Although I am retired now, I always found the prospects of entering additional foreign markets interesting. It is actually quite fun to create the regional variations in your business model to succeed. In a franchising company there are even more dynamics to consider. After all, you have a successful model, which has prompted others to contact you from foreign lands. But, you also know that the exact business model which made you successful in the US and other foreign markets will not be the same in places like Asia, Africa, South America, or the Middle East.
Not long ago, a gentleman contacted me, and this happens every couple of weeks or so, wanting to take my business model to his country. In this case it was the UAE, and he wanted to know how we would deal with such things as pollution control, water shortages, and differences in culture, regulations, law, and the consumer markets in his nation-state. Our franchise is a mobile washing service business. And we do have pollution control systems, some of the best in the world available, but it adds cost and takes longer to wash, or at least set up time and so if it is mobile it can be challenging while still trying to keep customer price low?
If the current business model is not viable at the price point, it needs to be tweaked to work, or one should never be afraid to pass on the deal either, likewise you have to make sure you follow the rules and your franchisee is well connected enough not to step on any toes, as they might easily get their but arrested or the laws and rules changed on short order, adds risk to any investment. Although similar to US law somewhat, it’s still run by the powers that be and you need their nod and go ahead, or cut them into the deal. That’s the way it’s done, you cannot argue or try to force your US Laws on them, it doesn’t work that way.
Indeed, I was told by the interested party that; “Abu Dhabi thrives on cheap labor, where they mostly come from countries in the South Asia (India, Pakistan, Bangladesh, etc.) There is no minimum wage here, so most of the ‘laborers’ wages range from (600-1,500 dhs.) a month (150-400 US Dollars). In terms of labor, that shouldn’t be much of an issue.”
In their nation you need to have a local sponsor from Abu Dhabi and they need to be 51% owner, which is interesting and similar to a number of countries, and in most cases such rules applies to Franchising too. Or if the licensed rights to the area could be granted, thus, the franchisor essentially has zero ownership, and the franchise buyer (which could be a partnership with a foreign entity). Meaning it’s a non-issue when it comes to franchising.
Something else many small time franchisors forget is that it is quite costly to draw up international agreements or attempt to make any type of offer in this case, without having all up-front payment of non-returnable deposits to cover those costs of course. Indeed, I have considered franchising in the UAE at length over the years, and rejected it each time for many of these reasons.
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