|“Franchising in Lebanon remains the pioneer in “home grown concepts and Franchise businesses” by Dr. Khaled A. Taki of FBC 15 May 2008|
The Lebanese have been experiencing with Franchising for quiet some time, first it began with INBOUD Franchises which were granted to Lebanese companies by Western Franchisors with known brands such as Mc Donald’s and Burger King their performance has been amongst the best within the international network of Franchisees, interesting to note that the Lebanese Franchisee for Burger King was able to convince the Franchisor to allow for the first time ever, for a Home Delivery service so as to compete with similar local brands offering this service and thus increase their over all sales, other Arab countries and brands then followed and today it is part of the over all Franchise operations .
However, the Lebanese experience with OUTBOUND Franchising is 10 to 15 years old, it is rather new and has been very successful indeed and Lebanese Franchisors are competing heavily with International Brands. In many ways this can be attributed to the introduction of Franchising to the Arab world, (the Levant and gulf in particular) by Western firms, who insisted on a Franchise agreement with Arab counterparts rather than accept the old traditional ways of doing business being such as partnership and exclusive representation.
It is well known that Lebanon has been a pioneer in the Arab world when it comes to Franchising its own “home grown concepts and businesses” which began in the 1990’s, as more and more Arab Gulf nationals visited Lebanon and in turn their companies began to inquire about opening a similar branch in the Gulf and propose to Lebanese companies mutual co-operation.
Prior to Franchising the old traditional way for any partnership was either that the company shares would be distributed amongst both parties and one party would grant the exclusive representation or distribution of the product or service to the other. However, during the 1980’s and 1990’s serious problems and losses arose between the partners, with some claiming that the laws did not protect the Lebanese and were in favor of the local partner.
For the most part, if a company/business has a unique product or service and a successful business trade track record and good management, then most likely it can be franchised.
As a result by the year 2000 such partnerships became almost obsolete and the Lebanese companies became reluctant to invest in any partnership outside Lebanon, and of course they had now discovered the option of the Franchise system offering further expansion without having to invest additional capital, which they were quick to embrace.
As a result today Lebanon has franchised over a hundred well known brands, most of which are in the Food and Beverages Sector, and a year ago, the Lebanese Franchise Association was established, (along the French Franchise Association model). Today the LFA encompasses 35 Lebanese Franchisors as members, as well as a distinguished number of consultants which make up the “(Chapter of experts) College De Experts”.
Amongst the most successful Lebanese Franchisor to name a few with branches all over the Arab world and some world wide are Patchi Chocolates, with over 129 branches , Casper and Gambini, restaurants offering probably the best Franchise package and management support anywhere, Café Najjar, and others . It has often been said that we consider the Lebanese Franchisors to be the best Ambassadors for Lebanon aboard.
Although most Lebanese companies have succeeded as Franchisors , unfortunately some , ( half a dozen or so ) have not because they failed to recognize the basics of Franchising and thought that all they had to do was to offer their name and pass on their product or service ( i.e. menu) without further participation.
They did not allocate a budget to build their infrastructure such as a comprehensive Franchise Program supported by a strong International Division which services and supports the network members, nor did they implement a well discipline management system capable of providing proper training and systematic implementation of the operations and product or service assembly manuals, thus although they did open a branch or two during the first year of Franchising, their lack of involvement meant that the Brand filed to maintain its position within the market and the Franchisee ended up losing both their investment as well as their business reputation in the market .
The successful Lebanese Franchisors did implement the Franchise system properly, and some even better than their western counterparts, also invested in their Human resources and management and today enjoy a healthy detailed time line for their Brand Developing program across the Arab Levant (Jordan), the Arab Gulf (GCC) countries, and Egypt.
The result has been a good catholic marriage between them as Franchisor and their Franchisees. , based on reasonable territorial joining fees, fair percentage of the gross sales as royalties, and some even provide management for the first year to ensure that the brand succeeds.
Today Lebanese Franchisors understand what it takes to become a successful Franchisor, which is one of the main reasons why the Franchise sector has grown in Lebanon so rapidly and will continue to do so at an impressive rate in the coming years.
Most Arab Gulf nationals are facing a problem because as hard as I is to believe, the number of Lebanese Companies that can be franchised is very limited with over 85 per cent already franchised and 15 per cent remaining totaling no more than a few dozen companies. However, to fill the demand the Lebanese known for their creativity and ingenuity, have now focused their efforts towards “ New Concept Development” , and are coming up with impressive concept ideas of international standards, the development process includes a complete Brand Identity package, interiors, exteriors , personnel required, detailed market analysis and implementation costs , which when completed on paper can be implement through a prototype and then can be Franchised all in one package deal priced accordingly, knowing well that the price for a concept is lower than a Franchise.
Franchising of existing Lebanese brands is expected to reach its peak in the coming three years, and is being replenished on a daily basis, as Lebanese continue to outsmart each other with new concepts to suit the Arab culture and market.
Obviously, Franchising in Lebanon would not be complete without the assistance of the consultants, as Lebanon is known to offer excellent consultancy service in most fields, like educational, media, financial.
So, it was no surprise that when the OUTBOUND Franchise sector was introduced those individuals with Franchise previous experienced began to offer their services and as the sector grew, many others who had been previously employed by potential Franchisors, simply got interested in the Franchise process, left their jobs and established consultancy firms of their own, many came from the management, hospitality, advertising and Brand Identity sectors, all eager to join the new trend.
Unfortunately many of the new comers failed because they simply copied the same Franchise tools to any potential Franchisors which can not be done, for the franchise cycle and set of manuals has to be “tailor made” for each Franchisor and Franchise network based on its own characteristics, criteria and methodology. Other consultants with previous consultancy experience , discipline and dedication, were able to learn the Franchise system in a short period of time and play it safe by offer specialized consultancy services within their area of expertise rather than attempt to cover the entire Franchise cycle, and just a few Lebanese firms or individuals , probably no more than half a dozen, are today full fledged Franchise consultants with plenty of theoretical and practical experience having worked before for or with International Franchisors.
OPTIONAL : As to non Arab Franchise consultants, with the exception of those consultancy firms which are owned or employ experienced Arab nationals , they have for the most part failed terribly , because of their lack of the language , dependency on others, understanding of the Arab culture, religious norms and values, traditional ways of life, and determination to insist on the implementation of a western Franchise exactly as it was designed and lack of flexibility to adapt to the needs and demands of the local clientele.
Franchising in Lebanon today is booming, offering home grown concepts and Franchise brands, and although it has not yet recognized by the government as a major contributor to the national gross product in terms of revenue from rights royalties and export of human resources, the campaign to pass the fist legislative law to cover franchising has been successful and the draft of such a law has been proposed to the Parliament and is being review by the respective committee thus should be ratified very soon.
In closing, at last the Arab world has accepted that the “ KNOW HOW “ which any individuals or company has acquired over many years of hard work, is worth a lot of money , whether the know how is rented for a decade or two as in the case of a Franchise being grated or the idea based on “ know how “ is being sold outright for a lump sum as a new concept , what truly counts is that the intellectual property and know how understanding has finally been recognized by the Arab world and Lebanon is already a major player and destined to continue to play a major pioneer role in all aspect of Franchising in the Arab world and Middle East region.