Air Stream Consultants Start Meetings For Our//Space Malaysia

The franchise laws in Malaysia are unique in many ways and we advise any franchisor to seek legal advice before making a start. The Franchise Act (FA) is one that allows regulators to add to a franchise territory size, prevent new companies from entering the market and seeks compensation from a franchisor who does not renew a franchisees agreement.

Although the FA does not expressly restrict the manner in which a franchisor recruits franchisees or selects its suppliers, the government does exercise some form of control and impose certain conditions (when granting its approval during the approval application/registration process). For instance, if the territorial area granted to a potential franchisee is considered to be too small or restrictive, the Registrar would request that the applicant to extend the territorial right to a larger area (usually by reference to a radius in km). The Registrar of Franchises would also require the franchisor to submit a list of its suppliers in granting approvals. If the franchisor has not shown profitability or healthy growth in their financial statements for the franchise business, the Registrar is likely to refuse the approval application or registration on the basis that the franchisor is not ready to sell its franchise systems to franchisees in Malaysia.

 

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Kevan Halliwell CEO Our//Space meeting Mr Yusuf from Malaysia

It might however be a case of attending a tradeshow in say Singapore and nobody can stop a Malay businessman from approaching your stand and making a master franchise enquiry.

If this does happen I would suggest you ask the prospect to come up with some answers and this is what is happening with Our Space after Air Stream had some great guys to meet after the franchise show

 

This link offers helpful IFA advice on global franchising law

 

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Millennials Seek Self Employment

Over a quarter (27%) of Millennial men are hoping to start their own business. This is testament to how a challenging jobs market is pushing younger generations to be more creative and flexible with their careers say MINTEL

The interesting feature from research also shows almost 1 millenial in 3 born outside the UK would like to be in business for themselves.

It once again points to a new set of demographics in regards to franchise marketing in  the future.

It would be almost unheard of for a franchise seeker a decade ago to be aged between 18 and 37.

Times are changing! The grey haired franchise developer could run some adverts, scare a baby boomer into buying a job and hey presto it was a walk in the park.

The baby boomer gravy train is changing and frankly if you learn the wants & needs of a goal setting millennial from outside the UK you will have a bigger market

Millennials, whom we define as those ages 18-34 in 2015, now number 75.4 million, surpassing the 74.9 million Baby Boomers (ages 51-69). And Generation X (ages 35-50 in 2015) is projected to pass the Boomers in population by 2028.

 

Obligations of a franchisee

 The Relationship Structure defines the elements that will make up the detailed terms of the various contracts.

Eight Steps To Buying a Franchise

  1. We’ve broken down the franchise buying process, as you are aware, buying a franchise means you are buying a tried/tested format, whilst we’d hope that this takes the guesswork away we must say take care, before you get dazzled by the bigger bank balances of the larger corporations you must do your own due diligence.

    In theory it is presented that you can also save time and energy by not worrying about generating publicity to raise the awareness of your new venture but as much as your customers will know what to expect from a big chain, they don’t always flock to a brand name they haven’t realised has opened.

    Having an established brand, proven market and a respected system of operation means that the battle could already half won for you before you even start your first day of trading. That is if all your facts are straight and you have looked at the business plan properly. The manner of response and quality of the information you prospective franchisor gives you can be a deciding factor in your final decision to purchase the franchise from that franchisor.

    My Passion Is To Help You Find Yours

    Richard Williams UK Franchise Broker Tel 01886 880088

    Gathering as much data on the sales potential of the market/territory you are going be operating in is critical and identifying future potential will be the backbone of the business.

  2. Use every resource available including demographic data from the Office of National Statistics, Trade Associations, Local Chamber of Commerce, Local Enterprise unit, Councils for town and borough.Look at the competitive information in annual report of brand leaders and request market information from the franchisor regarding the rationale for defining a territory.
  3. Crunch the numbers on your own and test the figures as your franchisee gross margin and the relationship to the royalties compared to net margin. You simply should walkway from a franchisor asking you to pay an 8% royalty on a gross margin percent is in 20 to 30% region. Check how long you should be in business before breaking even and what this period will cost you. Factor in extra for a safety margin.
  4. The requirements regarding any PR or advertising fund will be of interest. Is the fund fully operational?  Ask about the franchisees task in the administration and use of PR and marketing fund monies.
  5. Complete in depth due diligence on the franchisor’s financial statements with a focus on the source of revenue and any positive or negative trends. As stability is important in terms of the franchisor being able to service and support its franchisees– you must check the levels and source of capital.
  6. Interview current franchisees and ask for a list of terminated franchisees. Again verify the numbers by finding out what time frame they found when getting to reach break-even. After some coughing & spluttering they will say we are slow but its all different now… Its not! Have a prepared list of questions and you then must ask each franchisee and the franchisor the same questions. Then work out the facts for yourself.
  7. Asking the franchisor if they have ever been in or are in any sort of litigation will be of help and it might be worth checking the franchisees out with a litigation type question.
  8. Insist that you meet with the CEO or managing director in order to understand their role in the day-to-day operation of the franchise. What is their strategy for growing the franchise network and what is the longer term vision and then ask what happens at the end of franchise term? Can I carry on or do I have  any restraint of trade? Would you see yourself getting on with the directors and would you be comfortable to have them in your home socially…

 

The above are some of the points to get you started, it might also be worth considering your personal passion and how your passion is aligned with your business.

 

This is about your life and the choices you make must be your own and of course you must get some good professional advisors to support you.

You would also be sensible to seek the help of a franchise broker, just like an insurance broker or a stockbroker they tend to discover your appetite and match you to the best franchise for you and your income requirements

http://airstreamconsultants.co.uk/

Global Giants

Are You a U.S. Franchisor Going Global?

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The team at Airstream Consultants seeks to enable franchisine entrepreneurs from all over the world to globalise their business from a UK strategic hub.

Airstream does this by harnessing the support, master franchisees , broker networks and experience of its team of internationally successful franchise entrepreneurs.

We are known as franchise dealmakers, we identify emerging franchise brands and accelerate the world’s franchised businesses.

Our team’s impressive international networks and track record in building successful international businesses, enables the team to identify and work with these high growth franchise businesses and then help them accelerate from a UK strategic HQ.

For more information about the team at Airstream Consultants and to see if you have a company that matches its eligibility criteria, please contact: info@airstreamconsultants.co.uk  or call +44 1886 880088 or visit airstreamconsultants.co.uk 

UAE Map

Interested in entering or expanding your franchise activity in the UAE market? This article sets out what you need to know:

Franchise Business in the United Arab Emirates…

When going out and about in downtown Dubai you will see a plethora of franchises such as KFC, McDonalds, Costa Coffee, Caffe Nero, and even Yo Sushi.

From a handmade gourmet burger kitchen restaurant through to RE/MAX or Keller Williams real estate agency and you can even find one of the gym franchisors in action for those seeking a workout!

Without doubt a franchise business model is highly accepted in Dubai but it does come with a need for specialised legal assistance, it is not as easy to terminate a franchise agreement as other regions and a franchisor should appoint someone with an element of caution when covering UAE or Gulf States

Although there is no one specific franchising law in Dubai, a range of civil and commercial laws apply depending on the terms of the contract. There are multiple laws which can apply to franchising relationships and these include:  Federal Law No. 18 of 1981 on the Organization of Commercial Agencies (as amended by Law No. 14 of 1998) and which was further amended by Law No. 13 of 2006.  Federal Law No. 5 of 1985 on Civil Transactions.  Federal Law No. 18 of 1993 on Commercial Transactions. 16 In addition to the above depending on the terms and conditions of the agreement other laws and regulations may also be relevant, including:  UAE intellectual property laws for trade-marks, copyright and patents.  Labor laws, especially, where a franchisor may second staff to the franchisee.  Local Municipality rules – in relation to business names and signage;  UAE general principles dealing with restraint of trade and assignment of the franchise back to the franchisor in the event of default.

 

The UAE maintains a position as the major trade and investment hub for a large geographic region, which includes not only the Middle East and North Africa, but also South Asia, Central Asia, and Sub-Saharan Africa. The country ranked 19th in the World Economic Forum’s 2013- 2014 Global Competitiveness Index, and 23rd on the World Bank’s 2013 Doing Business report, improvements of five and three places respectively from the previous year. Multinational companies cite the UAE’s political and economic stability, rapid population and GDP growth, efficient and fast growing capital markets, an absence of corporate and personal taxes, or any evidence of systematic corruption, as positive factors maintaining the UAE’s attractiveness to foreign investors, with inward FDI recording a 20% year-on-year increase to reach $12 billion, accounting for over 40% of the total inward FDI of the entire GCC.

With all the above you would expect laws to be more favourable to overseas investors and in my opinion they are not. It is a legal framework that in my opinion is skewed in favour of local nationals.

A Federal Companies Law applies to all commercial companies established in the UAE and to branch offices of foreign companies operating in the UAE. Companies established in the UAE are required to have a minimum of 51 percent UAE national ownership. Regardless, profits may be apportioned differently and often are negotiated at fixed amounts. Branch offices of foreign companies are required to have a national agent with 100% UAE national ownership unless the foreign company has established its office pursuant to an agreement with the federal or an emirate government. The new draft Companies Law, as reported by government media, is near final form and awaits the final determinations from the President before it is decreed and published in the national gazette. However, the revised draft has been under consideration for several years and there has been no guidance given as to how quickly the new law might be issued and implemented.

Foreign investors may purchase 108 of the 135 issues on the UAE stock markets, the Abu Dhabi Securities Market (ADX) and Dubai Financial Market (DFM). The remaining 27 issues are primarily those of government-related entities (GREs), such as the national telecommunications and oil companies. Companies on the exchanges are subject to the Federal Companies Law, thus foreign investors are allowed to own up to 49 percent of a company. However, some company by-laws prohibit foreign ownership, and others limit it to less than the legally allowable 49 percent, although several major companies raised their foreign ownership limits in 2013 in anticipation of an increase in foreign investment generated by announcements that ratings agencies MSCI and Standard & Poor’s would upgrade the UAE from “frontier” to “emerging” market status. The international financial crisis and foreign speculation contributed to significant declines in local equity valuations since 2008, but the markets have rebounded strongly in 2013. The Emirates Securities and Commodities Authority (SCA), the UAE’s regulator, is considering raising the minimum level of capital for brokerages. The Commercial Agencies Law provisions are collectively set out in Federal Law No. 18 of 1981 on the Organization of Commercial Agencies as amended by Federal Law No. 14 of 1988 (the Agency Law) and applies to all registered commercial agents. Federal Law No. 18 of 1993 (Commercial) and Federal Law No. 5 of 1985 (Civil Code) govern unregistered commercial agencies. The Commercial Agencies Law requires that foreign principals distribute their products in the UAE only through exclusive commercial agents that are either UAE nationals or companies wholly owned by UAE nationals. The foreign principal can appoint one agent for the entire UAE or for a particular emirate or group of emirates. The Ministry of Economy handles registration of commercial agents. It remains difficult, if not impossible, to sell in UAE markets without a local agent. Only UAE nationals or companies wholly owned by UAE nationals can register with the Ministry of Economy as local agents. The federal Industry Law stipulates that industrial projects must have 51 percent UAE national ownership. The law also requires that projects either be managed by a UAE national or have a board of directors with a majority of UAE nationals. Exemptions from the law are provided for projects related to extraction and refining of oil, natural gas, and other raw materials. Additionally, projects with a small capital investment or projects governed by special laws or agreements are exempt from the industry law.

The legislation for a franchisor to consider in the UAE is Federal Law No. 18 of 1981 on the Organisation of Commercial Agencies (as amended by Federal Law No. 14 of 1988, and further amended by Federal Law No. 13 of 2006 and Federal Law No. 2 of 2010)

The Commercial Agencies Law

The UAE Commercial Agencies Law is applied to both agency agreements that cover franchisor/franchisee relationships, manufacturer’s agency agreements, distributors, dealers and self employed sales agency relationships.

As a franchisor you must seek specialised legal advice as this law will only apply to a contract that are registered with the UAE Ministry for the economy.

Any such contract will need to qualify for registration at Ministry level by many set policies including but not limited to a franchisee being a UAE national or a company/partnership 100% owned by UAE nationals.

Unlike EU agreements this franchise agreement must grant exclusivity over the region or its nominated territory being all or a part of the UAE.

To be enforceable a franchise agreement must be notarized and for some franchisees it is a minefield.

A franchise agreement not registered with the Ministry is legally not valid.  That is one opinion but many franchise agreements in the UAE are entered into between foreign franchisors and local limited liability companies and these are regularly companies that have a 49% foreign shareholding so  not 100% owned by UAE nationals.

If a non-exclusive agreement is set it will not qualify for Ministry registration.

Some say that franchise agreements which may meet the qualifying criteria for registration with the Ministry do not have to be registered although I say be prepared for your franchisee getting through the honeymoon period and then heading off to a UAE courtroom seeking a court to order a post completion registration and therefore gaining the fuller protection as offered by agreements with Ministry registration.

The UAE remains the UK’s largest market in the Middle East and the 12th largest globally by value in trade in goods and services. It provides access to the wider region including Africa and Asia, and a great deal of investment into the UK. However, despite the long association between the UK and the UAE, the UK has lost share of the expanding market, especially to emerging economies. A number of British companies who have been established in the UAE for over 70 years are now having to review and adapt the way they operate in this market in order to deliver in partnership with a UAE entity a “double bottom line” of profitability, capability and capacity building, if they are to maintain their commercial presence in the UAE long-term. Abu Dhabi and Dubai are very different places in which to do business. Dubai, with its “free zones”, world class transport links, and more liberal approach to trade and investment has been able to attract a vast range of UK companies, including many SMEs, and has successfully built an international financial centre in the Dubai International Finance Centre (DIFC) which is heavily influenced by the City and which operates its Courts under English Common Law. Abu Dhabi is more conservative and possesses most of the UAE’s oil and consequently its wealth. But a younger generation of leaders is now determined to diversify Abu Dhabi’s economy, not least for long term economic security. As well as competition from the Europeans and North American companies, UK companies will face increasing and aggressive competition from the high growth Asian economies such as Korea and China. The UAE can be a demanding and at times frustrating market in which to do business. But its strategic position and the vision of the UAE leadership make it one of the best places to do business in the Gulf. If UK companies are prepared to be here for the long-term, to partner with local UAE companies, to be versatile in their approach to doing business in the different Emirates and to contribute to the development of the UAE and its people in order to meet their vision for the future, then the prospects are good.

Frankly the British franchisors have allowed the UAE franchise market to become dominated by American brands and French brands.

As you may expect food & beverage battle it out with retail retail franchised brands. The Apart from this many Asian franchisors are entering the market.

We believe the next trend for this warm market is the smaller franchisee and area developer franchising from the UK is picking up.

As you can see franchise legislation, comes under general contract/commercial law in Dubai and the principles of Sharia law apply to commercial transactions in the Emirate.

The Repercussions Of Registration For  Commercial Agencies Law UAE For Franchisors

Should you have an agreement that qualifies, then franchisees more often than not show preference in registration at the Ministry.  The main consequences of registration are:

  • The agreement cannot be terminated by the franchisor without the franchisor being able to show  some kind of justification to cause termination and this is not a clear contractual right to terminate in the franchise agreement itself through non-performance. This is not easy!
  • The franchisee is able to instruct the UAE ports and customs authorities to prohibit any products in respect of which it is the registered agent entering the UAE without its consent.While this provides good protection against parallel imports it also puts a registered franchisee in an extremely strong negotiating position in the event that a franchisor wants to terminate an agreement and appoint a new franchisee.
  • This allows a franchisee to force a franchisor to go to the commercial agencies committee (and, potentially, then to the local courts on appeal) to seek termination of the registered agreement
  • This, in practice, restricts a franchisor from access to the UAE market, either by way of itself establishing a licensed presence in the UAE or by appointing an alternative franchisee, until the case has been finally determined or settled and the agreement de-registered.
  • A final determination, if a decision of the commercial agencies committee is appealed to the local courts, may take in the region of 3 years (or possibly longer) to obtain.
  • The factors that the commercial agencies committee (and local court, if appealed) will take into account when assessing the level of compensation payable to a registered franchisee upon termination of the arrangement include the performance of the franchisee, how long the arrangement has been in place and whether the franchisee has incurred significant expenditures in establishing the business (with more weight being given to more recent expenditures).

Currently, franchises are operating in fast foods, dine-in restaurants, auto leasing, apparel, soft drink bottling, beauty products, hotels, toys, photography, dry cleaning, furniture, hardware stores, office supplies, natural health products, publications, quick printing, garden care and florists, sporting goods, retail/convenience stores, maid and personal services.

Today, the largest segment in this industry is fast food with most major US fast food companies are already established in Dubai.

GCC nations are at the forefront of growing the franchise economy in the Middle East, while Egypt is the leading franchising destination among African nations. With a combined population of 1.4 billion, a GDP of $1.9 trillionan affluent customer base and (relatively) business friendly environment, the Gulf Cooperative Council (GCC) – Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Bahrain and Oman – presents the biggest opportunity for existing and potential franchisors and franchisees in MENA. 

The franchise economy in Middle East and North Africa (MENA) is worth $30 billion and is growing rapidly. As per Middle East and North Africa Franchise Association (MENAFA), the franchise industry in the Middle East and North Africa is worth over $30 billion today, and is growing at a CAGR of around 27% annually. Concentration of high net-worth individuals, favorable regulations, and a young and upwardly mobile consumer market are the key attractions for franchisors looking to expand their operations within the region. On the other hand, the driving factors for franchises and local governments are the entrepreneurial opportunities presented by the franchising model, job creation, and the ability to inject international grade skills and processes into the economy. Further, investors also feel more confident opening a store under the umbrella of a large, multi-national corporation, as they expect franchises to respect the strict quality standards issued by the mother company, and also benefit from the well-established operating, marketing, and accounting practices of the franchisor. 

Not surprisingly, GCC nations are at the forefront of growing the franchise economy in the Middle East, while Egypt is the leading franchising destination among African nations. With a combined population of 1.4 billion, a GDP of $1.9 trillionan affluent customer base and (relatively) business friendly environment, the Gulf Cooperative Council (GCC) – Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Bahrain and Oman – presents the biggest opportunity for existing and potential franchisors and franchisees in MENA. 

Source: Arab Business Review – Legal source Tamimi & Co –UKTI