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Look east to the opportunities of franchising in the UAE

Written by Ryan McChrystal on Monday, 12 January 2015. Posted in Analysis

A steady flow of franchises are setting up shop all over the UAE, especially in Dubai. But what is driving this demand to do business in the emirates?

Look east to the opportunities of franchising in the UAE

Since its inception, the UAE, a federation of seven emirates including Dubai and Abu Dhabi, has gone from nothing but vast desert land and small local trading communities, to having some of the most fertile areas to set up shop in the world. The country’s most populous city, Dubai, is undoubtedly the business hub of the Middle East, with access to 2.2 billion consumers. Its location and timezone makes it is the perfect gateway between east and west. 

However, there is more to Dubai’s success than mere geography. With 80-85% of its 2 million population made up of expats from around the world, it is a melting pot of different cultures on par with an early 20th century New York. It has lifestyle appeal and investment incentives to boot and there is great demand for western brands; if you walk along the Dubai International Financial Centre (DFIC), you’ll be spoiled for choice for western coffee brands; do you prefer Costa, Caribou Coffee or Caffè Nero? Or maybe you’d prefer a spot of lunch at Yo! Sushi or Gourmet Burger Kitchen. And, at the end of the day, you can work it all off at any number of Fitness First gyms. 

According to Nizar Lallani, CEO of Antal International in Dubai, a franchise of the British company dedicated to discovering and recruiting talent: “When you have people from so many different cultures, backgrounds and countries, they usually look for brands they know and so the UAE is a very attractive place for franchising, especially from the western part of the world.” 

UK companies have a particular advantage. “Of western expats, Britons are the most numerous, and as British companies started early in their inroads into this part of the world, they have great presence in terms of brands, products and services,” Lallani says.

Although the UAE economy was traditionally built on oil, with the influx of these western businesses, the main sources of revenue are now tourism, aviation, real estate, transport and financial services.

Franchises from the UK can also rest assured that if they extend into the UAE, the quality of potential employees is top notch. Being in the recruitment game, Lallani says: “Within the country there is a good availability of talent, but at the same time, when we pitch UAE positions around the world, people are more than willing to accept a position here – it’s an attractive destination for everybody.”

The only drawbacks Lallani can see are that things don’t move so quickly in the UAE as they do in Britain and set-up costs can be a little on the steep side too. “In the UK you can set up a business in a few hours but here, while still a straightforward procedure, it is a little more lengthy, approval can take anywhere between two and four weeks,” he says. “The cost of doing business is also higher but this is due to the higher standard and therefore cost of living.”

As if you weren’t already sold on Dubai being a top destination for your franchise, it is also home to over 20 ‘free zones’ catering to various industrial and business clusters where foreign investors can enjoy 100% foreign ownership of their companies – as opposed to the rest of the city where you need a local sponsor to hold a majority stake in your business. The absence of income tax for both mainland registered companies and those registered in the free zones remains one of the biggest incentives for foreign companies establishing in Dubai. 

While free zones are great in terms of setting up businesses, most companies will instead opt for having a local partner – and there are many eligible and willing local entrepreneurs. They must own at least a 51% stake in order to take advantage of doing business across the whole of Dubai. 

Although finding the right people to work with can be a lengthy process, companies don’t seem to mind the wait. Pitman Training, a franchise offering flexible training solutions, certainly doesn’t. It has had a presence in the Middle East but moving into the UAE is something it wants to get right. According to Andrew Walters, the company’s franchise sales director, it is keen to take the leap within the next 12 months. “If you look at the region in terms of where is most modern, forward thinking and outward facing, the UAE is right up there,” he says. 

Given the diverse nature of the UAE as a whole, Walters wouldn’t be keen on giving away a master franchise because of the huge potential among the different emirates. “The financial potential in Dubai – the obvious jewel in the crown – alone is huge but in order to exploit it properly you need the right people on board,” he says.

Being a British brand in the training sector, Walters is confident of success. “There’s a perception that ‘Made in Britain’ is a stamp of quality, particularly around education, which is one of the best UK exports and Pitman has some of the top names on board, including Oxford and Cambridge [universities].” 

In the UAE, the more upmarket you are, the higher your chances of success. “It’s very glitzy and glamorous – everything they do is what everyone else does times ten,” says Walters. One company that fits the bill is Goldgenie, the franchise offering consumers the Midas touch; it’ll turn everyday items such as your iPhone into gold, rose gold or platinum. “The UAE is a territory of discerning individuals who can afford to purchase luxury products, which is good news for us,” says Frank Fernando, company director at Goldgenie. “Internationally people do like to know quite rightly that they get good quality when they buy British.”

As with Pitman, Goldgenie is keen to do business in the UAE. Speaking of the region generally, of which he has a lot of experience, Fernando describes business dealings as “fair and honourable”, especially when compared to other parts of the world. “Given the nature of our business, we are targeted by a lot by fraud but I can count on one hand the amount of times this has been a problem in the entire Middle East,” he says. “On the other hand, there are certain countries, which will remain nameless, that we are much more diligent with.”

If this gem of the Middle East is for you, the bfa has some tips. Although it focuses on the UK market, including companies coming here from overseas, it recommends firstly that franchises looking to the UAE take the right advice from a properly qualified and suitably experienced professionals in order to secure their business during expansion. This includes advice from a franchise solicitor with expertise in international expansion.

Franchises may also wish to contact an international franchising consultant with experience franchising brands into the UAE. “They will know where the risks lie and how to mitigate them, understand the culture and the marketplace and be able to advise on where your brand fits, and help you to find the right locations and/or master franchisees, if going down the master franchising route,” says Pip Wilkins, head of operations at the bfa.

The bfa also works with the US Commercial Service in Abu Dhabi to help UK franchisors looking to expand into the Middle East. A free marketing option is on offer to franchisors targeting the region or already franchising there and looking to increase their brand visibility to any prospective franchisees.

There are no signs of the inflow of UK franchises into the UAE letting up anytime soon. With such high competition and elevated running costs, the UAE may appear to be a tough nut to crack at first but with the right preparation, there is no reason for UK brands not to thrive. 

About the Author

Ryan McChrystal

Ryan McChrystal

In a previous life McChrystal wrote about asset management in the Middle East. A history and politics graduate from the north of Ireland, he now focuses his efforts a little closer to home. When he's not knee-deep in journalism McChrystal fancies himself as a bit of a globetrotter. In the summer of 2014 he completed his second US road trip, spanning the east coast, but Americans will be glad to know he'll be giving them a break for a few years before returning. McChrystal is a music geek and proud parent of a dwarf rabbit named Dylan.

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