An Overview of Egypt

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					An Overview of Egypt

Egypt one of the most populous countries in the Arab world, with 75.4
Million people, and a population growth rate of 1.9% per annum over
the past decade. It enjoys a stable political environment.

The government has made significant economic reforms, including the
development of Egypt’s infrastructure and the encouragement of
private investment.

An Overview of Leasing

Leasing was introduced in Egypt under law 95, 1995. Since its
inception leasing business has continued to grow, both in terms of
quantity and quality. This is reflected in the continual increase in
contracts booked through out the years. It indicates the growing
awareness of leasing as an alternative form of lending.

The total number of leasing companies as of 2005 reached 161,
including 12 major leasing companies; that is companies with a size of
business exceeding EGP 100 million worth of contracts.

In aggregate, the total volume of leased contracts since the inception
of leasing under the law 95, 1995 reached EGP 14.3 billion. It should
be highlighted that as this is a cumulative figure, it is not an actual
balance. It shows the leased contracts booked per year, and as the
nature of leasing is long term it is a cumulative figure and will reflect
the general trend.

The development of the Egyptian leasing industry in the year 2005
shows growth and volume mainly in: heavy equipment, vehicles and
real estate.

 As the leasing law in Egypt is only applicable for commercial
purposes, it is a direct contribution of the capital growth in the
country.




The concept of Franchising
Franchising is generally described as the granting or licensing of
certain intellectual property rights by one agent, the franchisor, to
another, the franchisee and the access for the franchisee to certain
tangible and intangible benefits and privileges.

Since the 1970’s, Egypt has gone a long way in dealing with the
franchising concept. For example, local fast food chains have
dramatically developed up to an extent where they were able to
compete with international franchises in terms of management, service
and product quality. This situation led them to expand outlets by local
franchises throughout different governorates as well as going
international in some few cases. An example of these fast food outlets
is: Moemon, Cilantro, and Coffee Roastry etc


Franchising in Egypt

The franchising market in Egypt has tremendous potential, mainly in
the fast food sub-sector. The market has shown remarkable expansion
since it began in 1970, and the market is expected to continue growth
at an annual rate of 10 to 20 %.

Fast food franchises are the most common franchises in Egypt, where
most of them are US- based such as Hardees, KFC, MacDonald’s…etc.
The introduction of these new brand names changed and development
the tastes of the average Egyptian. Going out and eating became a
more regular custom than in the past. This concept has encouraged
many new comers to enter the market and reflects the growing trend
in this industry in Egypt.

Garment franchising is another new and growing industry in Egypt
such as Timberland, Mango, Addidas, and Nike…etc. This industry is
geared to the upper class. This class in Egypt is very fashion oriented
and likes to display designer labels.

As seen from these two industries there is a lot of potential and growth
in the Egyptian market. Franchising has extended well beyond food
and or FMCG products as both legal and accounting firms have
franchised their name quite extensively well beyond the famous few
world known Multinationals present in any and every country.


Effect of Franchising on the Egyptian Economy
Statistics obtained   from    the   Egyptian   Franchise   Development
Association 2004:

   Total annual turnover generated by all franchised systems in
    Egypt is estimated at EGP 5.2 Billion. (U.S 860 Million
    Equivalent)

   Total investments in the franchise sector of the economy are
    estimated at EGP 22 Billion. ( U.S. $ 3.7 Billion Equivalent)


   Employment in this sector is estimated at 36,300 employees.


  As seen from the above, franchising played and plays a vital role in
  the economic and social development in Egypt.

  Positive Contributions of Franchising:

  -   Helps local brands by increasing competition and raising the
      standard of product quality and services.

  -   Generating new incomes and additional jobs.

  -   Boosting the host economy and raising the standard of living of
      its population.

  -   It limits risk, as the franchisee is supported by the experience of
      the franchisor with proven methods, training and on-going
      advice.

  -   It reduces the rate of default on loans to franchise outlets, by
      providing a transfer of technology which results in superior
      standards of goods and services.




Funding through leasing have many benefits such as:
   Allowing for tax benefits as rentals are deducted from the
    income statement.

   Removing the burden of financing fixed assets whether through
    loans or capital, hence allowing the business to enjoy more
    liquidity which can be utilized in :
         Bolstering its position in the market through offering better
           credit terms to customers.
         Enabling the business to achieve cost savings through
           benefiting from economies of scale with suppliers.
         Expanding scope of operations.

  -   Leasing provides flexible payments (balloon payments, irregular
      payments….) according to the borrower’s cash flow.

In conclusion, franchising is a very attractive tool in the coming era
towards economic development in Egypt as well as MENA region
through:

  -   Contribution to the GDP directly through their own contribution
      and indirectly through developing supply chains into
      international level (local and export).

  -   Excellent tool to develop professional management skills in
      Egypt.


  -   Helps to solve the unemployment problem as in many cases it
      cand be a labor intensive industry.


Leasing has shown increasing trend in Egypt in the past 3 years. It is
expected to further increase. Hopefully this will lead to financing the
franchising business, mainly encouraging Egyptian brand names.

This will pave the way to a new era, in Egypt as a franchisor and not a
franchisee

				
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