Franchising in the GCC - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

Location - Gulf Cooperation Council (GCC)
http://en.wikipedia.org/wiki/Cooperation_Council_for_the_Arab_States_of_the_Gulf

The Council comprises the Persian Gulf states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

Background:

• The franchising industry grew 27% last year alone in the Middle-East.
• 'The 20 per cent annual growth of the FME in itself reflects the kind of interest Middle East as a franchising destination is generating. The retail industry in the Middle East is developing at a frenetic pace. At AED 30 billion, it is already the fourth largest contributor to UAE's GDP.
i. Although tremendous opportunities for new products and services are being created, the growth is also accompanied by intense competition between the incoming and the established brands, retailers, vendors and other service providers.
• Almost half of all franchises offer fast food. The industry is valued at $14 billion.
• Dubai is a major re-export center for perishable food products serving markets such as the GCC, Russia, Africa and India – a consumer market of over 2 billion people
• In the UAE, annual food imports are as high as $4 billion. This figure is expected to rise due to the strong economic growth as well as an increase in tourism and the natural populations.
• International franchising continues global expansion by embracing the Internet and on-line communications, as service franchises become a primary focus.
i. The U.S. is the best in the world at business systems and services. Prospects in far-flung countries, small and large, entice moderate and mid-sized franchisors to consider expansion through master licensing deals.
ii. Growth venues are in industries such as auto, business services, chemical application, executive education, logistics, pet care, retail, sports training, moving, residential and personal service franchise concepts as well as in the food and lodging sectors.
iii. At the same time in various countries, foreign franchise associations are developing beyond consultant clubs to become bona fide business organizations that benefit franchisors

Advantages of the GCC

• The Middle East's strategic geographic positioning uniquely places it midway between Europe and East Asia has only facilitated this growth - increasingly, Middle East is being perceived as an ideal business base that allows businesses to tap the best of all the worlds.
• Lifestyle changes throughout the region appear to be responsible for the increase in popularity. More women are working, resulting in less time to cook and disposable income.
• The other peculiarity of this market stems from the fact that it is a Baby -Boomer market with half of the local population under 29 years of age, and with a continuing average annual population growth of 3.5 per cent per annum.
• An additional catalyst is the largely composite population profile of the region.
i. Dubai in particular makes for a perfect case study as a city that is experiencing maximum positive spin offs due its heterogeneity. The expatriate population in Dubai which is a mosaic of 160 foreign nationalities represents 80 percent of the total workforce and the numbers continue to swell.
ii. A large chunk of this population is drawn from the Indian subcontinent. 30 percent of the expatriates come from Europe and the US, while recent years have seen a significant increase in resident communities from Australasia and South Africa.
iii. This diversity creates a consumer base drawn from broad social and cultural catchments. Such a scenario inherently creates a demand for a wide range of products and services from heterogeneous markets.
• Already plans to invest more than $580 billion in the tourism and hospitality industry between now and 2020 – there are currently over 200 projects worth over $23 billion under construction in the Arabian Gulf
i. Spending on leisure and tourism products is expected to reach $3 trillion by 2020.
ii. Annual revenues in the GCC’s attractions, entertainment and leisure industry are currently $10 billion
iii. There are several independent firms who are working to smooth over supply chain operations
• A number of companies are looking for strong growth in Middle Eastern countries. Well known franchises, including The Athlete’s Foot, Subway, Baskin Robbins, Benetton, Hertz and Domino’s Pizza are all expanding rapidly in the region.

Whats happening?

• Over the next decade the introduction of hundreds of fresh, locally nurtured
franchise concepts emerging within Dubai and the Gulf States will set the stage
for a great revolution of neo-consumerism. So what are the four key factors
driving this movement?
i. Firstly, the places to park new concepts; the current, ever-expanding construction phases in Dubai, UAE, GCC and all over Asia, provide a highly fertile ground for such concepts to nestle in, a home in the newly designed and creatively appointed decors, so that new concepts with the most lavish and appealing ideas would flourish. The combination of creative concepts blended with thousands of newly built access with improved consumer interaction is a very positive sign.
ii. Secondly, the Middle Eastern consumer at large is becoming increasingly fussy and armed with demanding attitudes towards high quality, better services, value and assurances while seeking emotional alliances with brand acceptance and responding to name identity recognition. The smarter and more difficult the customers, the better, resulting in best offerings with more sensible high-profile brand identities.
iii. Thirdly, a global tidal wave of new ideas; the current globalization of the best
original ideas parked under globally protected name identities, applying the
power of delivering unique selling propositions and making them available in
multiple countries and across continents is on the march. All over the world,
the race for syndicated/franchised ideas is on at full speed. The question is
either whether a country simply gets washed over, or takes a stand with innovative and homegrown counter offerings.
iv. Lastly, the new-name-economy; the sudden realization by serious business players to carve out a 100% proprietary, Five-Star Standard brand name identity with global ownership as the ultimate weapon to market a product or service on the world scene as an essential tool to franchise has finally come to reality.
• The market for retail space is booming currently as huge new malls in almost every GCC country are being built.
i. These malls will require a several food and beverage providers to populate them..
ii. Overall, Duabi’s indoor retail space is expected to increase up to 20 million sq.ft by 2010
i.
• Historically, the US led the franchise revolution now adopted worldwide creating
great legends. Today, in the West with over 100,000 different franchise offerings
and turning over a trillion dollar in businesses this model of commerce is spreading its wings fast in GCC and Asia.
i. For example, tomorrow's India alone would easily absorb some tens of thousands of big and small new franchise ideas; locally developed, locally nurtured with international concerns to protection to give them easy access to park themselves anywhere in Asia or around the world. This industry would employ millions and serve hundreds of millions of customers from the well-to-do sector of the growing Indian population.
ii. GCC too, is on its way to have hundreds of its own brand new local ideas, designed to deal with local service issues, culture and sensitivities to its taste, style or religious needs. There can easily be thousands of outlets to service its population with dramatic shifts in demographics at play. The local original ideas from GCC too can be further expanded to Asia, MENA and Europe etc.

Things to consider

• It is necessary to play the expansion game under global standards of trademark protection, armed with a deeper understanding of international rules of image marketing as the new standard. The days of common promotional logo-driven branding are numbered.
• Furthermore, there are also major leadership challenges issues in order to harness
the advance level of franchising in Gulf countries for a maximum impact;
ii. Acquiring a deeper understanding; global image repositioning issues
are becoming more and more critical, slowly shifting the western brands powers to the emergence of newly-created Asian brands with traditions and lifestyles in mind, also giving Dubai and Gulf countries an opportunity to join the race, and take the quantum for new franchise-able identities. These issues also rest with the educational fronts where there is a critical need to train tens of thousands of local front line managers into marketing and branding-savvy personnel, so that in turn, they become instrumental in creating great success stories from within the companies. The importance of creating a deeper understanding among every front line manager is to adopt standards while appreciating the powers and the role of intellectual property in such a combative upcoming global franchise wars.
iii. Localization; as an owner-operated-business-occupational activity, there is nothing better than the franchise model. The real success of this concept came when managers became owners, resulting in a high level of loyalty, service and performance which fueled quality control and growth.
Today, in countries all over GCC, finding great occupational activity for the
younger population, and to offer them a platform for turnkey businesses is one
of the best long-term strategies for the future. To encourage an owner-operated model would involve family type business at the grassroots level and also create a safer environment to carry the business forward and expand into more outlets or other similar models.

Recommendations

• To go fast forward, the players must create the best value propositions, create
the best service models but most importantly acquire an absolute 100% ownership of your brand name identity so you can play the hassle-free international expansion game without being embarrassed at each step of trademark conflicts.
• The strictest application the five star standard of naming will ensure long-term success and earn a hassle-free-global premium positioning. The name issue alone will have the best ideas sacrificed. Study the subject and acquire a deeper understanding, test the waters and aim for the expanding neighboring markets.

Sources

1. http://www.turkishweekly.net/news.php?id=51469
2. http://www.oxha.org/alliance-alert/2006-q1-jan2013march/alert.2006-01-25.4131366355/
3. Gulf News Weekly – January 17th, 2008