, their names are almost identical too, with a minor play of words separating one from the other.
Inspired by this spectacular success, many regional investors hurried to woo those other bun brands, whose offerings, by all accounts, were equally good if not better. Long story short, they all failed — spectacularly.
A woeful number of such examples exist in the retail and entertainment sectors too. In fact, most attempts at blindly emulating others’ franchise success have met with abject failure in the UAE. Here’s why:
Reverse engineering successful concepts isn’t an exact science
Deconstructing the key components of a business model and reassembling them under a new identity is what many copycat investors have sought to do. But whereas the role of behind-the-scenes factors like incisive leadership, a well-honed risk appetite and sheer grit may not be evident, it can be critical. The disparate success rate between seemingly identical sweet bun franchises is a classic case in point.
Circumstantial benefits can be disguised as a good idea
An individual who worked for a major facilities management firm for 23 years got retrenched from his job in Dubai about five years ago. Following some research, he decided to invest in a cleaning franchise and by the beginning of year three, he was a bona fide millionaire. With dirham signs in their eyes, two of his close friends partnered to start a similar enterprise … and lost their shirts.
Diligent observers would have known that cleaning is a brutally competitive business, and that their friend’s operations grew exponentially only because of his extended networks.
Good timing can’t be copied
Many franchise enterprises owe their exceptional results to good timing. This includes the right concept, at the right stage in the economic cycle, at the right demographic inflection point. And although good timing is usually attributed to strategic foresight, it is often just the result of pure luck.
Those who boarded the UAE cupcake wagon relatively late and found it stalling shortly afterward will testify to that.
Some franchisees are failing even when they look like a success
In franchise agreements, the odds are often rigged in the franchisers’ favour. Investors sign development schedules that mandate, say, five locations in four years, and these openings must happen even if the previous units are struggling. Moreover, it’s usually less damaging for a multi-unit franchisee to continue with a sub-optimal operation than to pull out of an agreement mid-stream.
New locations opened in such circumstances portray outward success and inspire me-too investors, who frequently end up disillusioned.
The life cycles of consumer trends are shorter
Be it shopping patterns, food preferences or clothing habits, trends run for a measurably shorter time than before. The reasons for this may be too many to enumerate, but the underlying factor is that incessant change is the new normal, especially with the UAE being an early adopter of latest practices.
Predicting longevity of trends is therefore an exercise in futility, and one might find that by the time an idea has been emulated, everyone else has already moved to the next one.
* The reverse also holds true — Failure doesn’t make an idea unfeasible
Just as aping another’s success doesn’t guarantee your own, drawing unwarranted conclusions from failures leads to missed opportunities. Franchised concepts that initially floundered don’t necessarily imply an unfeasible concept. Instead, a failure might just be a way of learning “how not to do” something.
Submarine sandwiches initially received a lukewarm reception in the UAE, where the Shawarma reigned supreme. Fast forward to the present and both coexist and thrive.
Tech evolution is in overdrive
Technology is inseparable from business and franchising. With every new iteration there is greater shift in the way strategies are devised and transactions are conducted. It’s also impossible to predict which revolutionary development around the corner will change an industry forever.
In such circumstances, aspiring franchise investors must keep a very keen eye on the tech world, where just a few missteps could destabilise an entire franchise system.
Success and failure may leave clues, but those of any consequence can only be unearthed through diligent research and clinical objectivity. In a world where change shows up at one’s door with little notice, the best bet for franchising success is original thought coupled with a hardy, shape-shifting dynamism. That’s definitely what the UAE example points to.
Sanjay Duggal is Vice-President for the Middle East and North Africa Franchise Association.