The growth of franchises over the past two decades reflects the quiet transformation in a multi-tier domestic market. And experts see the trend deepening in the consumption-led economic growth in the country.

“The interest of global companies, inspired by the success of brand operators in Pakistan and the insatiable appetite in upscale markets for branded products, means that the franchising business has a bright future in this country,” Tahir Mehmud, a business development manager commented while talking to Dawn.

The streamlining of facilitation services for aspiring entrants in the franchising business can help strike better deals.

“Currently, the absence of institutional support as well as limited awareness about technicalities involved and the tendency of businessmen to fly solo has led to a situation where trade terms are unfair for franchisees,” Naeem Muhammad, an executive at Augment, a franchise facilitation company associated with a global body, told this scribe over telephone from Islamabad.

Experts believe that while the government needs to tackle the credit ecosystem, specialist firms can take care of the rest. “[The government] must encourage banks to support franchising,” a corporate advisor suggested.

“A lot of entrepreneurial talent goes waste just because access to credit is difficult. If PM Nawaz Sharif’s youth loan scheme can push franchising as a viable option for startups, it can change the country’s economic landscape within five years,” a franchising consultant told Dawn.

Market trends suggest a quantum growth over the next five years in franchising business because of a complimentary relationship between demand and supply.

On the demand side, consumers’ preference for branded products, as well as global exposure of upper class youth and their capacity to spend and their inclination to adopt Western lifestyle mesh to make a promising market.

On the supply side, a pool of emerging qualified entrepreneurs is opting to start their own ventures because of lack of opportunities in the job market. However, many startups fail despite the general perception of low risk for both potential franchisor and franchisee. Some Western companies are also cautious in entering the Pakistani market.

According to a KPMG report released earlier this year, India hopes to triple the volume of franchise sales if its GDP continues to grow at 6.6 per cent.

“Pakistan can actually top up Indian franchise business growth expectations. The average GDP growth rate over the next five years is expected to increase from less than three per cent per annum during 2008-2013 to over five per cent in the 2013-2018 period,” an economist commented.

“If the franchise business did well during the anemic growth phase, it should boom in an improved economic environment. I know for a fact that there are many franchise deals in the making,” an executive told this writer from Lahore.

Already, McDonald’s, KFC, Pizza Hut, Mango, Next, etc. are household names in the country. From mid 1990s when KFC pulled up the shutters of its first joint venture in Pakistan, there has been no looking back. Currently, the brand has over 60 outlets in the country, while Subway has 40 and McDonald’s 27. Nando’s, Cinnabon and Dunkin’ Donuts are all fast expanding their footprints as well.

Inspired by their success, Gloria Jean’s, Hardee’s, Fatburger, Burger King, and Taco Maker etc. now have their presence in the market, and many more, including The Begal Bar, Smoothie Factory, Second Cup Coffee, Menchies, Coffee Planet, Doner Kebab etc. are at different stages of entering the lucrative Pakistani market.

According to the World Franchise Associates, the current market size of internationally franchised food outlets in Pakistan is estimated at Rs1.2 billion (in annual sales).

“Pakistanis spend an estimated $850-900 million a year on eating out at the 20,000 restaurants countrywide because of lack of other entertainment facilities,” informed Nauman Mirza, as quoted by a consultant.

While franchising is more visible in food, it has also made its mark in fashion, wellness, retail, and services segments. Some of the more popular foreign brands include Levi’s, Debenhams, Nike, Addidas, Next, Mothercare, Mango and Hyper Mart.

Some franchisees contacted by this writer in Karachi, Lahore and Islamabad were enthralled by a business model that, they say, offers backup support and mitigates risk.

“It suits us as franchisors are watching your back while you make a move in a highly competitive market. The convergence of interests of a local franchisee who has an insight of the local market, with that of a franchisor that has a rich pool of exposure, experience, technology and managerial skills, makes a perfect match for people who like to work for themselves,” an anonymous CEO said.

Franchising in Pakistan is not regulated, per se. The regime is fairly liberal. A foreign company can establish its business and is allowed to repatriate profits and capital.

Rafiq Rangoonwala, president of the Pakistan Food Association and CEO of KFC franchisee Cupola Group, reportedly said the domestic market offers good potential to international franchisors.

Karimullah Adani, a partner at Ali & Ali Associates, which deals in intellectual property and trademarks, informed that many Pakistani companies are also building brands to expand overseas through franchises.