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Business conglomerates like the Alshaya Co., Bin Hendi Enterprises, Emarat, Jawad Business Group, the Jumeirah Group and Gourmet Gulf to name a few have already established themselves as successful multi-brand franchise owners in the Middle East. There ar
AS the multi-brand franchise format eventually picks up pace in some developed and emerging nations, the dust seems to have virtually settled down in the Middle East, particularly in the Gulf countries, where it is archetypal for cash-rich business conglomerates to own multi-brand franchises. With numerous global franchise brands under their aegis, these business groups today stand at the stronghold of an entirely new franchise empire. Given the abundance of HNI (high net worth individuals), strewn across the Middle East, the fate and market of these franchise brands is considered to be ready for success.
Why Middle East?
As per recent reports, the Middle East markets have over four lakh high net-worth individuals, each with liquid assets of more than $5 million to invest in new businesses, which is more than 13 per cent of the population, which is very rich and together have available funds of more than US$2 trillion. Dubai continues to be the preferred base for franchised operation. However, most countries in the Middle East region do not have franchise-specific legislation.
The Middle East franchise market is dominated by a diminutive number of players, having as many as 50-55 brands in their portfolio. Highlighting this predominating trait, Dr Rahma Bin Mohamed Al Shamsi, Retail Sales Manager at Emarat, states, “The Middle East has been a global retail centre for many years but all of the skill and expertise was imported. So, it is good to see the development of international standard brands locally and then to see this expertise spread around the world.” Explaining the evolution of multi-brand franchise format in the Middle East, Tapan Vaidya, General Manager (Restaurant Division), Jawad Business Group, Bahrain, elaborates, “Franchising in the Middle East started in the 80s when American QSR concepts started to enter regional markets. Strong brands made it while concepts with inadequate quality support fell off. This further evolved with the advent of “Casual Dining” in the 90s, which proliferated into the new millennium through more of CDR.”
Given the growth achieved by franchise brands, early indications from research reports have pegged the annual growth of Middle East franchising sector to be around 25 per cent in 2011, back to the levels of 2008. With such a robust forecast, global franchise brands that have consolidated their position have already turned to be paradigm of success, attracting other western counterparts to make a beeline and head to the Mecca of franchise success. With the franchisee licence, these brands are positioned in several luxury and super shopping malls, developed continuously across Dubai, Bahrain, Kuwait and other primary areas of the region.
The Alshaya Co. has built a huge portfolio of franchise licenses, including UK fashion retailers Mothercare, Debenhams, Next, BHS, Topshop, River Island, The Body Shop, Clinique, Estee Lauder, Pearle Opticians, Boots, Starbucks, Foot Locker and Pizza Express. Gourmet Gulf, a pioneering food and beverage retail company operating premier casual dining brands in the Gulf, operates units of globally famed food chains- YO! Sushi, Gourmet Burger Kitchen and California Pizza Kitchen. Gourmet Gulf Company currently operates outlets in UAE, Kuwait, Oman and Bahrain, and has announced plans to have 100 outlets by 2014. The Landmark Group has diversified in leisure, food and hospitality segments with Fun City, Gourmet Station, Spaces, Citymax Hotels and Foodmark, the restaurant division which includes franchise brands like Mango Tree, The Meat Company, Carluccio's, La Gaufrette, Bazerkan and Ushna.
Speaking about motivating factors, Dr Rahma Bin Mohamed Al Shamsi explicates, “We have also developed comprehensive training and operating manuals, our inspiration is to make the brand and experience available to all.” Confides Vaidya, “At Jawad Business Group, we operate in over 300 locations in the Middle East and India in restaurants and coffee shops. Some of our major brands include Chili's, Papa John's Pizza, Burger King, Costa Coffee, Dairy Queen, Romano's Macaroni Grill, etc. We will continue to build our successful restaurants across the Middle East and simultaneously grow Papa John's Pizza, Chili's and The Great Kabab Factory in India.”
With the Middle East establishing itself as a commercial hub and several international franchisors making their way to the region, competition amongst brands seems natural. Refuting even an iota of competition in the multi-brand franchise model, Dr Rahma Bin Mohamed Al Shamsi says, “International franchisors bring best practice from other markets. However, their “offer” can be quite similar and not specifically suited to the “unique” demographics and requirements of the diverse UAE clientele.”
Vaidya elaborates, “Dubai is the epicentre of restauranting in the region; so much on offer that one is spoilt for choice. This has always attracted franchisors from around the world to descend onto this market.”
What defines success
However, with this much success and diversity, there's a question mark on the operational aspects of so many franchise brands at one go. From premium to luxury to F&B, clothes, accessories, lifestyle, the presence of numerous diversifications under one business conglomerate often leads to risks like breaking brand synergies and creating brand overlap. So, how well can these vital franchise aspects be maintained? Elaborates Vaidya, “It is important to ensure no overlap in brands to allow direct focus on the brands one has in the portfolio. Overlap by definition will affect synergy levels and should be avoided. Synergy can be easily achieved in various aspects, including all support functions like finance, HR, administration, soft-skills training, marketing and supply chain.”
Echoing similar views, Phil Broad, Managing Director of Jumeirah Restaurants LLC, explains, “The most important area is brand differentiation on food quality, service and the colleagues that serve our customers. The operating system will be able to give you synergy in many cases in areas such as health and safety, procurement and financial processes.” But Broad cautions, “It is very complex to run multiple brands and therefore, unless you have a talented and focused team around you, each additional brand will be distraction.”
Owning and operating diverse portfolios often entails to a plethora of opportunities as well its share of some unique challenges. Says Vaidya, “A diverse portfolio of concepts allows one to generate economies of scale through synergising back-end support functions as well as inventory procurement. Additionally, with different concepts, opportunities get multiplied in every trade area.”
As a master franchisee, most of these brands sub-franchise, which entails a robust support system. Dr Rahma Bin Mohamed Al Shamsi expresses this point well, saying, “The franchisee is supported at every step. However the adage, the more you put in, the more you get applies, whether this is site selection, staff recruitment and training.”
Think before you multi-franchise
Amidst so many brands, experts chip in a word of caution. “Strong competition is firmly entrenched with loyal customers across restaurant segments in the region and in the UAE, franchisors must tread carefully. They ought to identify key variables through research conducted in the market to understand local tastes and preferences before finalising menus and prices. It is equally important to hire the best talent available, this asset can make or break a business,” suggests Vaidya. While Dr Rahma Bin Mohamed Al Shamsi opines, “My advice is, don't just cut and paste your offer, study the market, the real estate, culture, customer preference and above all, give customers what they want and not just what you think they should want because that worked in x, y and z country.”