Franchise brands that have massively expanded to see universal success in their own nation but are nearing saturation point may find themselves at a crossroads. Does the brand continue to expand incrementally and steadily in its current market, or does it move into a new area that is teeming with potential customers but also has its own set of challenges?
Unquestionably, the Middle East has appealing potential for businesses aiming to increase their global reach. Numerous overseas businesses have taken advantage of this opportunity by entering untapped areas like the UAE in the hopes of winning over their potential new clientele.
This is demonstrated by a recent CBRE assessment, which classified Dubai as having the second-highest level of brand integration worldwide, after London.
One of the best strategies to accelerate business growth is franchising. It is a concept that has proven especially persuasive in the region’s burgeoning food and beverage industry.
Even though the UAE is a friendly market, there will still be obstacles to overcome. Popular brands have frequently entered the Middle East in the UAE and across the GCC only to fail soon after, frequently withdrawing totally. Why is this, then? Why does regional success not equate to a worldwide track record?
First, some background. Due to its expanding economy and proximity to other regional markets, the UAE is a popular entry point for international firms looking to expand into the GCC and the larger Middle East and North Africa area. Understanding the legal and regulatory frameworks will be crucial when thinking about a new market because it will enable prospective franchisors to effectively anticipate and avoid dangers.
In the retail, hospitality, and food and beverage industries, particularly in the GCC, where each of these sectors has seen considerable expansion over the past few years, the franchising model is virtually instinctive. There are rules that both the franchisor and the franchisee should abide by before making the commitment when it comes to “first to the region” brands.
From the standpoint of the franchisor, the first step is to investigate the history of the brand, considering its legacy and how it will fit into the local market. Brand recognition is another important aspect for franchisors. Is this a brand that local customers want but can’t get their hands on? Has its social media or online presence reached the neighborhood? The brand’s launch can be overshadowed by the region’s already globally integrated restaurant scene if it is unknown locally.
Prior to entering a new market, market research is crucial since it gives the franchisor more assurance that there is a need for the good or service. One of the biggest errors independent business owners frequently make is not conducting enough market research.
Franchisers should investigate rivals as part of their market research approach. There will always be competitors, but does the market have “room” for your future brand, or is the rivalry too severe for it to succeed?
Consider the available space inside your current portfolio in addition to the market. Think about whether this franchise would be a strategic fit for your current franchise portfolio, whether it competes with the others or doesn’t integrate with them. It is essential knowledge to know which of your possible competitors have succeeded (or failed) in the area, especially in the quick service restaurant sector.
Observe brand guidelines. There are several logistical advantages that an entrepreneur beginning a business from scratch would not have, in addition to the brand equity you are collecting. The fact that you receive training on how to operate a tried-and-true operating system is arguably the most significant benefit.
Because the franchisor has already refined everyday operations via trial and error, new franchisees can avoid many of the errors beginning entrepreneurs frequently make. Additionally, this assures brand-level quality and consistency on a global scale, ensuring that companies are providing clients with the same high-quality service they have experienced or will experience in other areas.
Not all facets of an international firm will be as simple to change for a new market as processes. The person you will now be selling to and how they and their environment differ from your previous encounters are undoubtedly the most crucial factors to take into account.
The Middle East is the ultimate obstacle for most brands when it comes to selling to a different audience because you have to take the region’s culture into account. It is important to consider local trends, customs, and consumption patterns, encompassing everything from halal standards to something as subjective as taste.
You need to consider more than just product adaptation, as meeting regulatory requirements for a new country may prove difficult. You could face legal repercussions and fines for breaking regulations that prevent some of your items from entering the country due to safety and quality standards stated in consumer protection legislation.
When a company is profitable, growth for the aspirational brand is all but certain. This kind of growth is incredibly profitable and can greatly lengthen a company’s existence. Even though operating in a new market occasionally presents challenges and calls for caution, thorough research, and due diligence, the rewards can be substantial. Location is important for domestic growth, while localization is more important for international expansion.
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