Moataz Al Alfy Presents Franchise Potential in Egypt
12 Dec 2018 - Honorary Chair of the Egyptian Franchise Development Association (EFDA) Moataz Al Alfy held a press conference on Oct. 31 in relation to the 16th Middle East and North Africa International Franchise & License Exhibition (MIFE 2018) to take place in Cairo on Nov.17 - 19.
Facts on Franchises in Egypt
Al Alfy said that there are 800 franchises operating in Egypt creating 800,000 direct jobs and 1.6 million indirect jobs. The size of their investments and sales are respectively LE 80 billion ($45 billion) and LE 14 billion ($8 billion).
The EFDA honorary chair added that the great majority of franchises in Egypt are small businesses and concentrated in the service sector. Franchisees can be real estate brokers who use modern systems or print shops, he said.
Al Alfy said that certain Egyptian businesses went international and global by entering foreign markets in the region, and in Europe through franchises. As for Egyptian franchisees, he said the start is often easy because foreign franchisers provide them with the know-how and the targets they need to meet.
EFDA Chairman Hatem Zaki stated that the percentage of local and foreign franchises is equal, and that franchises in Egypt run 60,000 outlets. Egyptian franchises in the culinary industry are competing with foreign ones, and have become the most dominant in the market, Zaki said.
The EFDA chairman stressed that the spillover effect occurs when foreign franchises enter the local market so as local brands start to replicate and develop their ideas offering their products in better prices. He also added that the investments of formal franchise feeding industries are in the value of LE 90 billion ($50.6 billion).
Franchise Financing and Growing Sectors
Al Alfy stated that franchises started in the country in 1969 and that the Social Fund For Development founded in 1991 was financing franchises. However, the project stopped because of the inability of non-franchisee customers to pay back their loans. Al Alfy added that franchisees often receive loans from banks easily as the latter are able to verify they possess the necessary know-how to operate and the contracts signed with the international or global brands.
Al Alfy revealed that the EFDA trains local financing entities and it works on finalizing an agreement with the International Franchise Association (IFA) to grant Egyptian franchisees the Certified Franchise Executive (CFE) designation after completing the pertinent program and course of study.
Franchises are always in the formal sector so they pay taxes and secure stable jobs. In addition, they are less likely to face financial problems, Al Alfy said, clarifying that there is “a need for quality only ensured through brands” giving the examples of seven Egyptian pharmacy chains as well as the X-ray and blood tests labs.
Al Alfy anticipates that there are growth opportunities for franchises in the sectors of maintenance and facility management services. He added that franchises have started to appear also in the education and economy-sharing sectors. Al Alfy said Egypt also needs social franchises in different governorates like nurseries, facilities offering contraceptive methods, and ambulance services.
Prospective Legal Framework for Franchise
Zaki revealed that a legal conference on franchise will be held in January in collaboration with an international arbitration firm. He also uncovered that the EFDA has drafted a franchise law in partnership with the Ministry of Trade and Industry, and that it will be submitted to the parliament next year.
The law was drafted after holding 18 focus groups comprising legal experts and franchisees to regulate franchise registration, and franchise disclosure documents presented by the franchiser.
MIFE 2018 is organized by EFDA in conjunction with the Cairo International Franchise Conformance; Franchise Matchmaking Forum; World Franchise Council (WFC) meeting, ASIA PACIFIC FRANCHISE CONFEDERATION (APFC) meeting; and Ibero-American Franchising Federation (FIAF) meeting.
Al Alfy said the EFDA hosted the exhibition organized by the World Franchise Council in 2007, and that this year’s event will have as participants investors, banks, insurance companies, and six ministers. The honorary chair said Egypt is a founding member of the association since its establishment 18 years ago.
EFDA Secretary General Hussein Abou El Fath said that 38,000 out of 45,000 brands from multiple countries have confirmed their participation. Those belong to Egypt, the Kingdom of Saudi Arabia, the United States, the United Kingdom, Lebanon, Turkey, Malaysia, Singapore, and China for the first time. They will present on the first day their franchise opportunities for investors.
That is in addition to non-brand participants such as the National Bank of Egypt (NBE), the Delta Insurance, the Exports Development Bank and the Organization of IBERO-American States, Abou El Fath said. The event will also be attended by six ministers and is held under the auspices of Prime Minister Mostafa Madbouly. The conference will include sessions on franchise funding and supply chain.