The vibrant Kuwaiti franchise market has been a perfect launch pad for many foreign brands foraying into the Middle East. They choose to initiate their regional expansion from Kuwait before spreading out to other parts. Read on.
Dubai being a regional nerve centre of commercial and trading activities enjoys the reputation of being a business gateway to the Middle East. Therefore, international franchisors seeking entry into the Middle East are expected to launch their franchise concepts in Dubai and other emirates. However, Kuwait has also been attracting several foreign franchisees to launch their concepts here before entering into other Middle Eastern countries. Kuwaiti market is much smaller in comparison to region’s other markets like UAE, Saudi Arabia, Iran, Iraq, and Egypt. With a population of approximately 3.6 million out of which nearly 60 per cent are non-Kuwaitis or expatriate community. With such diverse Diasporas, the country’s consumer market is apparently more receptive to international brands and concepts.
Favoured destination
Kuwait has been one of the first countries in the GCC region, to recognise the benefits of franchise business model. Many international brand names such as Burger King and KFC began their Middle Eastern journey from the Kuwait before expanding into other Middle Eastern countries. McDonald’s entered the country in 1994. Ruby’s Tuesday restaurants launched their first franchise location in the Middle East in Kuwait in 2003.
Recent developments
In recent times, several foreign franchisees have selected Kuwait to launch their regional expansion. The first international location for Pinkberry opened in Kuwait in 2009. US-based Smashburger’s chose to open its first international location in Kuwait. Located at The Village, Abu Al Hasaniya, it is the first of 23 franchise locations planned for the area by the brand’s regional franchise partner. Further, Gelatissimo, a Gelato brand from Australia recently opened its first overseas store in Kuwait.
Market traits
Over the years, the Kuwaiti market has evolved as a franchising-friendly country. It is one of the most competitive and prime franchising markets in the Mid-East. Moreover due to its small size, Kuwait’s market presents a manageable territory to franchisors. Given these factors, it offers a perfect test market to try their concepts and test their strengths and weaknesses before setting out to break in more difficult markets in the region.
Key sectors
In Kuwait, food and beverage, supplemental education, apparel and accessories, and fashion and lifestyle are the leading franchising sectors. The world’s most recognised brands such as McDonald’s, Ruby’s Tuesday, KFC, Burger King, Baskin Robbins, Subway, Wendy’s etc have established their presence in the market. Among clothing brands, one can find franchises such as UK’s Mother Care and British Home Store (BHS). In 2011, USA’s Bricks 4 Kidz, a children education and enrichment program forayed into Kuwait via franchising. Besides, segments like beauty salons, fitness, automotive service centres, dry cleaning and laundry business are other franchising sectors with a lot of scope.
Big players
As it is common in the region, in Kuwait also, the big business groups have dominated the franchising scenario all these years. They have been representing prominent world brands by acquiring franchise rights for them. The country’s market boasts of several big players in the franchising sector. There are local business conglomerates like Americana Group, M. H. Alshaya Co, and Kout Food Group (AlHomaizi Foodstuff Co.) which are multiple franchise operators of several international brands from across sectors like food, fashion and lifestyle. Founded in 1964, Americana Group with a network of over 1,300 outlets is one of the most successful franchise operators in the whole world. Its brand portfolio includes the world’s most well known brands like KFC, Hardee’s, TGI Friday’s, Costa Coffee, Krispy Kreme etc. Founded in 1890 in Kuwait, M. H. Alshaya today is a major retailer in the Middle East. It is the franchise operator over of nearly 55 retail concepts from various sectors fashion and footwear, casual dining, health and beauty. Kout Food Group, a leading QSR business represents global brand namely Pizza Hut, Burger King, Applebees and Taco Bell.
Emerging trend
Cashing in on the potential and readiness of the market, the international franchisors are now opting for sub franchise agreements to grow their brand’s presence. The changing scenario is gradually giving way to direct franchise model and sub franchising with multiple and single unit options. The shift can be attributed to the emergence of new class of investors and aspiring entrepreneurs who have large pool of investible funds for start ups. Especially, the present economic world order is inspiring many people to establish own ventures across the world, including Kuwaitis.
Risk minimised
For an international franchisor, given the reputation of Kuwaiti market, brand’s first launch in the Middle East in Kuwait, provides him a better understanding of the neighbouring markets. The market provides the foreign brand to test the concept, understand the market and facilitates its adaptability to regions business environment, consumer preferences, region’s culture and way of life. While the local business houses by entering into sub franchise agreements can share the burden of developing the international brand with sub franchise partners in terms of capital, infrastructure, operations and services etc, the prospective entrepreneur gets an opportunity to leverage on an established, proven and successful international brand.
Finally
For most franchisors, selecting the right market is one of the most careful decisions they have to make while expanding internationally. In a large, dynamic and diverse market like Middle East, the foreign brands can benefit immensely from the experienced gained in the Kuwaiti market. The track record of being a foremost choice and success for number of global franchisors is a testimony of this fact that Kuwait will continue to provide a fertile franchising ground for international brands in the years to come.
