Go east young man

Posted 09/07/2013

A recent commentator estimated the MENA (Middle East North Africa) market to be worth $30billion, though this is probably made up by a large percentage of the heavy weight US food and beverage brands. The franchise market is predominantly consumer focussed and is still dominated by a small number of players such as AlShaya, some with over 50 brands in their portfolio. Recent impression however is that there is still a steady flow of UK brands going out to the Middle East where there is still a demand for niche brands that compete with the big US players.

We ourselves have in the past few months been involved in five separate food and beverage transactions, two retail and eight service sector deals into the MENA region. Probably 50% of these deals involve a single entity undertaking a multi country roll out, which we find is increasingly common, though not always ideal from the franchisor’s point of view. This means that paying particular attention to the Development Schedule and its sanctions is crucial so as to avoid delays across the region by ring-fencing poor performance in individual countries.

Perhaps unfortunately for lawyers, most of the MENA countries do not have special franchise legislation, although most still have pitfalls for the unwary franchisors in the guise of their agency laws, which are clearly designed to favour the local nationals. The Far East on the other hand has many countries with disclosure laws, though none it must be said, as severe as the applicable ones in North America.

If you have an established business, it’s never too late to go overseas.  I find that many clients simply receive passive enquiries through their websites (so why not make it clear on them that you are happy to receive such enquiries?) whilst others proactively seek developers and masters through referrals, agents and trade shows. This strategy worked for Neal’s Yard Remedies’ Calum Mackay, who carried out a desk study before approaching potential partners in Indonesia, only to find the relationship with their future partner to be cemented because of a referral from a retailer in Thailand. And Assad Khan of fast growing Taiwanese Tea concept Bubbleology recognised early on that their focus was to be on Emerging Markets, so elected to locate a showpiece unit in London on the 5th floor of Harvey Nichols. They signed eleven masters and developers in two years.

What everyone is clear about is that if you are to be successful, you must be prepared to properly engage with enquiries by following similar procedures to the UK (properly thought through offer, application form, franchise information memorandum), but obviously with an overseas slant. And be prepared to travel!Click here to find out more about our Franchising Solicitors. For an initial discussion, please contact John Chambers on 01603 703080 or email john.chambers@ashtonslegal.co.uk . Alternatively complete one of our enquiry forms.