The surprisingly large capital costs must also be borne in mind, far more than with many conventional businesses, while corporate barriers to expansion and lack of real brand ownership have to be considered. Franchises can indeed be profitable, but real growth will be largely in the hands of somebody else. None of which helps the first time franchisee. There may be a vast amount of research on franchising for them to fall back on, but almost all of it is based on the huge and fundamentally different US market. The Gulf may be untapped by comparison, says the area manager, but it has a whole different set of challenges.
Franchise fees have to be paid, and retail rents are far from cheap.
You need the support of your mother brand, but you also need to be realistic with your margins. It is small wonder that some brands, such as Disney in the UAE, prefer to go down the licensing route rather than assume the additional overheads and risks of franchise operations. An additional cost factor is that of getting products to the Gulf - less so perhaps in fast food but a real problem with clothing and other manufacturing franchises. Shipping rates have remained high as operators attempt to claw back income lost in the Asian crisis, yet franchisees are unable to pass the costs on to the customer. They know what these brands cost in those markets, so you can't just make everything more expensive here.