By: Rafic Fakih
Brands that have grown exponentially to enjoy widespread success in their country of origin but are approaching saturation point can find themselves at a juncture of choices. Does the brand continue to grow steadily yet incrementally within a familiar market, or does it take the leap to a new territory, one abundant with new consumers but with unique nuances to navigate?
The Middle East is a region that undoubtedly offers attractive opportunities to brands looking to expand their international footprint. A long list of foreign companies have recognized this opportunity and jumped into new markets such as the UAE with the hopes of a warm welcome from its new customer base. This can be seen through a recent CBRE report within which Dubai was listed as having one of the highest levels of brand integration in the world, second only to London.
Franchising can be one of the most effective ways to amplify business growth. Within the thriving food and beverage category in the region, it is a model that has proved particularly compelling.
While the UAE represents a supportive market, these opportunities do not equal a challenge-free process. In the UAE and across the GCC, there have been numerous instances of popular brands entering the Middle East only to fail shortly after, often pulling out entirely. So why is this? Why doesn’t an international track record equal regional success?
First, some context. The UAE is a common point of entry for international brands that want to expand into the GCC and the wider Middle East and North Africa region, due to its growing economy and proximity to other regional markets. When considering a new market, understanding the regulatory and legislative frameworks will make all the difference, helping prospective franchisors deftly preempt and navigate the hazards.
The franchising model is almost instinctive in the retail, hospitality and F&B sectors, especially in the GCC where each of these sectors have experienced significant growth over the past few years. When it comes to “first to the region” brands, there are guidelines that both the franchisor and the franchisee should follow before taking the plunge in a partnership.
From the franchisor’s perspective, the first of which is to explore the brand’s history, looking into the heritage of a brand and at how that will fit into the local market. Additionally, brand awareness is a key factor for franchisors. Is this a brand that local consumers covet but don’t have access to? Has its online or social media presence penetrated the local market? If the brand is unknown here, its launch may get lost in the already internationally integrated restaurant landscape that the region has to offer.
Conducting market research before entering a new market is incredibly important, giving the franchisor greater confidence that there is a demand for the product or service. Failing to do adequate market research is one of the biggest mistakes independent entrepreneurs typically make.
Throughout the market research process, franchisors should also look into competitors. Competitors will always be in the picture, but is there “space” in the market, or is the competition too fierce for your potential brand to thrive?
Do not only think about space in the market, but also within your existing portfolio. Consider if this brand would be a strategic fit for your existing franchise portfolio, if it doesn’t mesh with the others or, on the other hand, if it conflicts them. Especially within the quick service restaurant market, looking into which of your potential competitors have already made it (or failed) in the region is crucial information.
Stick to brand guidelines The brand equity you’re acquiring is not the only advantage, but logistically there are a lot of benefits that aren’t available to the entrepreneur starting a business from scratch. Perhaps the most significant is that you get a proven system of operation and training in how to use it.
When I began my journey with McDonald’s, I worked for nine months in two locations around the world, learning how to construct the perfect burger in Singapore and prepare our world-famous fries in Philippines. The level of “McDonald’s way” practical training I received on both a service and business level was unparalleled to anything I could have taught myself.
New franchisees can avoid a lot of the mistakes startup entrepreneurs typically make, because the franchisor has already perfected daily operations through trial and error. This also ensures brand-level quality and consistency internationally; making sure businesses are offering their customers the same quality service that they’ve received or would receive at locations elsewhere.
Not every aspect of the business internationally will be as easily adaptable to a new market as processes. The arguably most important aspect to consider is who you’ll now be selling to and how they and their environment are different to your prior experiences.
Selling to a different audience means you have to consider the appeal of the product to the region’s culture, and the Middle East is the ultimate challenge for most brands in doing so. Local trends, customs and consumption habits must be taken into account, including everything from halal requirements to something as personal as taste.
At McDonald’s we’ve of course covered the basics of making sure all of our offerings are halal and adhere to the local health regulations, but we’ve also introduced new menu items such as the McArabia to appeal to the local audience.
You must think of more than just product adaptation, as product compliance for a new country’s regulations may be a hurdle. If there are regulations restricting some of your products from entering the country due to safety and quality regulations outlined in consumer protection laws, you could incur legal penalties and fines for breach.
When a business is successful, expansion is practically inevitable for the ambitious brand. This sort of expansion is significantly profitable and can have a strong positive effect on the lifespan of a business. Though doing business in a new market can be testing at times and requires both care and extensive research and due diligence, the dividends can be great. To grow domestically, location is crucial, but to grow internationally, the onus is on localization.
