The Economy magazine, published by the Eastern Province Chamber of Commerce, revealed that the size of the franchise market in the Middle East is estimated at $30 billion, with the Kingdom’s share estimated at approximately 50%, Consequently, further growth is expected in this sector, particularly in light of Vision 2030, one of whose pillars is supporting those wishing to invest through the franchise system. The magazine noted that some Saudi companies have become exporters of brands around the world.
The magazine noted that franchising, which emerged in 1871 in the United States and spread throughout the world, is based on an agreement between two legally and economically independent parties: the “franchisor” and the ”franchisee,” whereby the former grants the latter permission to use one or more intellectual or industrial property rights, or technical know-how to produce or distribute a specific good or service under the trademark produced or used by the franchisor, in exchange for financial compensation or other benefits and interests.
The magazine reported that, according to this definition, and according to a number of experts and specialists, the experience of commercial franchising in the Kingdom has gone through several stages. The first stage was importation, which began modestly and tentatively in the late 1970s and early 1980s, but the real expansion began after the 1991 Gulf War, as the number of franchise imports increased until the number of companies operating in this field reached more than 250. The second phase saw Saudi companies begin granting their own franchises, with one fast-food chain launching in 1994 from Mecca to grant franchises east and west, reaching as far as Jakarta, Indonesia, and Chicago, USA. Other companies followed suit, bringing the total today to 22; one of which alone has granted approximately 700 franchises in numerous countries around the world.
The third phase is the phase of activating the franchise industry in the Kingdom, which is the phase we are currently experiencing. Community service funds have begun financing projects by franchisees, and soon the Saudi Credit and Savings Bank will begin offering attractive loans to small and medium-sized enterprises, with franchise projects among the most important activities eligible for funding.
