Small-scale franchising gives start-ups a low-cost option

Taking up a franchise or becoming a distributor for an established brand can help budding entrepreneurs cut their teeth in the business world.

Balqees Al Mesbahi is an aspiring entrepreneur focusing on children’s products. Delores Johnson / The National

Entrepreneurs can sink all their time and money into launching a business, but they cannot escape one simple fact: many start-ups fail.

But while bringing a new brand to the market certainly has its pitfalls, there are less risky – but by no means infallible – ways of cutting your teeth as the next Fadi Ghandour or Richard Branson.

Taking up a franchise or, on a much smaller scale, becoming a distributor for an established retail brand, are both ways to start something of your own, but with the reassurance that it is based on a tried-and-tested business model.

The Abu Dhabi resident Balqees Al Mesbahi has done just this. The 25-year-old Yemeni has a full-time job in accountancy, but in her spare time she sells kids’ products she buys from the Dubai-based Big On Children. They include a product line called “Sing Your Name” – personalised CDs and alarm clocks.

Ms Al Mesbahi started as a distributor in March 2014, selling products at kids’ events in the UAE. She spent just US$3,000 on her first bundle of products from Big On Children, which promises a return of more than 100 per cent if its distributors sell everything.

“Everyone thinks that if you want to have your own business, you need a very big budget,” says Ms Al Mesbahi. “I wanted something to start small. But it can make serious money.”

Samar Nabulsi, the co-founder and managing director of Big On Children, says the majority of the company’s distributors are stay-at-home mums who want to start their own business, but don’t have massive sums of money to invest.

The company has exclusive distribution rights in the Middle East and North Africa for several kids’ brands including Sing Your Name and the South African clothing label Hooligans. Packages sold to distributors start at $3,499 – a recent increase on the first package Ms Al Mesbahi bought.

“For someone to start off with only $3,000, if God forbid it goes south, then they’ve only lost $3,000. But they’ve learnt a lot along the way, from marketing and dealing with people, to trying to get space in huge retail malls,” says Ms Nabulsi.

Big On Children has its own retail spaces, notably in venues like The Dubai Mall and FAO Schwarz in New York. But its key plan is to boost the number of master distributors it licences in various regional countries – those who are responsible for selling on packages to individual distributors – as well as dealing direct with smaller UAE resellers like Ms Al Mesbahi.

Taking on a small distribution package is one way of testing your entrepreneurial skills. Another much more costly and time-consuming route is pursuing a franchise.

Saurabh Narain, an Indian expatriate living in Dubai, is one of a growing band of franchise holders in the UAE. He is managing director of the Early Stars Early Learning Centre, which recently opened its first Maple Bear nursery in Dubai and plans a total of six nurseries in the UAE, as well as a longer-term ambition to open a 2,000-capacity high school.

Maple Bear is a Canadian brand active in a dozen countries worldwide. Mr Narain says he is investing Dh3 million in launching the first of his Maple Bear schools in the UAE, including Dh1 million in operational losses for the first year.

While that includes a slight premium because it is a franchise, rather than his own brand, the entrepreneur says it is well worth it given Maple Bear is an established brand.

That also gives him the benefits of the Canadian firm’s global marketing, says Mr Narain. “I’m a firm believer of the franchise model generally speaking. If you get a right brand and a right partner, it gives you that expertise and that global reach,” he adds.

“When you have your own brand you can have a lot more freedom. But at the same time the restrictions [of being a franchisee] help you not do anything stupid. Because they are proven to be successful.”

Rony El Nashar, founding partner of the Dubai-based SeedStartup Venture Fund, agrees that becoming a franchisee rather than building your own brand could be “an easier path to entrepreneurship”.

But the start-up expert cautions that taking a franchise only really works if the brand is well known. “For a brand which does not have huge regional awareness and whose operations are not rocket science, you’re probably better off launching your own brand,” he says. “Another important factor to consider is that legal disputes between franchisees and franchisors can sometimes arise.”

But for Mr Narain, the franchising model is in a class of its own.

“For young entrepreneurs wanting to start their first venture, I definitely believe it’s a great way forward,” he says. “Why reinvent the wheel?”

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