How to open a franchise in UAE
UAE is considered to be the most promising and opportunistic international franchise market as it is one of the fastest growing markets in the world today, in one of the most investor friendly regions.
Franchising allows companies to expand without the risk of debt or the cost of equity. Since franchisees provide the initial investment at the unit level, franchising allows for expansion with minimal capital investment on the part of the franchisor.
In addition, since it’s the franchisee, and not the franchisor, who signs the lease and commits to various service contracts, franchising allows for expansion with virtually no possible liability, thus greatly reducing a franchisor’s risk.
For companies with limited resources in terms of staff or time, franchising is often the fastest way to grow. Thus franchising not only allows the franchisor financial leverage, but it allows him to leverage his resources as well.
Franchising combines the entrepreneurial passion of a small businessman with the experience and resources of a larger corporation. This organizational structure is extremely efficient and offers you maximum benefits in addition to support from the franchisor.
In order to start a franchise, you need to possess a business mind with an optimistic, confident and passionate attitude. UAE offers a friendly business environment in its terms of corporate taxation, repatriation of profits, infrastructure, entity ownership and human resources.
Once you decide to start a franchising program, there are a few critical research and market analysis details that need to be done. You must identify the potential markets for expanding the business through franchises in terms of number of players in that market, demand in that market, consumer behaviour, business laws and so on.
You will need to have a UAE national sponsor to start and run a franchise in UAE. This law does not apply to a business if you open one in any of the multiple free zones of Dubai or Abu Dhabi which allow for 100% foreign ownership and zero taxes. However, you will need a much larger capital base to open in a free zone.
Once you have identified the key markets, you then need to identify the prospective franchisees by creating a franchisee profile of the top players by studying the size of their business, their growth rate, team size, financial capabilities, training and development, market share, number of stores/ brands owned etc.
At the end you have to develop a business and a marketing plan on the basis of this findings.
If properly structured, franchising can allow small companies to more effectively compete with much larger competitors. It can also allow larger companies to gain the advantages of highly motivated unit management while reducing overheads.
However, the franchisee is not completely independent. Franchisees are required to operate their businesses according to the procedures and restrictions (products, services, pricing, geographical territory) set forth by the franchisor in the franchisee agreement.
Some people find these restrictions a disadvantage to becoming a franchisee.