A May survey from WayMaker Journal, a publication, captures today’s work reality among Gen Z (aged 30 and under). The survey found 69% want to start a business, “not because they believe entrepreneurship is easy [but] because owning a business is the one thing that feels like control right now,” the analysis said. 

The survey noted Gen Zers put “marriage on hold, relocation on hold, [and] career changes on hold. But entrepreneurship … is not on hold. The dream was never the house. It was always freedom. Gen Z found a different door.” 

One way to realize the ambition of owning a business is the franchise model, in which small companies pay fees to multinationals to produce and sell the latter’s products or services, while the franchisee typically retains nearly all decision-making responsibility and net profit. 

For aspiring business owners, the dilemma is whether to build a brand from scratch or choose the franchise model, relying on the franchisor’s know-how, exposure, patents, and expertise to attract customers, but remaining confined to specific markets.   

Local boom coming 

In Egypt, franchise activity is primed for a boom. “We are seeing growth in franchise activity for the first time since COVID-19,” Hatem Zaki, chairman of the Egyptian Franchise Development Association (EFDA), told Al Borsa News in January. 

To capitalize on the opportunity, the EFDA launched Egypt’s first “accelerator” solely for franchisees. The first batch comprises 10 companies, one of which is state-owned. 

Zaki also noted the  EDFA is developing a draft law regulating franchise activity. “The law aims to protect the rights of the state, the franchisor and the franchisee, and to regulate registration, disclosure and contract termination processes, thereby establishing a clear legal framework for the activity for the first time,” he said. 

​ In December, Basel Rahmy, CEO of the Micro, Small and Medium Enterprise Development Authority, announced plans to organize Egypt’s first franchise conference in cooperation with Saudi Arabia. It aims to match franchisors and franchisees and raise awareness of the franchise economy. 

​ These efforts come as the local market lacks reliable franchise statistics. “The last comprehensive survey was conducted in 2005. However, current estimates suggest about 1,300 franchise systems operating in the Egyptian market,” Zaki said. That lack of data can turn off both franchisors and franchisees. 

​ Good for society 

According to The Economist, franchise business models “have long been sneered at … derided by economists as little more than a cheap growth tactic in which franchisees stumped up the capital to open new outlets. Critics claim that franchisees are not ‘true’ entrepreneurs … but merely glorified store managers obsessed with the illusion of being their own boss.” 

​ Nevertheless, franchising has proven its economic worth over the years, as most franchisees are startups or small companies. “Small businesses are the backbone of most communities, and they provide high levels of economic value to the towns and cities in which they are located,” noted Neighborly Franchising, a franchise company, in September. “Because franchise businesses are small businesses, as a franchise owner, you will likely become an integral part of your local economy, supplying essential services and employing community members.” 

​ These franchise companies also “pay town and city taxes and create new jobs,” said Neighborly Franchising. “Taxes support many community goods and functions, including schools, road repairs and maintenance, emergency services, parks and recreation, and other vital community services.” 

​ Endangering local brands 

According to Rick Grossman, a franchisee with 49 branches across 19 U.S. states, franchising is better for entrepreneurs who want to run a business rather than build one around their original product or service idea. “Very few people have the natural ability or expertise to be efficient at all aspects of running a successful business,” he explained. “That is where the franchisor’s experience comes into play.” 

​ Franchisors offer “a structure for launching, operating and growing a business,” Grossman told Entrepreneur, a publication. “The operational and marketing procedures, coupled with comprehensive operations manuals and training programs, are designed to enable franchise owners to earn more and spend less time and effort than would be otherwise required to open and operate a similar business on their own.” 

​ The second factor that makes the franchise model easier than starting a business from scratch is “collaboration among franchisees breeds success,” Grossman said. “Though each business is independently owned and managed, all franchisees share in the collaborative benefits of the organization through the support and oversight of the franchisor.” 

​ Some of these positives include access to “group advertising resources not typically available to small, independent business owners; owning your own business and making day-to-day decisions … guided by the experience of a successful business enterprise; [and] the ability to sell products and services to markets that company-owned outlets [can’t] serve.” 

​ Other benefits include “operational support from the franchisor [in] financing, accounting, employee training, and operational procedures,” accessing the same suppliers as “all franchises will share the same interior and exterior physical appearance, the same product, the same service, product quality, training, [and] brand awareness.” 

​ Local brands advantage 

On the other hand, building a new brand can offer several advantages over franchising. First is “flexibility, [which] has always been a hot button for entrepreneurs who exchange that stability of a ‘real job’ for the freedom of being their own boss,” Grossman said. In franchises, the franchisor must maintain product and service quality and identity. 

​ Second, local brand owners don’t share revenue with a franchisor. However, Grossman was “surprised” that money “is seldom the most important,” saying, “We know many people who have left huge salaries behind, because they were miserable, to … launch a business.” 

​ Lastly, local brand owners have a better “status” than franchise owners. This “is an all-encompassing category that includes not only titles and positions, but more importantly, the feeling of purpose one has and being a part of something significant,” he said. 

​ Starting a franchise also requires more up-front money than starting a local brand. Franchise fees, hiring standards, and office space design, quality, aesthetics, and equipment must meet franchisor standards. Local brand owners can dispense with these costs in the initial phase. 

​ Also, the odds of franchising success depend on startup capital. “The smaller the initial investment, the higher the rate of failure,” according to Investopedia, an investment platform. When starting a new brand, success usually depends more on the products and services offered. 

​Owning a franchise also imposes expansion limits, as the franchisee may lack the capacity or the franchisor’s approval to expand beyond certain markets or regions. For example, in Egypt, Manfoods is a McDonald’s franchisee with no operations outside the local market, since other franchisees operate the fast-food chain in each Middle Eastern and African market. 

​Two exceptions are Coldwell Banker Egypt and Cinnabon Egypt. They are franchisees of U.S.-based brands and also operate in neighboring countries via franchise agreements. 

​However, local brand owners can grow as freely as their business models allow. The list of fast-moving goods companies in Egypt includes Edita Food Industries, Juhayna Food Industries, Domty (Arabian Food Industries), Spiro Spathis, and Auf Egypt (owner of Abu Auf). Chemical companies include Eva Cosmetics, Egyptian Company for Cosmetics, and Nuit Fragrances, among others. They all operate directly in markets across MENA, especially the GCC. 

​Additionally, local brands are more likely to become franchisors themselves. Examples include fast-food chains like Zooba, Buffalo Burger, Mo’mem, and Tseppas. As well as cafe chains Cilantro and Beano’s. 

​ Several local preschool and school brands have expanded in the region through franchise agreements, including Trillion (The Montessori House), Petals Preschools, and CIRA Education. 

​ A smart choice 

Ultimately, choosing between a franchise and a local brand comes down to an entrepreneur’s risk tolerance. “Small business considerations are critical when deciding between starting your own business and investing in a franchise,” noted Neighborly Franchise. One important metric is the success rate of franchises versus startup businesses, it added. 

​According to the U.S. National Franchise Association, “Franchises have a higher success rate, with over 90% of franchises still operating after five years, compared to only about 50% of independent businesses.” 

​A PricewaterhouseCoopers report in April said a “hybrid approach [is] emerging” in the Middle East. This strategy sees companies “operate directly in key flagship markets, while franchising in others where speed, partner access and capital efficiency are more advantageous.” 

​Others are “developing new mechanisms to franchise personalized and premium food and beverage concepts while maintaining a higher [than usual for a franchise] degree of control over quality and service,” the PwC report said. 

​Ultimately, the franchise business model is open to the region. “As competition intensifies and consumer expectations continue to evolve, the question for brands is no longer whether to expand into the Middle East, but how deliberately they choose to do so,” the PwC report noted. “The optimal mix continues to evolve.”