Franchising Opportunities in Dubai, UAE and the Middle East

July 19, 2024

Franchising is simply a method for expanding a business and distributing goods and services through a licensing relationship.  In franchising, franchisers (a person or company that grants the license to a third party for the conducting of a business under their marks) not only specify the products and services that will be offered by the franchisees (a person or company who is granted the license to do business under the trademark and trade name by the franchisor), but also provide them with an operating system, brand, and support.

The Advantages of a Franchising

A franchiser provides an established product or service that may already enjoy widespread brand-name recognition. This gives the franchisee the benefits of a pre-sold customer base which would ordinarily take years to establish. Franchising increases your chances of business success because you are associating with proven products and methods.

Franchisors offer important pre-opening support (site selection, design and construction financing, training, grand-opening program) and ongoing support: training national and regional advertising operating procedures and operational assistance ongoing supervision and management support increased spending power and access to bulk purchasing

One of the significant benefits of becoming a Franchisee as opposed to starting your own business from scratch is the lower risk of failure. The statistics are overwhelming when comparing the success rates of Franchisees versus stand-alone businesses.

The Disadvantages of a Franchising

The franchisee is not completely independent. Franchisees are required to operate their businesses according to the procedures and restrictions set forth by the franchiser in the franchisee agreement. These restrictions usually include the products or services that can be offered, pricing, and geographic territory. For some people, this is the most serious disadvantage to becoming a franchisee. In addition to the initial franchise fee, franchisees must pay ongoing royalties and advertising fees (royalties).

In the GCC, more than 50 percent of retail sales are generated from international brands, and in the leading malls, the retail mix is as much as 80/20 (international brands versus home-grown).

Acutely aware that in a race to secure customer loyalty, the malls need to create a mix that is a combination of tried and tested brand leaders with innovative, exciting, and fresh concepts; leasing teams are notoriously finicky when it comes to awarding retail space.  One thing is for sure, only the best in their field will be entertained. In the most important malls, you can open a retail store only if the brand already exists somewhere else; no new brand is accepted. In any case, you need to respect some regulations; for example inside the Dubai Mall, you need to significantly renew your shop every 2 years, to offer visitors something new.

Fast-food has been the darling of the retail sector and it is said to account for 40 percent of the franchising market. Eating out here is inherent in the culture and with a growing number of tourists to accommodate, the fast-food, casual dining category appears to remain the leading contributor to retail revenue for years to come. Not surprisingly, U.S. concepts are the most revered, particularly with the young and aspiring. Attracting the attention of this group is paramount to many businesses here, as it’s estimated that more than half of the region’s population is under the age of 25.
U.S. and U.K. brands dominate across all categories but there has been success among brands from around the globe, including France, Germany, Italy, Holland, Brazil, Canada, and the Far East among others. U.S. and U.K. brands remain high on the target list for many of UAE’s premier retail investors. They have proven acceptability here and are thought of as being reliable, consistent, and mature.

The legal system here is founded on Sharia law, a system of religious and social responsibility. The region’s leaders are all too aware that changes are needed if the GCC is to be truly an international player. There have been many initiatives to amend the constitution to reflect international legal standards and significant changes have been made particularly in relation to intellectual property rights and licensing laws. The GCC is dedicated to its continuing legal evolution and is generally considered to be franchise-friendly.