Franchising in Tunisia: A Growing Economic Opportunity
Over two decades ago, the concept of franchising was relatively unknown to Tunisian operators. However, with the gradual establishment of international brands in the early 2000s, a ripple effect was created, leading to the development of numerous Tunisian brands, not only in Tunis but also for export.
Today, this technique is increasingly popular, fostering investments in various commercial, industrial, and artisanal fields, despite occasional event and media presence.
An Expert's Insight
We discussed the topic with Rym Bedoui Ayari, an international expert in franchising, who provided clarification on the concept of franchising, its associated challenges, and its economic and commercial potential.
The Press — If we want to quickly review the evolution of franchising in Tunisia, how can we evaluate its development? Rym Bedoui Ayari: Franchising is a business development model, similar to a partnership or an initial public offering (IPO). When a company wants to expand, it has several alternatives, including franchising. Franchising allows a company to develop its points of sale without having to invest in them itself. Instead, it seeks investors who will open locations in its name.
Franchising has its advantages and disadvantages, but it's not suitable for everyone. It requires know-how, and some companies haven't yet reached the minimum maturity threshold or haven't registered their concept. Therefore, they're not ready to franchise.
There are three essential pillars for franchising: a well-established brand name, know-how, and the ability to transfer it.
It's essential to distinguish between a brand license and franchising, which offers a promise of success that a brand license does not. I explain this by saying that an investor who wants to operate under a particular brand can obtain the right to use a successful brand name, along with technical assistance.
However, franchising involves duplicating a model that includes transferring know-how and providing technical support, with an underlying promise of success, of course, under continuous quality control, standards, and norms.
The basis of franchising is intellectual property. A company that, after several years of successful operation, wants to expand by creating new points of sale with other investors, giving them its name, cannot do so if it hasn't previously registered its name with the INNORPI (National Institute of Standardization and Industrial Property). This would be considered fraudulent, as someone would be selling something that doesn't belong to them.
Hence the importance of having dedicated legislation on franchising, which would be perceived as a strong signal to investors. Tunisia is one of the few countries in Africa to have enacted a law on franchising, dating back to 2009.
Challenges and Opportunities
Among the recurring issues associated with franchising is the question of royalties, which are legally transferred abroad. What is your perception of this aspect? What kind of control is exercised by the state at this level?
For international franchises, I don't have concrete data. However, certain sectors, such as restaurants, training, and gyms, are subject to state approval, represented by the Competition Council. Other sectors, like textiles or optics, are not subject to state approval.
Approvals are generally granted for five years, renewable upon presentation of a business plan, and if it creates jobs. A commission within the Ministry of Commerce evaluates and decides. The renewal is also done based on a dossier. Then, there are terms fixed in the contract between the two companies. Regarding royalties, they average 5-6%. In the training sector, this can reach up to 25%, considering the intangible aspect.
If this is the situation regarding establishment, what about separation conditions? How does one proceed if one of the parties wants to terminate the contract?
Generally, the contract includes termination clauses, and many things can be discussed. There may be penalties on both sides. Usually, there is a termination of the contract when the franchisee no longer meets the franchisor's standards: quality, safety, supply, and non-compliance with tax and social authorities.
Such non-compliance could harm the network's image, which may decide to part ways with a partner. Also, if the franchisee does not achieve the desired performance, despite the franchisor's assistance and support, does not make the necessary effort, or does not show seriousness, a contract termination could be considered as a last resort, knowing that a termination or closure of a point of sale is often subject to negative interpretation.
Changing Franchiseurs
Can a franchisee, who is the owner of their establishment, change brands and therefore franchisors?
They cannot do so before the expiration of the 5-year period. Moreover, good franchise contracts can give the franchisor priority over the lease in case of transfer. In this case, the franchisee leaves, and the franchisor can find another investor to continue the activity under the same brand. The franchisee loses in this case. Additionally, the franchise contract can provide for a neutral period, where the franchisee who wants to terminate cannot install a competing brand or create their own brand, thus providing a protection period for the franchisor.
Tunisia's Franchising Potential
How can a country like Tunisia benefit from franchising?
In Tunisia, people are starting to work with professionals and are generally well-advised. Personally, with the "Wefranchiz" platform, I have conceptualized 56 models, connecting franchisors and franchisees. I have accompanied Tunisian companies in establishing franchises in Algeria, Libya, and other African and Gulf countries.
It's a development model, and we have reached a certain level of maturity in Tunisia. For example, the café where we are now is a brand developed by a well-known Tunisian group. You have other examples in restaurants, traditional pastry shops, and textiles.
Today, with pride, when you take a tour, you notice many points of sale set up as franchises, and these are purely Tunisian brands that are franchising.
The State's Added Value
What is the added value for the state?
A franchisor, which is necessarily a company, can only give its brand to an existing company. And, of course, it will require transparency in financial statements and legal declarations. This will inevitably generate revenue for the state. On our "Wefranchiz" platform, we receive many requests from Tunisians who want to invest under already successful brands, in order to avoid the risk associated with starting from scratch.
We also receive many requests from Tunisians living abroad, who are increasingly interested in setting up franchise projects rather than acquiring real estate or agricultural land.
Conclusion
I think the real intelligence of economists and people who operate and want to participate in the country's economic life is not to say that franchising is an international model. Today, franchising is a Tunisian-Tunisian model. It's a business model that supports many households.
It's a development model adopted by Tunisians, which has not only thrived in the country but is also becoming an export project. Statistics show that the fear of international competition is 1%. Franchising is in demand everywhere, in popular neighborhoods and affluent suburbs, thanks to the willingness of Tunisian entrepreneurs who have decided to create their own models, whether in commerce, restaurants, new technology, etc.
An entrepreneur who creates their concept, experiments with it, and once successful, will sell and export that know-how. And among the most demanding continents is Africa.
We have the advantage of a diaspora based internationally, which, instead of investing in real estate or other investments, prefers to invest in franchising. It's essential to choose partners, location, and contract carefully, but the fact remains: we have a diaspora that knows and believes in franchising. Certainly, not everything is perfect, but the sector is developing.
