Some say that in the Middle Ages, the earliest franchises were born when political leaders began to designate privileges to citizens, such as conducting fairs, running markets, or operating ferries.
Today, the model, one that allows many owners across the globe to buy and share the same brand, has proven to be successful for some. Just Falafel is one example; after launching as a small falafel store in Abu Dhabi in 2007, it is now an international food chain with over 700 stores set to open in the next 40 years, thanks to its adoption of a franchise model. It's also now rumored to be considering an IPO on the Dubai NASDAQ, a rare feat for a local startup.
New competitors are taking note. Inspired by Just Falafel's success, Fayez Salam Al Nusari launched Mandilicious last year, as a traditional restaurant in the UAE with one goal in mind: “building a global brand through franchising.”
“I admire their strategy," says Al Nusari. "I have followed their growth from day one. They started with a very small shop in Dubai and from day one they were thinking about franchising; they wanted to be global.”
Thinking globally, with a local twist
Al Nusari, who is from Yemen, has lived in Dubai for 18 years. On the first of March last year, he launched Mandilicious’s first branch in Dubai's Times Square Center, to serve traditional dishes from Yemen, Saudi Arabia and Arabian Peninsula.
Just one day later, he received a request to franchise.
Due to high demand for the "cuisine of Arabia," he says, he opened other branches in Dubai and then Abu Dhabi. “I started alone, [and] it took me eight to nine months to [create] the business model,” he recalls.
Now, after receiving 10 million dollars in funding from an angel investor, he is looking into hiring and executing on his initial plan. He began doing market research to assess global demand, and became convinced that it was feasible, since, essentially, he says, "anybody will eat rice and meat, and that’s what we serve."
After working for two months with Francorp, a company that helps brands set up the legal and financial structures to expand internationally, Mandilicious is now in direct talks with around 15 franchisees and has registered its brand in 45 countries around the world, including Malaysia, Singapore, Indonesia, Saudi Arabia, Qatar and Oman, while keeping an eye on the Arab world and a few countries in Africa.
Mandilicious's revenue stream will consist of three major components:
- A franchise fee, which franchisees will pay for the rights to build a new Mandilicious. Depending upon region, this will typically be between $18,000 USD and $25,000 USD per franchise, Al Nusari says.
- A marketing fee of 2% to 4%, which franchisees pay to Mandilicious in exchange for global brand marketing.
- Royalties of 5% to 6%, which franchisees will pay Mandilicious for regular use of the brand.
Once it is fully set up, Mandilicious will also have a dedicated franchising department that will handle initial training for franchisees and ensure quality control.
The challenges of franchising
As one could imagine, one of the biggest challenges Mandilicious has faced has been maintaining consistency across its outlets.
“Having a central production unit that delivers to all the outlets was a main factor for success because you can guarantee quality," he explains. It was still difficult to ensure the same products, because the chefs he hired before didn’t have the right local flare.
Team building was another challenge he has overcome. "The biggest challenge is always people-related,” Al Nusari says. To create more team unity, he asked every single employee (the team is now 75), whether they were drivers, customer service agents, or salespeople, to go into the kitchen and learn how things are "cooking." His advice? “Involve people in every segment of the company,” he says. Regular meetings don’t have to be in the office; they can be in the kitchen, he says.
So it may sound like an easy route to global expansion, but nothing is quite that simple. For those startups thinking about franchising, here's a few pieces of advice:
- Appoint an attorney. Experts can help startups set prices, create a franchising agreement, and protect their intellectual property.
- Choose the right location. A thorough market study can help startups maximize the possibility that their product is well-positioned to serve its market.
- Set regulations. Giving franchisees a set of guidelines to follow related to training, hiring and other key practices is critical for ensuring that branches run well.
- Support your franchisees. Helping franchisees beyond training and hiring will keep them motivated. Setting up an effective communication channel with them, and celebrating victories will maintain morale.