Franchise System Growing Fast in Saudi Market  

JEDDAH, 13 June 2006 — The franchise system is relatively new but growing in the Saudi market, according to experts who spoke at the seminar on the sidelines of the Jeddah Franchising Exhibition.

Jeddah Governor Prince Mishaal opened yesterday the two-day exhibition being held at the lobby of the Jeddah Chamber of Commerce and Industry (JCCI). Thirteen franchising companies, local and international, are exhibiting their products and services as well as two funding sources, the private ALJ Fund for Small Businesses and the public Small Enterprises Development Center by the General Organization for Technical Education and Vocational Training.

Organized by the Jeddah Small Businesses Support Center at JCCI and the Franchise Development Services Company, the exhibition and seminar aimed at informing potential businessmen about the franchise system and its potential in Saudi Arabia.

Mazin Battarjee, deputy chairman of the JCCI, talked about the role of the chamber in supporting and developing small businesses by reducing the risks involved, facilitating funding and improving the trade, industry and services environment in order to create investment opportunities.

Franchise expert Sary Hamway went through the steps and procedures involved in starting and developing a franchise while legal consultant Sharif Akkad explained the legal aspects of franchise agreements.

Akkad pointed out the difference between independent agency agreements, which is more common, and the franchise agreements. He went into detail about the contracts content, rights and obligations.

However, he also pointed out that in Saudi Arabia there is no system regulating franchise agreements yet at the Ministry of Commerce. There is a project underway of developing a system for franchises.

Speaking to Arab News, Talal Badkook, chairman and CEO of Badkook Group and the Franchise Development Services Company, said that the franchise system entered the Kingdom in the early 90's so it is relatively new.

"We don't have yet a franchise culture but I'm sure the future for it will be successful as it has been around the world, it is just a matter of time," he said.

The difficulties that face franchises now are people's apprehension of this new system and the lack of systems and laws that regulate it. "The lack of systems however is not preventing foreign investment. We already have over 300 foreign companies present. And there are contracts that regulate the relationship between franchiser and franchisee," said Badkook.

Other difficulties, especially for small businesses, include the lack of funding sources, but Badkook said that steps are being taken to address that by the government and the public sector. Another problem is that there is no franchise association, but again they are in the process of establishing such an association that will take care of all aspects of franchising.

"Franchising of local companies is growing. Five years ago, our company developed the franchise of two companies a year, now we are developing the franchise of seven companies a year and we expect that number to increase," said Badkook.

He gave examples of successful local franchises that have expanded nationally, regionally and internationally such as Al-Tazaj chicken, Kudu, Hot & Crispy and Corn in the Cup.