Franchises: 345 brands and 2,050 outlets
21 July 2009
Read by 1801 persons
The sector employs 20,000 people. 47% of brands are French, 14% Moroccan, and 11% American. There is a high concentration of brands in Casablanca. Local brands are starting to expand abroad.
Contributing 11% to the GDP, franchising has seen significant growth in recent years. However, this sector is still unregulated. Only a Code of Ethics developed by the Moroccan Federation of Franchising sets good conduct practices, defines the concepts of franchisee and franchisor, and establishes the rights and obligations of the parties involved. These elements are highlighted in a recent study by the Center for Economic Intelligence (CIE) of BMCE Bank, which La Vie éco has had exclusive early access to.
However, the Ministry of Commerce and Industry emphasizes that despite the lack of specific laws, professionals seem satisfied with the common framework. The ministry explains that, while not ruling out the possibility of future regulation, "the absence of a law has not had a negative impact on the franchising sector, whose operators rely on practices and jurisprudence, and no difficulties have been reported."
Today, there are 345 brands in clothing, restaurants (fast food, specialized restaurants, cafes), and various other businesses (furniture, hairdressers, pastry shops). The sector employs 20,000 people in over 2,050 outlets. The average network size for each brand is 6 stores. Only 29 brands have more than 10 stores, while the majority only have one.
High Failure Rate in the Restaurant Sector
The regional distribution of franchises shows the dominance of Casablanca, which accounts for 26% of franchise network stores. "This is due to two main reasons: income levels are 15-17% higher than the national average, and foreign brands always choose to open their pilot stores in the economic capital. This allows them to test the Moroccan market and consequently establish their development plan in other cities," explains Jad Benhamdane, the analyst who conducted the study.
Rabat and Marrakech follow Casablanca, with respective shares of 13% and 7%. Furthermore, the study notes the expansion of franchising in other cities like Tangier and Fes, thanks to the development of shopping malls.
The activity is highly diversified; however, not all sectors are expanding at the same rate. While clothing, representing 30% of franchises, is nearing saturation but continues to dominate the market, the restaurant sector shows great potential while also experiencing the highest failure rate.
The experiences of Subway, Dairy Queen, Dunkin Donuts, Wimpy, and Schlotsky's have been very short-lived due, according to the study, to "poor location, failure to achieve the expected turnover, or lack of proper market research." Consumer habits, according to some observers, can also explain the failure of certain franchises. The most striking example is Dunkin Donuts, which failed to establish its American donuts against the competition from the Moroccan sfenj, even among the affluent class.
According to the study, the various franchise branches generate satisfactory income. Their turnover has shown double-digit growth over the past three years. Growth was 93.5% for food and beverage and 50.1% for clothing.
This performance is explained by the fact that all brands have now reached their cruising speed, the enthusiasm of Moroccans for "fashion" trends, and the aggressiveness of consumer credit companies, which allowed the furniture franchise to achieve 34.4% growth.
In terms of origin, France accounts for 47% of brands. French brands are mainly concentrated in clothing, cosmetics, and hairdressing. American franchises, mostly active in restaurants, car rentals, and education, represent 11% and are the second largest foreign group. They are followed by Spanish (8%), Italian (7%), and various other nationalities.
However, considering all origins, Moroccan brands occupy second place with 14%. Moroccan franchisors operate mainly in telecommunications, clothing, and furniture. Their networks have 1,160 stores.
"The development of national franchises is due to the accessibility of franchisors, who require less capital than foreign brands, and the fact that franchisees, sourcing locally, do not incur customs duties and do not face storage constraints or a lack of logistics platforms," explains Mr. Benhamdane.
Professionals are calling for more commercial spaces...
Now having a solid financial base and sufficient maturity, Moroccan franchises are expanding abroad. The study mentions the examples of Océane in Tunisia, Benson Shoes in Brussels and Abidjan, Pralinor in China, and Sakanid in Algeria. The Marwa brand also plans to establish itself in Spain. Furthermore, in the local market, companies holding foreign brands have, according to the study, developed ambitious development plans, both independently and through franchising.
The study cites the cases of the Nesk Investment group, whose investment will amount to 365 MDH over the next four years, the Aksal group, which plans to open two Massimo Dutti stores in Rabat and Marrakech by 2010, the Marwa brand, which intends to open three outlets per year, and the Saham group, which aims to achieve good national coverage with 280 stores by supporting the development of Ego and Via Seta, with an investment of 30 MDH for each brand by 2010.
However, the sector suffers from insufficient commercial space and high land costs. Land costs can represent up to 80% of the investment. Furthermore, the practice of "informal work" is also an obstacle, as noted in the study, which states that the law does not sufficiently protect owners and encourages high rents.
The development of commercial spaces in centers, galleries, and malls is a response to the concerns of sector operators. New cities (Tamesna or Tamansourt) will have premises, which will avoid real estate price hikes.
But land is not the only obstacle; the study also notes that "banks are still reluctant to support this specific form of distribution." They believe that joining a franchise is not a real guarantee and that the contract can be terminated at any time; the franchisee can therefore lose their brand, which constitutes the essential part of their business assets.
Contract termination often results in a prohibition on using the equipment. In response, franchise professionals suggest lowering risk premiums. They also want banks to adopt a strategy specific to the franchising sector and consider financing options (lease-back) that allow franchisees to easily switch to simple rentals.
Published and posted online on July 18, 2008
lavieeco.com
Contributing 11% to the GDP, franchising has seen significant growth in recent years. However, this sector is still unregulated. Only a Code of Ethics developed by the Moroccan Federation of Franchising sets good conduct practices, defines the concepts of franchisee and franchisor, and establishes the rights and obligations of the parties involved. These elements are highlighted in a recent study by the Center for Economic Intelligence (CIE) of BMCE Bank, which La Vie éco has had exclusive early access to.
However, the Ministry of Commerce and Industry emphasizes that despite the lack of specific laws, professionals seem satisfied with the common framework. The ministry explains that, while not ruling out the possibility of future regulation, "the absence of a law has not had a negative impact on the franchising sector, whose operators rely on practices and jurisprudence, and no difficulties have been reported."
Today, there are 345 brands in clothing, restaurants (fast food, specialized restaurants, cafes), and various other businesses (furniture, hairdressers, pastry shops). The sector employs 20,000 people in over 2,050 outlets. The average network size for each brand is 6 stores. Only 29 brands have more than 10 stores, while the majority only have one.
High Failure Rate in the Restaurant Sector
The regional distribution of franchises shows the dominance of Casablanca, which accounts for 26% of franchise network stores. "This is due to two main reasons: income levels are 15-17% higher than the national average, and foreign brands always choose to open their pilot stores in the economic capital. This allows them to test the Moroccan market and consequently establish their development plan in other cities," explains Jad Benhamdane, the analyst who conducted the study.
Rabat and Marrakech follow Casablanca, with respective shares of 13% and 7%. Furthermore, the study notes the expansion of franchising in other cities like Tangier and Fes, thanks to the development of shopping malls.
The activity is highly diversified; however, not all sectors are expanding at the same rate. While clothing, representing 30% of franchises, is nearing saturation but continues to dominate the market, the restaurant sector shows great potential while also experiencing the highest failure rate.
The experiences of Subway, Dairy Queen, Dunkin Donuts, Wimpy, and Schlotsky's have been very short-lived due, according to the study, to "poor location, failure to achieve the expected turnover, or lack of proper market research." Consumer habits, according to some observers, can also explain the failure of certain franchises. The most striking example is Dunkin Donuts, which failed to establish its American donuts against the competition from the Moroccan sfenj, even among the affluent class.
According to the study, the various franchise branches generate satisfactory income. Their turnover has shown double-digit growth over the past three years. Growth was 93.5% for food and beverage and 50.1% for clothing.
This performance is explained by the fact that all brands have now reached their cruising speed, the enthusiasm of Moroccans for "fashion" trends, and the aggressiveness of consumer credit companies, which allowed the furniture franchise to achieve 34.4% growth.
In terms of origin, France accounts for 47% of brands. French brands are mainly concentrated in clothing, cosmetics, and hairdressing. American franchises, mostly active in restaurants, car rentals, and education, represent 11% and are the second largest foreign group. They are followed by Spanish (8%), Italian (7%), and various other nationalities.
However, considering all origins, Moroccan brands occupy second place with 14%. Moroccan franchisors operate mainly in telecommunications, clothing, and furniture. Their networks have 1,160 stores.
"The development of national franchises is due to the accessibility of franchisors, who require less capital than foreign brands, and the fact that franchisees, sourcing locally, do not incur customs duties and do not face storage constraints or a lack of logistics platforms," explains Mr. Benhamdane.
Professionals are calling for more commercial spaces...
Now having a solid financial base and sufficient maturity, Moroccan franchises are expanding abroad. The study mentions the examples of Océane in Tunisia, Benson Shoes in Brussels and Abidjan, Pralinor in China, and Sakanid in Algeria. The Marwa brand also plans to establish itself in Spain. Furthermore, in the local market, companies holding foreign brands have, according to the study, developed ambitious development plans, both independently and through franchising.
The study cites the cases of the Nesk Investment group, whose investment will amount to 365 MDH over the next four years, the Aksal group, which plans to open two Massimo Dutti stores in Rabat and Marrakech by 2010, the Marwa brand, which intends to open three outlets per year, and the Saham group, which aims to achieve good national coverage with 280 stores by supporting the development of Ego and Via Seta, with an investment of 30 MDH for each brand by 2010.
However, the sector suffers from insufficient commercial space and high land costs. Land costs can represent up to 80% of the investment. Furthermore, the practice of "informal work" is also an obstacle, as noted in the study, which states that the law does not sufficiently protect owners and encourages high rents.
The development of commercial spaces in centers, galleries, and malls is a response to the concerns of sector operators. New cities (Tamesna or Tamansourt) will have premises, which will avoid real estate price hikes.
But land is not the only obstacle; the study also notes that "banks are still reluctant to support this specific form of distribution." They believe that joining a franchise is not a real guarantee and that the contract can be terminated at any time; the franchisee can therefore lose their brand, which constitutes the essential part of their business assets.
Contract termination often results in a prohibition on using the equipment. In response, franchise professionals suggest lowering risk premiums. They also want banks to adopt a strategy specific to the franchising sector and consider financing options (lease-back) that allow franchisees to easily switch to simple rentals.
Published and posted online on July 18, 2008
lavieeco.com
