US Franchise Opportunities in Saudi Arabia

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US Franchise Available In Saudi Arabia

Saudi Arabia

The kingdom of Saudi Arab is located between the red sea and the Persian Gulf within the Middle East. Its neighboring countries are Qatar, Kuwait, Oman, Yemen, United Arab Emirates, Jordan and Iraq. The total area of the country is about 2,149,690 square kilometers that is 1/5 of the United States. Total population of the country is 26.94 million. It is a Muslim country and is governed by monarchy. The capital of the country is Riyadh. The official language is Arabic and the currency of the country is Saudi riyal. Saudi Arab is an oil producing country; it is the largest oil and natural gas producer country.

The currency of Saudi Arab is pegged to US dollar at a fixed rate of 3.75 SAR. 90% of the country’s export includes oil and natural gas. Saudi Arab holds 20 percent of world’s oil reserves. 45 percent of the country’s GDP comes from the petroleum sector. Saudi Arab is the member of OPEC.For reducing the dependence on oil for gaining future economic growth the government-encouraged industrialization and welcomed foreign business and foreign investment in the country. Its trading partners include the United States, Japan, UK, Germany, Singapore, Taiwan, Italy, china, and South Korea. (Export.gov, 2017).

US Franchise Opportunities in Saudi Arabia

The United States Franchising In Saudi Arabia

The relationship between United States and Saudi Arab is bound by their interest in oil and security. The oil embargo of 1973 caused many problems in the US economy, in order to avoid any such problems in future the country made alliance Saudi Arab. The reason behind USA interested in doing business in Saudi Arab is that if there are many US franchises opened in Saudi Arab and the country becomes dependent on the income earned from those industries then Saudi Arab will hesitate in creating another oil embargo in the future. Protecting and providing security these oil-producing countries is in the foreign policy of U.S. there are huge business opportunities prevailing in Saudi Arab for United States and other countries as well. The government officials and businesspersons of Saudi Arabia have profound bonds with US and many businesspersons and officials have degrees from universities of the US. There are mutual investments of the stakeholders of both countries in huge projects. (Ali, 2008)

The Regulatory Framework Of KSA

The kingdom of Saudi Arab continues to fascinate international franchisors in the hunt for expanding their business in the country. In order to expand business in the KSA 1 has to understand the regulatory framework prevailing in the country. The legal framework is based on Sharia that is Islamic principles and legislation passed by the government. A franchise law for public consultation was released in January 2017 by the Ministry of Commerce and Investment (MOCI). (Cfr.org, 2017)

According to this law, the franchisors wanting to initiate business in Saudi Arab must be aware of the following features:

  • The franchisor must submit an application form to MOCI for registration with relevant documents following the requirements of law.
  • A franchise contract containing protection for franchisee must be submitted.
  • The franchisee has to appoint a local franchisor.
  • An agreement under the requirements of Commercial Agencies Laws and Regulations (CAL) should be provided inclusive of specific terms regarding the nationality, territory, capacity renewal and termination of the franchisor.

Some Important Tips For Franchisors

  1. Undertake persistence of the franchise and deliver the best or its improvement on the agreed regulations.
  2. The provisions of the franchise must be strictly under the law of the kingdom to avoid any issues.
  3. Include protection for the franchisor to gain benefit in case of agreement terminations.
  4. Safeguard protection of trademarks.
  5. Check for the updates from MOCI in case of any changes in the franchising framework as it may affect the relationship between franchisor and franchisee in the end.(Paul Allen, 2017)

Franchises Available In Saudi Arab

  1. Astoria serving Original Chilean sandwiches
  2. Sonic the iconic burger brand
  3. Cool greens providing homemade food
  4. Hard rock café
  5. Golden chick the family focused meal
  6. Club Pilates boutique Pilate studio
  7. Millions of milkshakes
  8. GOOD foods
  9. Tap out fitness the martial arts expert
  10. Pie pizzeria
  11. Pave’s pizza
  12. Mobile outfitters
  13. Au Bon Pain foods
  14. Little princess spa
  15. Snap fitness gym
  16. Project pie one price food space
  17. Papa Murphy’s pizza
  18. transmission and miles complete auto care
  19. Marcos pizza
  20. Lawry’s the prime rib restaurant
  21. Lapels dry cleaning
  22. Cycle bar the cycle boutique
  23. Alta mere and smart view window tinting
  24. Amazing athletes
  25. Flipping pizza restaurant
  26. Attila Mongolian grill
  27. Ground round grill and bar
  28. Doc popcorn restaurant
  29. Crepe delicious
  30. Glam n glow salon
  31. Good feet
  32. Subway restaurant
  33. Utterance natural cosmetics
  34. C house coffee lounge
  35. Taylor of old bond street
  36. Glamour secrets beauty products
  37. BEI training
  38. Home instead senior care services
  39. Direct English linguaphone group
  40. NYS collection of designer sun glasses
  41. Munchies (Businessforsale.com)

About The Franchises Listed

Some of the franchises listed above are foreign franchises located in Saudi Arab. The country of origin of these above listed franchises is United States of America. These franchises have designed their legal frameworks of their business on the principles of sharia so that they can operate easily in the kingdom of Saudi Arab. Most of these franchises include eatables, as food is the necessity of life and people from around the globe need food for their survival. Everybody wants to try different varieties of food so many franchises of restaurants and cafes are opened in Saudi Arab that provide Halal food.

With the changing lifestyle of people and people becoming more fashion forward they want to acquire more new and innovative stuff so, the different franchises of salons, spas and boutiques are now welcomed in the kingdom of Saudi Arab. The women of Saudi Arab are becoming more open to beauty products so different flagship stores of beauty products and cosmetics are now opening their franchises in the country. They are now becoming aware of fitness regimes and sports for which different sports material franchises and gyms are in operation for the people. Franchises of different schools and linguaphone groups are now operating in Saudi Arab because English is necessary for doing business worldwide these days. Medical care facilities and old age home franchises are becoming famous in Saudi Arab as well.

Why Do You Think They Are Successful In Saudi Arabia

The franchising marketplace of Saudi Arabia has countersigned noteworthy progress in the recent years with numerous up-and-coming American franchises captivating their origin. Most of these franchises and brands are by this time quite deep-rooted in the country. As mostly, these franchises are dedicated in the food and beverage and merchandising divisions. Seeing this trend, many Saudi franchise owners have gone international and opened their franchises internationally in different countries of the world to earn more besides their progress in the petroleum sector. Franchising is considered an ideal kind of business for different small and medium enterprises of Saudi Arab. The rapid growth in franchising started since 2005 in Saudi Arab.

These international franchises are dominating the market, as they are famous foreign brands. Franchising is suggesting a positive outlook for the country including higher GDP and increased exposure of the natives of the country to the different brands of the world. It is also increasing the tourism in the country associated with these brands or franchising world. The food sector and the franchises relating the restaurants and eatables are topping the list of spending with more than 17 percent making it about $42 billion. Other sectors include clothing and footwear making $13.9 Billion and 5.66 percent. Franchising is successful because it establishes consumer oriented business in Saudi Arab and it offers innovative business models for food and nonfood sectors and introduces new business opportunities. (Murray, 2018)

Risks Involved In Establishing A Franchise In Saudi Arab

As the franchising business is increasing in the kingdom of Saudi Arab and investors that are more international are opening their franchises in the kingdom, there are some risks involved while establishing their business. First of all the conservative nature of Saudi society is a barrier for the international investors as there are strict Islamic principles of trade and business followed in the kingdom. Abiding those rules and regulations may have serious consequences. Businesses are obligatory to acclimatize and modify to local imposts. Another challenge is that Saudi government wants franchises to higher more Saudi nationals as compared to non-Saudi nationals for work in the companies.

Many franchises were closed down because of not obeying the laws of the country. There are different kinds of risks involved in franchising like political risk, operational risk, country risk, technological risk, environmental risk, and strategic risks. Strategic risks include the competitiveness of any firm in the market with all the other firms and franchises already well-established and rooted in the market. Political risks include the political decision-making and structure of host government as well as risk of embargos and sanctions. The franchisee should understand the political system of host country to avoid risks.

Operational risks include the operational activities like machinery wear and tear, supply of resources, inventory, reducing auditing cost, detection of any illegal activities within the franchise. Country risk includes the infrastructure of the host country, its laws, its nature of business, cultural differences and language barriers, economic conditions; crime rates etc. franchisee should keep all these risks in mind before starting a business. Technological risks include lack of information, lack of security and equipment, lack of electronic transaction, lack of technology, which creates problem and affects the business. (Gov.uk, 2017)

Conclusion

Franchising opportunities is deep rooted in many business categories including food and beverage, laundry, apparel, footwear and clothing, mail and package services, dry cleaning services, automotive parts, restaurants, sports, printing stores etc. there are more than 300 foreign businesses having franchises in Saudi Arab. The kingdom of Saudi Arab continues to fascinate international franchisors in the hunt for expanding their business in the country. USA interested in doing business in Saudi Arab is that if there are many US franchises opened in Saudi Arab and the country becomes dependent on the income earned from those industries then Saudi Arab will hesitate in creating another oil embargo in the future. Franchising is considered an ideal kind of business for different small and medium enterprises of Saudi Arab. Franchising is suggesting a positive outlook for the country including higher GDP and increased exposure of the natives of the country to the different brands of the world.

Also study:

Doing Business in Saudi Arabia

References
  • Ali, S. (2008, November). Franchising appeal: Market Growth in Saudi Arabia. Retrieved from https://www.franchise.org/franchising%E2%80%99s-appeal-market-growth-in-saudi-arabia
  • com. (n.d.). Saudi Arabia Franchise Opportunities. Retrieved from https://www.businessforsale.com/franchises/franchise-for-sale-saudi-arabia
  • org. (2017, May 12). U.S.-Saudi Relations. Retrieved from https://www.cfr.org/backgrounder/us-saudi-relations
  • gov. (2017, July 07). Saudi Arabia – Franchising. Retrieved from https://www.export.gov/article?id=Saudi-Arabia-Franchising
  • uk. (2017, March 12). Overseas Business Risk – Saudi Arabia. Retrieved from https://www.gov.uk/government/publications/overseas-business-risk-saudi-arabia/overseas-business-risk-saudi-arabia
  • Murray, M. (2018, February 21). The Frenchises Law Review Edition 5 . Retrieved from https://thelawreviews.co.uk/chapter/1159249/saudi-arabia
  • Paul Allen, M. M. (2017, September 19). Franchising in Saudi Arabia: top tips for navigating the Kingdom’s regulatory framework. Retrieved from https://www.dlapiper.com/en/oman/insights/publications/2017/09/franchising-in-saudi-arabia-top-tips-for-navigat/

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