Franchise Retail Market Maturing Across the MENA Region

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Franchise Retail Market Maturing Across the MENA Region

25 Jan 2010

Dubai - The MENA retail market is fast maturing and is set to evolve from an emerging market to a mature one, in terms of operating model, according to a new retail report published by CB Richard Ellis (CBRE), the global property consultancy.

CBRE’s latest research report examines the current attitudes and 2010 expansion plans of 220 leading retailers, based on interviews conducted over the summer of 2009.

As Mark Morris Jones, Director of Retail, CB Richard Ellis Middle East, explains: “It is clear from the report that retailers not already present in the MENA region would prefer to enter the market on an owner-operator model, as opposed to through franchising or a joint venture. (See graph below)

CBRE Graph

“Certain areas of the MENA region are such that you cannot come in with 100% ownership, as the local laws won’t allow it. Those brand owners that don’t franchise their outlets in the region, do so because they want to maintain absolute control as a matter of principle. On that point, given the number of brands operated regionally and the time that they have been in that relationship, it can be assumed that, for the most part, all parties are happy with the situation.”

The survey found that a far higher proportion of retailers who say they are likely to franchise are targeting the “emerging” markets. The exception is the MENA region, which is surprising given that in the past the Middle East has been a market in which retailers have chosen to pursue a franchise option. One explanation is that a high proportion of those who would look at franchising in the region have already done so.

“The Middle East has a high penetration of brands particularly from Europe and the US. There is a high saturation of brands in these more developed markets, so more established brands need to expand to emerging markets in order to get greater market share.

“Certain big global brands are reluctant to enter the region without 100% ownership, as they want to maintain brand integrity and so they will continue to concentrate on markets where this is possible. These retailers will continue to look to the Middle East for opportunities and will consider their options if and when the situation changes to allow them to do this.” Mark added.