Dubai: Buying a franchise doesn’t ensure that your business will run smoothly as it comes with risks.
Investors in the Gulf Cooperation Council (GCC) countries are flocking to international markets searching for brands that are not already present in the region. While some manage to run a successful franchise, others don’t.
“Some of the franchises are running successfully in their home countries but once you bring them to other countries, you have different demographics and consumer behaviour, so these affect the franchise,” said Assad Khalil, managing director of Allied Brothers Co, an Abu Dhabi-based consultant management company, on the sidelines of the Middle East Franchise Expo in Dubai on Tuesday.
Pitfalls arise when franchisees don’t research the market they operate in, said Syed Anwar, business development and training manager at London Business Group, which owns London Fish and Chips, a home-grown food and beverage brand.
Franchise owners find themselves in a difficult situation when they don’t have sufficient retailing experience, can’t maintain their cash flow and sustain a good relationship with the franchiser, and, in the case of food and beverage brands, can’t source products’ ingredients from the country they operate in, according to industry players.
“Some of the toppings for the milkshakes we serve [at Hwy 55] are not in the UAE and the Middle East. So we ship them from the US — it’s at a high cost but I can manage,” Khalil said.
Not having a good location is another reason why franchisees are not successful, according to Anwar.
“Most of the concepts that are successful are not doing very well in certain locations because the decision of a location might have gone wrong,” he said.
Also, franchisees fail when they don’t have the required resources to run their operations, he added.
While buying a franchise comes with risks, it is less risky than developing a concept from scratch, industry experts said.
“When you take a franchise, you take a successful concept. But when you take your own concept, you’re experimenting with it. The operational and marketing certainty may not be there. But with a franchise, somebody has tried and tested the market, and operationally it’s been successful,” Anwar said.