Franchising is a long-term cooperative relationship between two entities—a franchisor and one or more franchisees—that is based on an agreement in which the franchisor provides a licensed privilege to the franchisee to do business. The franchisor grants the franchisee the right to use a developed concept, including trademarks and brand names, production, service and marketing methods and the entire business operation model, for a fee. The franchisee then provides the time, capital, and desire to utilize the brand and services provided by the franchisor to build a thriving business.
The product, method or service being marketed is usually identified by the franchisor’s brand name, and the holder of the privilege (franchisee) is often given exclusive access to a defined geographical area for a defined period of time, all of which is defined in the Franchise Agreement.
Franchise: A privilege or right officially granted to offer specific products or services under explicit guidelines at a certain location for a declared period of time.
Franchise Agreement: it’s the legal document that governs the cooperative relationship between the Franchisor and the Franchisee for a specified period of time (usually long-term period). It frames the relationship in a concise manner.
Franchisee: A person or entity who purchases the right to use a franchise trademark, techniques, products and services, brand name and the franchise business model from the franchisor.
Franchisor: The company owning/controlling the rights to grant franchises to potential franchisees. The franchisor grants the independent operator the right to distribute its trademark, techniques, products and services, brand name and the franchise business model for a percentage of gross monthly sales and a royalty fee.
Franchising is an excellent plan for some small businesses, particularly those whose distinctive business models can be easily duplicated and scaled.
Could your own small business serve as the model for a franchise?
If you have the money and want to maximize your chances of success, approach a franchise consultant to tweak your plan: consultants have seen it all before and will let you save time and energy, and avoid mistakes. As a franchisor, you have to prepare a large number of business and legal documents (as well as the Uniform Franchise Offering Circular, UFOC), and for state and federal government entities. A franchise attorney can help you create these documents and meet the legislative requirements.
The highest-priority task of a franchisor is promoting and selling the business model to potential investors; a franchise consultant can help you with also with this point. As CEO of a company, your main task is selling services/products and you were involved in the operational side of your business. As the CEO of a franchise company, you have to drum up excitement among potential investors: after the marketing activities to get new leads, you have to promote opportunities related to the opening of a new activity under your brand: you are selling dreams..
One of the main reasons franchising is attractive to franchisees is that they are buying the rights to use an established trademark and/or brand name. That’s why you must invest money in consolidate your own brand.. the more your brand will be famous, the more you will find franchisees. Marketing efforts could include a sales campaign, direct mail initiatives, franchise sales brochure, a sales videotape, a Web site with franchising information, paid placement on franchise opportunity Web sites, trade show participation.
It’s also important for your business to register your intellectual property rights. Next you will need an operations manual and training programs for your franchisees: thanks to these documents, you will be able to transfer them all the needed know-how to operate under your brand and to move easily in the market, following your guidelines.
More over you have to supervise the UFOC, attend speaking events to acquaint the market with your franchise and get connections provided by friends and family.
Franchising your business has tremendous advantages, from a higher return on investment (ROI) to risk reduction and retention of capital.
But before you begin the process of franchising your business, you must first determine if your concept and operating system are franchisable; basic tenants of franchisability include:
Credibility. A franchisor must be credible to prospective franchisees.
Uniqueness. Your business must have sufficient differentiation from other franchises either in terms of products and services, marketing, lower investment cost, or target market.
Straightforward operations. Your system and business model should be relatively easy for a new franchisee to learn in a short time frame.
Adaptability and demand. Your concept should adapt well to many locations and there should be sufficient demand for your products/services.
ROI. A franchised business should have enough profit after paying fees and royalties to earn an adequate return on investment.
Strength of management. Even the most successful company will falter without a strong management team in place.
Why the United Arab Emirates?
The UAE is a young country, having recently celebrated its 37th year as an independent state. It is open and highly cosmopolitan with a very large expatriate workforce. The UAE is a confederation of seven emirates. The best known is the business center of Dubai. The largest, Abu Dhabi, covers 80 percent of the land mass and holds most of the UAE’s vast oil and gas reserves. The UAE has emerged in recent years as one of the very top markets for U.S. exports in the Middle East/North Africa region, surpassing larger countries like Saudi Arabia and Egypt. While U.S. exports to the UAE in 2000 were only around $2 billion, they now exceed $13 billion.
The combination of vast oil wealth in Abu Dhabi, business acumen on the part of oil-poor Dubai, and the government’s desire to rapidly develop the country has resulted in a sustained boom in business opportunities. In spite of current problems caused by the global financial crisis, the UAE will remain a good market for U.S. firms in infrastructure, oil and gas, defense, greenbuild technologies and services, solar energy, and health care products and services, to name a few.
A Business Hub for the Middle East
The UAE is best known for the city of Dubai, which features the tallest building in the world (Burj Dubai), man-made palm shaped islands (Palm Jumeirah), and other signature projects. Dubai has built itself very successfully into a business, financial and logistics hub for the Middle East, as a bridge between East and West. The Jebel Ali Port is the third largest man-made port in the world and the largest in the region, while Emirate Airline has expanded aggressively to become the leading airline in the region. While there is no doubt that the real estate sector in Dubai is currently facing a shakeout, the role of the city as a regional business center is still strong.
Not content with being outdone by Dubai, the emirate of Abu Dhabi has emerged as the strongest link in the economy, as it controls nearly all of the country’s oil and gas revenue. Abu Dhabi is in a very strong position to ensure the economic stability of the country as a whole, and its own ambitious development plan offers many business opportunities for U.S. firms.
The other five emirates—Sharjah, Ras al Khaimah, Umm al Qaiwain, Ajman and Fujairah—also offer business opportunities as they seek to develop their economies to take advantage of the overall growth in the country’s economy.
The UAE, primarily Dubai, has been touched more severely by the financial crisis than some of its more insular neighbours. The strength of Abu Dhabi is going to ensure that the country as a whole is largely protected from any severe downturn, but sectors such as real estate are experiencing weakness that will result in greater competition chasing fewer projects for the time being. As market conditions are evolving rapidly, U.S. companies should monitor the market closely and be alert for a rebound.
Market Opportunities and Best Prospects
U.S. products, services and companies are highly respected in the UAE for their technological edge, management experience and innovative spirit. With the Emirati Dhiram pegged to the U.S. dollar, currency risk is reduced and competitiveness vis-à-vis the Euro is an advantage for U.S. exporters.
The expansion in direct flights between the U.S. and the UAE also facilitates business. Various airlines have non-stop routes between the U.S. and UAE: Atlanta (Delta), Washington DC (United), New York (Emirates and Etihad), Houston (Emirates), San Francisco (Emirates) and Los Angeles (Emirates).
Amazing Resources & Opportunities
(source: http:// www.alfajer.net/shipport/dubai.htm)
- Dubai with a GDP growth of over 16.7 % per annum has became fastest growing economies in the world. In fact, during the past decade, Dubai’s growth was the fastest.
- Estimated $ 3.5 billion are being spent on purchases in the maritime sector of Dubai.
- The UAE is one of the world’s wealthiest countries.
- The third-largest proven oil reserves in the world.
- The fourth-largest gas reserves in the world
- And these reserves will continue to provide energy for the UAE for more than 150 years.
- The import/re-export ratio makes the UAE the third most important re-export centre in the world after Hong Kong and Singapore.
- Dubai Ports are already the principal gateways of re-export and redistribution, along with channels in Kuwait, Jordan and Oman.
- World container port traffic is predicted to increase by 74 per cent to 92 per cent by 2010 and the container terminals in the Middle East and Indian Subcontinent will be areas of under-capacity, considering the predicted growth figures.
- Dubai‘s ports rank 13th in the world with a record of handling 5.15 million TEUs in 2003, up by 23% from the previous year’s 4.19 million TEUs. In other words, it handled 63.62 million metric tones of cargo in 2003.
- Dubai’s foreign trade is growing @ 21% per annum.
- Dubai‘s Logistics Industry registering 15% growth per annum
- Middle East- a procurement Hub, especially Dubai
- UAE Ports are on a major expansion spree and it is worth $ 2.5 billion in order to handle to ever increasing the traffic.
- Dubai Maritime City- the world’s largest maritime city with 2.5 million sq metre artificial peninsula invites large scale involvement of global players.
- Increasing demand & production of LNG (Liquefied Natural Gas) by this part of the world will automatically increase the traffic of in this area in to many folds.
- 40% of worlds shipping tonnage belongs to Asian Ship owners and managers
- 12 of the worlds top container lines are Asian
- Worlds top 6 container ports are in Asia.
- Asia Pacific maritime trade is worth $ 103 billion
- 86 % of the global order book belongs to Asian Shipyards.
- A modernised Iraqi economy will likely generate more international trade, which is why brokers are clamouring to establish offices in places like Dubai.
- Jebel Ali Free Zone Authority (JAFZA) recently announced massive expansion with increased handling capacity to 21.8 million TEU by 2020. By 2005 alone , 5.8 million TEU capacity will be added.
- The Port of Fujairah is currently the world’s number three bunkering centre, soon catching up to Singapore and Rotterdam
For more information on the actual economic situation of UAE, we do suggest you to read the United Arab Emirates Business Forecast Report, which provides essential macroeconomic, political and financial analysis for companies doing business in the United Arab Emirates.
United Arab Emirates Business Forecast Report Q3
Executive Summary (http://www.businessmonitor.com)
Deepening Recession, But Government Money To The Rescue
We maintain our view that 2009 will be a tough year for the UAE; indeed, we have revised our growth forecasts downwards once again due to the deteriorating state of the world economy, the ongoing decline in UAE property prices, and continued tight lending conditions at local banks.
That said, we are forecasting a fairly robust recovery in 2010, as international trade flows pick up, population growth resumes and the financial sector gets back on its feet. Despite some continued concerns over Dubai’s financial health, we highlight the extensive reserves held by Abu Dhabi, which will see the country through the worst of the downturn.
Politically, the UAE remains extremely stable. It does not face the sort of demographic or sectarian pressures that could threaten social harmony in neighbouring states such as Saudi Arabia or Bahrain. That said, the government continues to work hard to keep its populace happy, and will continue to do so despite the fiscal pressures exerted by lower oil prices and the worsening growth outlook. Top of the political agenda is protecting Emirati workers from rising unemployment through the government’s ‘emiratisation’ programme, which seeks to raise the proportion of local citizens in the workplace, and in the private sector in particular.
We are forecasting recession for the UAE in 2009, with the economy expected to contract by 1.7% in real terms. This is mainly due to negative growth in the exports component, due to a reduction in oil output (in response to OPEC quota reductions) and a drop in re-exports, in response to the drying up of international trade flows. Growth in consumer spending will also slow considerably, and there is a risk that it could turn negative. Job losses are likely to spur net emigration from the UAE in 2009, as redundant workers lose their residency rights, meaning a smaller pool of domestic consumers.
Private construction activity has virtually ground to a halt, and real estate developers are slashing their prices to shift empty properties (there are even reports of the prices of properties that have already been sold being negotiated downwards, in order to stave off the risk of repayment defaults).
That said, the government is ploughing ahead with its own construction plans. Abu Dhabi has confirmed a long-term project to build a new capital administration district over the next ten years, while government-controlled utilities such as DEWA have successfully raised financing for ongoing investment plans.
UAE’s Key Industry Sectors
Which industry sectors in country will grow fastest, and where are the major investment opportunities in the the UAE market?
BMI targets investment opportunities in country’s high growth industries, including automotives, food and drink, infrastructure, oil and gas, pharmaceuticals and healthcare, telecommunications and IT.
UAE’s Key Industry Sectors Contents
BMI’s independent 10-year forecasts to end-2018 and industry trend analyses for country’s leading industry sectors, including a selection from: – Automotive – Defence & Security – Food & Drink – Freight Transport – Infrastructure – Oil & Gas – Pharmaceuticals & Healthcare – Telecommunications
Coverage of country’s Key Industry Sectors – the UAE Market Overview
Size, value and structure of industry; impact of liberalisation and privatisation on sector performance and prospects; friendliness of business environment
Latest Developments in country Review of latest projects, deals, privatisations, mergers and acquisitions, and implications for sector performance; company rankings for national and multinational companies in country; main industry players by local sales, employee size, market share and main brands, products and services
10-year Industry Forecast for country Historic dataset (2003-2007) and BMI forecasts through end-2018, covering headline industry data broken out by sub sector
Target strategic sector-by-sector opportunities in country’s high growth industries, attracting public expenditure and foreign investment; identify key players and competitors driving growth, investment and business opportunities.
Benefit from competitive intelligence on top national and multinational companies operating in country’s major industry sectors, including analysis of recent trends in sales and market share, company strategies, product launches and latest deals.
Who buys the UAE Business Forecast Reports?
The UAE Business Forecast Report is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in UAE.
Our Business Forecast Reports are relied upon by corporates, banks, government departments and multinational organisations around the world.