By Courtesy starbucks Starbucks: The gold standard of franchising. By Mohsen Allam Egyptian/Arab sweets could be a good international franchise option By Mohsen Allam Do you have what it takes to build a new franchiseidea into something with Carrefour’s brand value?

By Tamer Hafez

You scour malls searching for the latest and greatest of them, you drive past glitzy billboards extolling their joys. If you go out to eat, chances are you’re putting them in your mouth. Foreign goods have always had clout, and as the market floods with Sony gadgets, Mango and Zara shirts, franchises have been the fast route to success for many of today’s entrepreneurs.

In 1973 Egypt had its first taste of post-revolution franchising when Wimpy, a British chain of hamburger restaurants, opened a location in Cairo. It was an early beau in Egypt’s turbulent love affair with foreign brands. But protectionist barriers, the cult of tawkilat (in the private sector) and of Nasser (in government), non-tariff barriers and import duties as high as 2,000%, and a generally lousy economic climate all stalled the entry of foreign goods until rounds of customs reforms in 2004 and earlier this year streamlined the import process and slashed duties.

Today, franchises are streaming into the market. The US Commercial Service estimated that over 60 franchises have opened, but that was before the explosion of brands at City Stars. Some estimate the number is as high as 300 brands. The latest addition to the fast food scene includes Burger King, while the Alshaya group (master franchisee behind Starbucks in Egypt) is opening several dozen other brands at Maadi CityCenter and elsewhere, including H&M, Boots, Mothercare and Body Shop.

From clothes to home utilities to food chains, consumers aspire to own, eat and wear global brand names. Franchising gives owners a competitive advantage: the business can trade off of the international brand’s reputation and customers can benefit from the experience and quality of foreign expertise.

Consumers love the idea of “Made in Egypt” when it comes to religion, culture, music and art, but not when it comes to a new home sound system.

Yet the public’s adoration is not unconditional, and big names such as Sainsbury’s and McDonalds have been caught in the backlash. During the 2000 Intifada, many boycotted American brands (including McDonalds, KFC, Pizza Hut) and the newly opened Sainsbury’s grocery store for supposedly supporting Israel. While Sainsbury’s profits dropped substantially and subsequently closed up shop (though, officially the store was closed due to a change in corporate strategy), McDonalds emphasized its Egyptian ownership and management and was able to re-gain its credibility.

So, the franchising boom continues. And as more products become available, franchisers can take new directions. The market is saturated with chain restaurants and entrepreneurs are looking ahead to the next big niche. Potential franchise owners can bring in popular foreign brands in domestically dominated sectors, open franchised branches of local establishments in other cities, or someday, take the domestic brand international.

An elite group of Egyptian brands could successfully franchise their products abroad. Al-Malky, which makes traditional milk-based desserts (omm ali, roz bil laban), has branches throughout Cairo, covering its most profitable markets. Al-Malky does a delicious thing well, and would potentially turn a profit in Western markets. In the coming years, an American businessman on a trip to Egypt may stop at an Al-Malky store and fall in love with the delicious omm ali. He may beg Al-Malky to let him franchise the desserts back in New York, making everyone multimillionaires. But that day isn’t here yet, and neither Egyptian businessman nor foreign dessert fans have considered taking the brand global.

But that doesn’t mean that the wheels aren’t in motion. There must be a few Egyptian Bill Gates skulking around the boardrooms, predicting future needs and waiting for the flash of Windows XP-like inspiration that would allow local trailblazers to take over an entire industry. Egypt must also have a few Sir Richard Bransons, ready to build their own diversified Virgin empires but instead of Virgin’s recording studios, clothes, airlines, hospitals and bridal shops, a local empire would cater to cultural tastes, opening a chain of mobile phone accessory boutiques, fusion koshary restaurants and a line of branded mid-range microbuses offering seat-belts and a screening of the latest Ahmed Helmy comedy.

By combining Egypt-specific business models with proven international brands, business owners can reach entirely untapped markets. McDonalds, for example, has customized its menu to suit Middle Eastern tastes with the McArabia sandwich. This synthesis, catering to cultural interests but holding oneself to an international standard, makes the market ripe for franchise investments.

Then, there is always bringing in foreign brands that no one has considered. Given the consumer’s taste for everything international, a new business idea coupled with a flashy foreign name could translate into big profits. Currently, the market is open for creative franchising options that appeal to both local taste and brand-name comfort.

So, take a few minutes, brainstorm the next big thing and build your business plan. In a subsequent installment, In the Black will cover the steps it takes to turn your business idea into a business plan.

The business model: Luxury buses and minibuses that serve routes between Cairo, upscale districts like the Diplomats’ Village, Marina and other North Coast areas. State-of-the-art coaches equipped with personal amenities, plush seats and a steward serving chilled drinks. There would be bus pick-up and drop-off services to all of the resorts, as well as a resort-to-resort shuttle. Customers could reserve seats and view schedules via internet or mobile. The cost would be billed to their mobile bill, Vodafone cash (or similar products from Mobinil and Etisalat when they roll out), their payroll account or through subscription to the service.

Keys to success: A-class consumers flock to the North Coast, so cater to their tastes fuse convenience with luxury ensure reliability of vehicles and schedules have easy access to the service ease of payment

Critical failure factors: aversion to riding buses buses seen as low-class transportation unable to offer frequent (daily, twice daily) routes because of limited clientele expensive start-up costs

Possible extensions: There are many reasonably affluent smaller cities like Tanta, Damietta and Fayoum, where a percentage of the population would likely pay a premium to travel to and from Cairo in air-conditioned, clean, well-maintained buses.

Foreign brand: The Limoliner is a deluxe 28-passenger coach that travels between New York and Boston. Providing its passengers with internet access, power outlets, great amenities and an attendant, it has become the preferred means of travel for many regular commuters. It travels between the cities at least three times a day, everyday, offering businessmen the opportunity to commute in absolute comfort.

The business model: Any person who owns a new car calls the company when it needs repairs. A representative provides doorstep pick-up of the client’s car, replacing it with a company car, and a small service fee is added to the bill. No subscription would be required to use this service.

Keys to success: Keep fees low target customers wealthy enough to fix cars at official maintenance centers but who don’t have another car available to them company car should be reliable and easy to handle service provided in one phone call.

Critical failure factors: Problems with red tape and insurance streamlining the procedure

Possible extensions: This company could launch a car club with services for its clients, such as buying/selling advice, new car comparisons, on-call towing and road tests. Having subscription fees is an option.

Foreign brand: AAA is one of the most famous auto-clubs in the world and franchising would provide a relatively under-supplied market (people who want on-demand car care) with a name that has already earned wide-spread trust. Not only does AAA promise highly efficient and reliable service, it possesses a high level of brand awareness, even in Egypt.

The business model: Offer a selection of audio tapes and CDs of books in Arabic online, in libraries and bookshops. The increasing prominence of Arab authors coupled with long commutes enables many to catch up on modern and classic literature. Religious audio lectures are already hugely popular, but diversifying the market would allow consumers more choices. The success of Diwan bookshop, the Bibliotheca Alexandrina, the annual Cairo International Book Fair and the Reading for All Festival (which is sponsored by the First Lady) signals a dedicated consumer base.

Keys to success: Correct placement and marketing through bookstores and fairs a strong awareness amongst book-lovers audio for popular and best-selling books, capturing the love-to-but-too-busy market

Critical failure factors: Obtaining reproduction rights from publishing houses is required small market lack of materials may limit offerings

Possible extensions: Offer book reviews and recommendations to guide readers. Create audio translations for popular books written in English. Export the Arabic audio books to Arab populations in foreign countries.

Foreign brand: Audio Book Company has done amazingly well. Its titles are comprehensive and it is one of the oldest businesses working with audiotapes. Using its name as a franchise would increase the trustworthiness of the product, and help with brand recognition amongst foreigners familiar with the company.

The business model: A chain of shops that supply high-quality tools and project kits for home decoration and handy-work. The Do-It-Yourself craze shows no signs of slowing down in the UK and US; people are remodeling bathrooms, staining decks and decorating their children’s bedrooms to the extent that such work has become more of a hobby.

While DIY guides take up entire sections at Barnes and Noble, it remains a foreign concept in Egypt. While a large mall in Haram called Dary retails tools, it doesn’t appeal to middle- and upper-class consumers, for whom it would have to become “cool” to pick up a tool.

Keys to success: Offer high quality, versatile tools easy to understand instructional manuals grab the market of young perfectionists who want the room color to be just so convince upper-class consumers it’s cool to get your hands dirty, perhaps through a tie-in to popular programming such as those run by Oprah Winfrey pal Nate Berkus.

Critical failure factors: The company is mobilizing a new market, and to succeed, DIY must overcome huge social obstacles stigma attached to doing work that is traditionally considered below you taking income from the gardener electrician or painter traditional culture undermines the industry

Possible extensions: Since owners are hoping to create a new market, instead of looking at possible extensions, focus should be given to strengthening and retaining the DIY market.

Foreign brands: B&Q is a British chain that sells DIY for the home and garden. It offers a wide spectrum of DIY tools allowing you to build or re-model any area of your property. The brand’s advice center ensures that people get assistance when needed. Using a foreign brand is important; the prestige attached with international goods will help overcome the current social barriers. Dary, the local brand, could also be franchised, but its service extension may not be as strong, and it lacks the desperately needed allure that foreign brands possess.

The business model: A center that has a dual purpose: to encourage child development through various activities while at the same time serving as an event facility for children. The center would primarily offer sessions, where infants onwards would develop their language, communication and social skills through music classes, art, fitness, and mommy-and-me sessions, with each class catering to a specific age group. The center would also be an ideal venue for children’s events being that it is already equipped with the necessary facilities.

Birthday parties, for example, are currently held in restaurants, or when families are lucky, private clubs. The center would easily be able to accommodate such parties with an indoor gymnasium with tunnels and slides and a kitchen with trained staff to help kids decorate their own cakes, among other activities.

Keys to success: Creating a family environment qualified instructors and personnel a trusted reputation experience in party planning

Critical failure factors: Unhygienic facilities poor supervision leading to injury or lawsuits poor educational quality services are unaffordable

Possible extensions: Use the center as a network for qualified tutors. Many parents find having to pick up and drop off their children’s tutors to be a hassle. Instead, the center could provide such transportation bringing the tutor right to the customer’s doorstep.

Foreign brands: Gymboree is an American company that works to improve the development of children ages 0-5 through music, classes, and exploration. Classes are broken up into seven stages based on the developmental rate and age of the child, meaning that the course activities grow with the children. At age three months a child would be learning signs to help communicate, and at age three, they would be engaging in art classes and independent play. The brand already has 500 franchises in 26 countries. It offers each franchise staff training, special equipment, assistance in marketing and a network of support.

The business model: A shop provides plain color, high quality cotton t-shirts to shoppers who want to design their own prints. Clients can tailor a t-shirt to their taste regardless of design/picture source. The self-designed t-shirt can be marketed on both ends of the economic spectrum, from a boutique in Maadi to a tiny shop in Attaba. The shirts are cheap to make and appealing to anyone with a little creativity.

Keys to success: Screen-printed shirts are already popular and being able to make up your own catch phrase or graphic to put on your shirt takes the idea of clothes as identity one step further, providing the population with yet another way to wear their mind on their sleeves.

Critical failure factors: Enforcing design or color limitations low market visibility low brand awareness unclear market

Possible extensions: Offering other cotton-based clothes to undergo screen-printing an on-line design and purchase option

Foreign brands: Most stores operating under such a business model are online businesses. To capture the young customers who are more open to buying online, pattern the business after Zazzle.com, which boasts over 500,000 user-created products available for purchase on the site. Or widen your customer base and go a step further and set up a franchise deal that would capitalize on Zazzle.com’s expertise; using their tools and experience to setup an actual shop (since online shopping hasn’t gained much popularity). But widening your customer base might not be that easy — buyers in the United States are a different market (think forty-something soccer mom who wants her kid’s face on her shirt) than the most likely buyers in Egypt (teens and adults in their 20s who want a glib phrase in English).

Sometimes, succeeding is simply finding the right market. Though Wimpy closed in Egypt, the brand was wildly popular in South Africa. Owned by Famous Brands, Wimpy has 452 restaurants in South Africa and in 2007 it acquired a 75% stake in Wimpy UK, effectively allowing the management of a developing world franchise to enter a first-world market. Famous Brands plans to revamp the Wimpy UK business model and brand to reflect the South African franchise’s casual diner image, showing that sometimes a franchise can improve on, overtake and absorb the original model.

Some franchises depend on the big name alone, entering popular industries without ever modifying the product or researching market gaps. Burger King, the latest burger franchise to hit town, is an example of searching for a brand name before the niche. McDonald’s and Hardee’s have already saturated the market, and homegrown fast food chains such as Cook Door and Mo’men have captured a strong following. Unlike the empty market Wimpy entered, Burger King has its work cut out for it. The opening of its first branches in City Stars and Sharm El-Sheikh show the company at least has its positioning right — hit the foreign clientele where turnover is quick and brand recognition is high. If Burger King proves there’s room in Egypt for another char-grilled beef patty, imagine what true innovators could do with a good idea, brand presence and an open market.

From Oct 24-25, 2007 the US Commercial Service in Egypt and the Egypt International Economic Forum are co-hosting the US Franchise Development Conference. The conference aims to support the expansion of the franchise industry within the country and introduce American franchises to business opportunities in the region.

It will explore franchising as a means of sustainable economic growth, as well as serve as a networking event for businessmen, franchisers and investors.

For more information or to sign up go to http://eieforum.org/ bt