LATEST ECONOMIC BRIEFINGS
EMIRATES: DUBAI | 30.07.2010
Dubai’s capital markets appear to be in for significant change with plans unveiled to establish a second-tier stock exchange coming hot on the heels of Dubai Financial Market (DFM) – the government-administered domestic bourse – and the DIFC-based NASDAQ Dubai’s move to formally link their trading platforms. All of this is happening as speculation of a merger between the bourses of Dubai and Abu Dhabi mounts.
ALGERIE | 30.07.2010
Les efforts importants déployés par l’Algérie pour augmenter la production céréalière commencent à porter leurs fruits, dans la mesure où les récoltes record de l’année dernière et les rendements importants de 2010 aideront à réduire les coûts d’importation et à créer des emplois sûrs dans les zones rurales. Cependant, l’objectif de l’autonomie alimentaire fixé par le pays reste encore bien éloigné.
SENEGAL | 30.07.2010
Le Sénégal est en train de devenir un leader en matière de développement de l’énergie solaire comme énergie de l’avenir, et ce, à la fois à l’échelle nationale et continentale. Pour y parvenir, le pays veut augmenter l’utilisation des énergies renouvelables afin de surmonter ses propres manques et promouvoir un grand programme international ayant pour but de mettre fin à la dépendance de l’Afrique de l’Ouest à l’égard des combustibles fossiles.
BULGARIA | 30.07.2010
Though Bulgaria’s economy is likely to remain in the slow lane for the rest of this year, the country’s banking sector continues to show resilience in the face of global economic contraction. There are concerns, however, that increasing levels of bad loans carried by some lenders could add to pressures on the sector.
OMAN | 28.07.2010
A raft of new agreements recently signed by the Ministry of Transport and Communications will see a significant round of investment in Oman’s transport infrastructure. The 15 agreements, signed earlier in July, cover projects in land, sea and air infrastructure and are worth a total of OR136.9m ($355.9m).
COUNTRY COVERAGE
Bright Franchising Future
Egypt, Volume 176
23.02.2007
23.02.2007
Across the Middle East, businesses and governments are becoming increasingly aware of franchising's potential. The franchise industry in the MENA region is valued at over $14bn and is growing at an annual rate of 27%. Egypt is at the heart of this growth with a January 2007 census by the Egyptian Franchise Development Association (EFDA) counting 290 full format franchises, up from 212 in 2005.
Since Wimpy, a UK-based hamburger restaurant chain, became the first company to take advantage of former President Anwar Sadat's 'open door' policy in the 1970s, Egypt has had an influx of foreign chain restaurants and the franchise concept in the food sector has developed swiftly. The trend is still strong today with US firms Sbarro and Papa Johns opening their first outlets in Egypt in the last few months. Meanwhile, Egyptian restaurants such as Mo'men are using the franchise model to expand their businesses both domestically and internationally.
While the food franchise market is not yet saturated, the retail sector, particularly clothing and lifestyle brands, appears to offer the most obvious franchising opportunities. Anticipating a new wave of franchise deals, Franchise Excellence, a Kuala Lumpur-based franchising marketing firm, opened an office in Cairo in January 2007. It is working in partnership with Hands-On, a local management consultancy firm. Mohamed Kandeel, a partner at Hands-On, told OBG that after several years of strong economic growth, the Egyptian franchise environment has reached "the right time to flourish. We expect apparel to be at the forefront of this trend and all we need are a few success stories to increase awareness of the franchise business model."
One such success story in the GCC is Riva, a fashion retailer originally from Paris and now based in Kuwait, who recently announced plans to expand into Egypt. The company has built a successful business model in the Middle East based on buy-when-you-see purchases and products that appeal to local tastes. In 2006, SAS-Egypt, a joint stock company, brought brands such as La Senza and Esprit to one of Cairo's top shopping malls.
Egypt has a high number of 'class A' consumers, people with a monthly income of over 10,000 Egyptian pounds ($1755). Some who work closely with franchising are aware of the strong demand for high end products. Hatem Zaki, an EFDA board member, told OBG, "Anyone who doubts the purchasing power of the Egyptian market should consider, as a salient example, the success of mobile phones in the country."
The granting of licenses to Egyptian factories to produce foreign branded clothing also has benefits. Nike currently has some of its cotton wear produced in Egypt. Industry analysts say the business model they provide and the demand from domestic and foreign market has the potential to rejuvenate the Egyptian textile industry, which has been in decline in recent years due to a lack of investment.
Home-furnishings is another area of potential growth. The highly successful Swedish company Ikea are investigating the possibility of entering the Egyptian market, although import regulations are a possible stalling point, according to Jim McCallum, group director of the Dubai-based retail conglomerate Al-Futtaim, which holds the Ikea franchise.
Traditionally, high import taxes have proved significant disincentives to foreign franchises but the recent drop in taxes and the pro-franchising stance of Prime Minister Ahmed Nazif's cabinet suggest conditions are likely to improve. Analysts suggest greater obstacles come from franchisors' policies and a lack of practical knowledge among Egyptian bankers and lawyers.
Some industry insiders say the current trend of offering master franchises to MENA regional directors does little to help Egyptian business as they have a tendency to expand only into big cities and are often unaware of regional differences. Zaki said, "They would be better served by appointing area developers for each country and sub-franchising to talented local entrepreneurs who are more aware of the local market and have the resources to expand outside of major cities."
Zaki told OBG there is also a need for a better understanding of the potential of franchising amongst bankers, greater liquidity in the banking system to finance loans for small franchisees and a greater knowledge of franchise legal practice amongst the country's lawyers.
The EFDA, a non-governmental organization (NGO) was founded in 2001 to promote franchising as a business model in Egypt. It works closely with another NGO, the Social Fund for Development, to provide tailor-made financial and legal services to franchisees. As a result of their efforts, Egypt became the first country in the Middle East and the second country in Africa, after South Africa, to be admitted to the World Franchise Council (WFC). In April, Cairo will host the WFC annual exhibition with an eye to showcasing the country as a centre for investment.
Since Wimpy, a UK-based hamburger restaurant chain, became the first company to take advantage of former President Anwar Sadat's 'open door' policy in the 1970s, Egypt has had an influx of foreign chain restaurants and the franchise concept in the food sector has developed swiftly. The trend is still strong today with US firms Sbarro and Papa Johns opening their first outlets in Egypt in the last few months. Meanwhile, Egyptian restaurants such as Mo'men are using the franchise model to expand their businesses both domestically and internationally.
While the food franchise market is not yet saturated, the retail sector, particularly clothing and lifestyle brands, appears to offer the most obvious franchising opportunities. Anticipating a new wave of franchise deals, Franchise Excellence, a Kuala Lumpur-based franchising marketing firm, opened an office in Cairo in January 2007. It is working in partnership with Hands-On, a local management consultancy firm. Mohamed Kandeel, a partner at Hands-On, told OBG that after several years of strong economic growth, the Egyptian franchise environment has reached "the right time to flourish. We expect apparel to be at the forefront of this trend and all we need are a few success stories to increase awareness of the franchise business model."
One such success story in the GCC is Riva, a fashion retailer originally from Paris and now based in Kuwait, who recently announced plans to expand into Egypt. The company has built a successful business model in the Middle East based on buy-when-you-see purchases and products that appeal to local tastes. In 2006, SAS-Egypt, a joint stock company, brought brands such as La Senza and Esprit to one of Cairo's top shopping malls.
Egypt has a high number of 'class A' consumers, people with a monthly income of over 10,000 Egyptian pounds ($1755). Some who work closely with franchising are aware of the strong demand for high end products. Hatem Zaki, an EFDA board member, told OBG, "Anyone who doubts the purchasing power of the Egyptian market should consider, as a salient example, the success of mobile phones in the country."
The granting of licenses to Egyptian factories to produce foreign branded clothing also has benefits. Nike currently has some of its cotton wear produced in Egypt. Industry analysts say the business model they provide and the demand from domestic and foreign market has the potential to rejuvenate the Egyptian textile industry, which has been in decline in recent years due to a lack of investment.
Home-furnishings is another area of potential growth. The highly successful Swedish company Ikea are investigating the possibility of entering the Egyptian market, although import regulations are a possible stalling point, according to Jim McCallum, group director of the Dubai-based retail conglomerate Al-Futtaim, which holds the Ikea franchise.
Traditionally, high import taxes have proved significant disincentives to foreign franchises but the recent drop in taxes and the pro-franchising stance of Prime Minister Ahmed Nazif's cabinet suggest conditions are likely to improve. Analysts suggest greater obstacles come from franchisors' policies and a lack of practical knowledge among Egyptian bankers and lawyers.
Some industry insiders say the current trend of offering master franchises to MENA regional directors does little to help Egyptian business as they have a tendency to expand only into big cities and are often unaware of regional differences. Zaki said, "They would be better served by appointing area developers for each country and sub-franchising to talented local entrepreneurs who are more aware of the local market and have the resources to expand outside of major cities."
Zaki told OBG there is also a need for a better understanding of the potential of franchising amongst bankers, greater liquidity in the banking system to finance loans for small franchisees and a greater knowledge of franchise legal practice amongst the country's lawyers.
The EFDA, a non-governmental organization (NGO) was founded in 2001 to promote franchising as a business model in Egypt. It works closely with another NGO, the Social Fund for Development, to provide tailor-made financial and legal services to franchisees. As a result of their efforts, Egypt became the first country in the Middle East and the second country in Africa, after South Africa, to be admitted to the World Franchise Council (WFC). In April, Cairo will host the WFC annual exhibition with an eye to showcasing the country as a centre for investment.
