FRANCHISING

IN MOROCCO

POSITION

AND FACTORS OF SUCCESS

INTRODUCTION
Franchising is a business strategy a company may use in capturing market share, getting and keeping consumers. It is a marketing system for creating an image in the minds of current and future consumers about how the companys products and services can help them .Since few years, franchising has known a remarkable boom in Morocco. Today, there is a mass of Moroccan and foreigner ensigns in the market. Franchising which appeared in the beginning of the 20 century in France and USA has quickly expanded starting from the seventies in Western countries. As a recent phenomenon In Morocco, the first franchising establishments date from the sixties, it is in the nineties that international ensigns have started to develop , with approximately 210 ensigns and daily announcements of new franchises installed on the Moroccan territory. Franchising is not only a method for distributing products and services that satisfy customers needs. It has become a current life style for the consumers. The mains of this project are to answer the following questions: What are the types of franchising that exist in Morocco? What position the Moroccan franchises take on the local market in front of the foreigner ensigns? Why franchising is so successful in Morocco?

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AND FACTORS OF SUCCESS

OUR

AIMS

Why franchising is successful? Is it the Moroccan culture or the mode of distributing that makes it successes? Why Moroccan costumers prefer the foreign ensigns instead of the Moroccan ones? Is it a matter of quality or just a wrong image of the Moroccan ensigns? How the Moroccan consumers behave and think when deciding on what brand to choose: the Moroccan brand or the foreigner one? Our objective by asking those questions is to test if franchising is just a mode of distribution that is neutral and does not have any effect on Moroccan consumer's behavior or is it more than that? (One of the effective forms of globalization).

PROCEDURES
We will proceed to answer those questions by carrying out our study, by distributing the questionnaire to costumers in sales locations, restaurant and the following stores in the city: Macdonald's Pizza Hut Pepe jeans Yves Rocher Jeff de Bruges Swatch Agatha Flou Flou Marwa Bigdil Tequila Solo Indigo Lacoste Cater Pillar Mostt Venizia Ice In Barbecue Ibis Hotel Avis EuropCar

In addition to those tools, we will collect data and information from official sources:" Agadir Commerce Chamber" and "Regional Center of Investment". Also we will make interviews with several managers of franchises.

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SCOPE

OF THE PAPER

Our study will contain two main parts. The first one is about the theoretical notions. It will define the principles of franchising; identify a typology of different franchises that exists till now. It also aims drawing an historical account of franchises over the world and time. Opposing the franchisor to the franchisee goals, we will compare rights and obligations that both of the parts must respect. In the second part, we will try to find answer's elements to our puzzle. Testing both of hypotheses to see which is right is the method we will work with. First, it is important to know how to create a franchise and what is the process that the actors on franchising go through when launching a franchise, how is it working between the franchisor and the franchisee. Secondly, we will analyze the mapping of franchises in Morocco by activity sectors and origin. Besides, we will study cases of failures and success, and explain the factors that had lead the franchisees to both situations. Finally, we will visit Agadir's franchises stores, asking consumers about their opinions. Part one: theoretical part

1. What is franchising? 2. historical account, by Widad

3. Types of franchising

4. Franchisor/Franchisee Relation, by Widad

Part two: practical part

1. How to create a franchise in Morocco?

2. Moroccan versus Foreign franchises 3. Distribution of franchises by activity branch, by Widad

4. Success and Failures stories in Morocco, by Widad

5. Franchising ensigns in Agadir 6. Consumers opinions Hopping that we will get enough and the right information, we will formulate the conclusion of our research and answer the questions we aim.

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REVIEW

OF LITERATURE

Robert Gappa, the president of Management 2000, Houston, TX, a firm specializing in assisting companies in the use of franchising as a growth strategy, says that "Franchising is the most popular system for growing a business in the United States today" and he adds that " Franchising advantages over going into business for yourself include; opening quicker, experiencing success sooner, developing a customer base faster, having less risk and being more profitable. Your success as a franchisee is based on the proven success of the franchisor to operate company units and upon the success of existing franchisees". But he also advances, regardless of the business strategy, "Franchising is successful because we are people of habit and are brand-driven", talking about Americans. So what about Moroccans? "A franchise is like a marriage" is Lou Gurnick's statement, founder of Franchise Business International, Inc. According to him, a franchise system is a success kit because all the necessary tools are provided. He judges that franchise success is due in large part to thorough step-by-step franchisee training and careful supervision from the franchisor. However, he thinks that "the franchise system also serves the public well. A franchisee must be capable, imaginative entrepreneur who can detect the many wide gaps in the franchisor distribution system and do something to close them. "Most reputable franchise operations have succeeded because they meet such needs." According to the Moroccan Office of Industrial and Commercial Property (OMPIC), the reasons of success are numerous and based on four pillars: the technical and commercial assistance; the franchisee motivation; rapid covering of the market; and relative low cost for the franchisor to expand. Nevertheless, even if franchising has proven itself in many sectors, success is not always guaranteed. Indeed, at the same time that many franchises succeed, others disappear. What had caused those failures? What is the part missing to the puzzle? For Yves Sassi, president of the French Observatory of Franchise, the success of franchisee depend on concept feasibility in Morocco: are the local consumers interested in the product, are the practiced prices acceptable, legislation, habits, customs taxes do it allow to the investor making profits? And the franchisor, does he provide a real help? Considering the previous statements, we will determine what are the factors reacting on the Moroccan market. Joining the different points of view of those authors will allow us to test and compare the hypothesis. In a simple way, we are going to prove that, in fact, the points of

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view don't converge a lot. Behind the economic and successful business strategy, franchise sales a culture, ideologies and styles of life, and the Moroccan consumers are unaware that they are consuming a globalization product. We will try to explain in proportion as we advance in our study, how franchising as a mode of distribution ,has become an aspect of globalization.

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THEORETICAL PART
1. What is franchising? 2. historical account 3. Types of franchising

4. Franchisor/Franchisee Relation

1.
FRANCHISING

WHAT ?

IS

Definition1:
-Franchising is a 'business marriage' between an existing business (the franchisor) and the newcomer to business ownership (the franchisee) Definition2: -Franchising is a way for companies to expand without expending huge amounts of capital. It benefits the Franchisor because the Franchisees use their own money to set up the new outlets. It benefits the Franchisees because they are able to operate under a proven system which is more reliable than starting your own company from scratch. The often quoted figures say that 80% of new start ups close down within 5 years, whereas 80% of Franchisees are still trading after 5 years! Definition3: -When people speak of franchises, they are usually referring to business format franchises. Such a franchise is essentially a business clone. The franchisor has developed a system for reproducing his business (often right down to the last detail). When you buy a franchise, you rent the franchisor's trademark and method of doing business. The method of doing business involves a standardized approach to delivering a product or service. Definition4: -A form of business organization in which a firm which already has a successful product or service (the franchisor) enters into a continuing contractual relationship with other businesses (franchisees) operating under the franchisor's trade name and usually with the franchisor's guidance, in exchange for a fee.

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2.
ACCOUNT

HISTORICAL

The word Franchise comes from old French meaning privilege or freedom. In the middle ages a franchise was a privilege or a right. In those days, the local sovereign or lord would grant the right to hold markets or fairs, to operate the local ferry or to hunt on his land. This concept extended to the Kings granting a franchise for all manner of commercial activities such as building roads and the brewing of ale. In essence the king was giving someone the right to a monopoly for a certain type of commercial activity. Over time the regulations governing franchises became a part of European Common Law. Over the centuries the franchising concept has evolved as the economies of the nations of the world have evolved. In the 1840's in Germany certain major ale brewers granted franchises to certain taverns, giving those taverns the exclusive right to sell their ale. This was the beginning of the concept of franchising as we know it today. In 1851, the Singer Sewing Machine Company began granting distribution franchises for their sewing machines. Singer had written franchise contracts which were the forerunners of modern franchise agreements. In the 1880's cities began to grant monopoly franchises to street car companies and utilities for water, sewerage, gas and later electricity. Around the turn of the century, the oil refinery companies and the automobile manufacturers began to grant the right to sell their products. At this stage in the evolution of franchising it was essentially just the granting of the right to distribute and sell manufacturers products. Business format franchising, which is the dominant mode of franchising today came onto the economic scene after World War II with the return of the millions of US servicemen and women and the subsequent baby boom. The baby boom is still driving the economy and will continue to do so into the next century. There was an overwhelming need for all types of products and services, and franchising was the ideal business model for the rapid expansion of the hotel/motel and fast food industries. During the explosion of the 60's and 70's there were many abuses in franchising. There will always be the unscrupulous con men/women among us, ready to prey on the uninformed and gullible. There were a number of totally fraudulent franchise companies which literally took peoples money and ran, and there were a number of companies that were undercapitalized and poorly managed which went bankrupt, leaving a trail of failed franchisees that lost everything.

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It became clear that the franchise industry had to change in order to remain a viable business concept. On the industry side, The International Franchise Association was created with the specific intent of uplifting the entire industry. The IFA holds training in all aspects of franchising which greatly enhances the professionalism of the industry. Members of the IFA are required to adhere to the IFA's Code of Ethics which sets a high standard. The IFA works closely with the US Congress and the Federal Trade Commission on improving how the industry relates to the franchisees. On the government regulatory side, the Federal Trade Commission, in 1978, required that all franchisers submit to all potential franchisees a document called the Uniform Offering Circular or UFOC, before receiving money. The UFOC provides very detailed information on the franchise company, such as its history, information about the officers, litigation history, audited financial statements, the franchise agreement, which is the contract between the franchiser and franchisee and a current list of franchises with owners names and telephone numbers. The intent of the UFOC is that it provides enough information so that the prospective franchisee can make an informed decision. The FTC doesn't actually review the UFOCs unless there is a complaint and it decides to conduct an investigation. Also there are a number of states called registration states which have their own requirements that must be met before a franchiser is allowed to sell franchises in their states. In some cases these requirements are more stringent than the FTC's. There are several franchisee associations which work to protect the interests of franchisees. Today, franchising is a highly regulated industry which offers a great opportunity to those individuals who truly want to realize their dream and go into business for themselves.

3.
FRANCHISING

TYPES

OF

Production franchise: the franchisor manufactures himself the products distributed by his franchisees. Its development strategy is to manufacture good products and brands and to distribute it by franchisees which profit from qualities and the notoriety of the concerned products. In this category of franchise we find as a vast majority the sectors of textile industry, garments, the household appliances Distribution franchise: in this type of franchise, the franchisor does not manufacture himself the franchised products. He makes manufacture or buys products from various independent

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suppliers. On the other hand, he ensures the distribution of these products thanks to a network of franchisees that he sets up. Also we find, as the preceding type of franchise, the textile, the house equipment, the gadget and gifts shops The production and distribution franchises show the 2 following common characteristics: All the stores must have the same ensign and present homogeneity in their appearances (fitting window) The sale concerns the same line of products with an identical marketing policy. Service franchise: the franchisor offers to his franchisees: - A formula of services - A specific method which has showed its service effectiveness by the pilots. The service franchise experiences a certain development with the appearance of new economic sectors which can be the subject of new services likely to be franchised: matrimony agencies ( Felicitas), hostelry (Ibis), fast-food (Mac Donald' S), transport, renting At the USA, the services franchises represent more than 80% of the franchisees, in France 20%. Except the chains hotel, this type of franchise does not impose from the franchisees, an important setting of funds. By definition, the service franchise involves the know-how which is the main element of this commercial system. The industrial franchise: in this type of franchise - The franchisor and franchisee are both industrialists. - The contract is complex because the franchisor transmits to the franchisee not only his knowhow but also the right to manufacture and market the concerned products. The contract concerns the complex concepts like the license, of brand, sometimes the supplies of raw materials to manufacture the specific concerned products. All these fields are added of course to the techniques of franchise. That leads to the transmission of a total package of performance called Lifreding: LIcencing, Franchising, Export and Direct investment.

4.

FRANCHISOR

FRANCHISEE

RELATIONAL

SHIP

The Franchisee

Buys licensed rights to clone the whole business package from the franchisor in a specific territory for a specific period, backed by full training and support from the franchisor Invests capital, time, effort and any relevant past experience to create his business, replicated from the franchisor's business formula/system Gets a safer, more structured, brand-led way of moving into independent business

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The Franchisor

Provides a ready-made, established and tested business format including name, corporate power, know-how, training and support services Gains a new outlet in a new territory with minimum capital investment in setting it up Expands his network cost-effectively with investment from the franchisees Building the Best Franchisor/Franchisee Relationship Possible

Time and time again, we have often heard people compare the franchisor-franchisee relationship to that of a marriage. They will talk about the "honeymoon" period and how the franchisor and franchisee are in "partnership" together for a common purpose. And while this analogy may have some merit, our feeling is that a marriage is exactly what the franchise relationship should not be. When we think of marriage, we think of a joint venture relationship. In a joint venture, there are partners. Because of the relatively equal footing of the "partners," the typical joint venture starts out with a negotiation--and is often a series of ongoing negotiations. Like a marriage, there are the "who does the dishes" issues, and then there are the more serious issues, such as money. Because each joint venture is unique, every one of these issues is usually subject to negotiation. Because a joint venture partner typically is compensated based on how much money goes to the bottom line, one concern that most "spouses" have is how the accounting gets completed. On a one-off basis, this is fairly easy to monitor. But on a massive scale, it is almost impossible. And when your joint venture spouse does cheat on you, it can become a battle among equals in divorce court. In fact, that is one of the big differences we find between franchising and joint ventures. Unlike partnerships, franchising is much more like a parent-child relationship. The franchisee, like the child, will go through a variety of growth phases during the course of their life. When children first come on the scene, they are typically very dependent on their parents, relying on them for the education and training that will allow them to survive in this world. And as they grow older, they become less dependent, and you begin to allow them some latitude--first playing in the yard and eventually crossing the street on their own. As they get older still, they will begin to test the boundaries of their relationship, pushing a little around the edges, trying to change or influence the system that you have set for them--and perhaps breaking some of the

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rules. But they still live in your house, and what you say goes. It is simply a question of how forcefully you choose to put your foot down The key to being a good franchisor starts with communication. And that means more than the occasional newsletter and a visit from the field representative. Relationships are built with dialogue, so it's important that you encourage dialogue in every aspect of the relationship. Good franchisors are careful to create multiple venues where constructive dialogue will occur. Annual conventions, regional meetings and advertising councils all provide for this two-way communication. FORGET FRANCHISING IF YOU ARE: Arrogant - think you know best/unwilling to learn Stubborn - won't follow the franchisor's system Unrealistic - underestimate selfemployment Under-funded - start business on a shoestring Disorganized - bad at manmanagement Maverick - unable to work as a team player Lazy - content to be a passenger Complacent - content to reach a comfort level Panicky - unable to cope when pressures multiply Unconfident - unable to control staff, hire/fire Unsupported - by spouse, family, partner etc Unhealthy - physically unable to cope ESSENTIAL CONSIDERATIONS FOR THE FRANCHISEE: Defeatist - unable to battle through adversity Greedy - overcharge consumers/fiddle royalty fees Impressionable - easily misled or misdirected Self-deluding - overestimating abilities, e.g., sales Immature - inadequate life-experience Introverted - unable to communicate and mix Short-sighted - failing to take a longterm view Over-optimistic - expecting too much Impatient - unwilling to wait for payback Extravagant - spending early turnover on luxuries Impetuous - riskily ignoring professional advice

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Capital This may be from savings, rollover, redundancy pay, compensation, inheritance or loans enabling you to setup and operate the business in return for access to the franchisor's systems, know-how, training and ongoing support

Time You must live and breathe the business to the exclusion of all else, certainly at first, so that it builds on a stable foundation Effort You must commit to learning, building and sustaining the business and be willing to go the extra mile Family/Spouse Family are often expected to assist in running the franchise Security You will give up paid employment, unemployment benefit, company pensions and control over a possibly re-mortgaged home or savings in favor of borrowing commitments, debt servicing and debt chasing

Experience You should bring all your relevant experience to the business, e.g., management, accounting, technical, administrative etc. Competitiveness You may need to absorb the effects on your margins of tied supplies, mark-ups, royalties, marketing and other percentage levies Freedom You will be limited by a contractual but constructive relationship with the franchisor, especially regarding work methodology, operating procedures, maintenance of quality standards, supervision and monitoring. You will forego the right to conduct a similar business of your own devising and being restricted in choice of buyers for your business when you want to sell it on to realize your investment or simply to move on to pursue something else.

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PRACTICAL PART
1. 2. 3. the evolution of franchise in Morocco why Morocco the franchise sector in Morocco comparison of different countries legal How to create a franchise in Morocco Success stories in Morocco some Franchising ensigns in Agadir consumers opinion environment

4.
5. 6. 7. 8.

1. THE

EVOLUTION OF FRANCHISE IN

MOROCCO

Over the last few years, franchising in Morocco has witnessed significant development which has largely contributed to the modernization of the national commercial fabric. The emergence of franchising in Morocco can be described through three development periods: 1960-90: This phase marks the entry of franchising in Morocco and the first stages of its development. Between 1960 and 1990, the growth rate of franchises was very sluggish with approximately one new franchise being introduced every five years. The first franchise set up in Morocco was Avis, a concept imported by the SCAL Company back in 1962. A year later, Hertz followed suit and set up in the country. Sixteen years later, the French Europcar entered the Moroccan market. And in 1981, Pigier, a computer initiation school, was established in Morocco and soon set out to develop one of largest networks by number of outlets.

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1990-1997:

This

phase

coincides

with

the

growth

of

the

concept

of

franchising.

Starting from 1990, the franchise growth rate changed its pace to attain an average of six new franchises per year. According to a survey conducted by the Ministry of Industry, Trade, Energy and Mines in April 1997, some 42 franchising network, with some 174 outlets were in existence. 1997-2004: This phase is marked by an exponential growth of franchising.

In November 2002, some 120 networks comprising about 540 outlets, distributed across the major cities in Morocco, were identified. By the end of June 2004, the number of franchises rose to 210 with more than 700 outlets. When compared with the figures obtained following the survey that was conducted in 1997, these figures reveal a 400% increase in the number of networks over a seven year period

2. WHY MOROCCO?
Moroccos advantages A liberal and stable economic system that fosters investment and job creation; Geographic and cultural proximity to Europe; Developed infrastructure; Young, qualified, and flexible human resources; Competitive cost of production factors; Legislation which allows for the enhanced protection of the investor Double taxation conventions with more than 30 countries Commercial courts Unrestricted capital flows Advantageous contractual law Article 7.1 of the 98-99 Financial Law, as it has been completed and modified Article 17 of Framework Law number 18-95, which constitutes the Investment Charter A flexible legal framework Franchise law is regulated by the common law of contractual obligations A booming consumer market A market that is far from being crowded: varied investment opportunities Very attractive tariff duties The disappearance of reference prices, within the framework of free-trade agreements with the European Union, Turkey, Arab countries, AECE, and the USA Progressive tariff dismantling

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3. THE

FRANCHISE SECTOR IN

MOROCCO

Types of Franchises in Morocco Today Morocco has approximately 210 different franchised branded systems, distributed in more than 700 outlets throughout the Kingdom. Franchising activities can be grouped in three categories: distribution franchises, service franchises, and industrial franchises.

The distribution of franchises by business category

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The garment sector, which represents 28%, is the most predominant and dynamic sector. It is followed, respectively by: restaurants and fast-food (11%); cosmetics and hair-dressing (8%); confectionery (5%); furniture (6%); car-rental (4%); education (4%); optics and gift-shops (3%). The remaining 31% is allocated amongst the remaining sectors. Compared with the data collected in 1997, there appears to be a sizeable rise in the garment sector, with a spectacular 500% growth. Distribution of franchises by type of stakeholder To date, some 82 trade names (or 39% of the total) have developed by means of a masterfranchise contract which grants them exclusivity in the exploitation of the trade name throughout the Moroccan territory. By contrast, 95 trade names (which account for 45% of all the systems established in Morocco) are limited to a simple franchise contract. The remaining 16% of franchises (33 trade names) are owned by Moroccan franchisors.

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Distribution of Franchises by Country of Origin:

Imported Franchises France comes first as the country of origin of most of the franchise systems present in Morocco, with 34% of the franchises, concentrated mainly in the areas of garments, cosmetics, hairdressing and care. American franchises, which come second with some 21 trade names (or 10% of the total franchise systems) are present mainly in the areas of restaurant / fast-food, education, and car rental. Belgian and Spanish franchise systems come third, with 3% of the total each. Local Franchises The success achieved by foreign trade names has spurred Moroccan investors to develop their own concepts. To date there are some 33 Moroccan franchisors (16% of the total).

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Distribution of Moroccan Franchises by business category Moroccan franchises are particularly dynamic in the garment sector (30%) and the furnishing one (21%). Moroccan franchises are usually placed in the best business locations in terms of visibility. It should also be noted that Moroccan franchises enhance their presence in regions where major trade names are absent. For instance, Yatout has just set up business in the town of Tiznit in the South of Morocco. Distribution of Franchises by City The geographical distribution of franchises reveals that there is a significant concentration of franchises in Casablanca (255 trade names, which account for 37%), as compared with Rabat (with 128 trade names). Marrakech, Meknes, Fez, and Agadir trail far behind. Distribution of Franchise by Number of Outlets

The distribution of networks by number of outlets reveals that more than 71% of franchise networks established in Morocco have less than five outlets. The remaining 29% are made up of networks with more than five outlets. They are trade names which have managed to achieve great notoriety at the national scale, such as Bigdil, with 37 outlets and Kitea with 17 outlets. Market opportunities

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Foreign Franchises: The Moroccan market is far from being overcrowded. In fact, the introduction of new trade names in little-known niches or trade names originating from countries that are under-represented here in Morocco will actually boost the market by diversifying supply. Local franchises : There are a great opportunities for the development of unexploited national concepts which can be developed and exported abroad, such as for instance Moroccan cuisine and traditional arts and crafts. Another area with great potential, particularly as a micro-franchise, is the development of convenience store concepts. The development of Moroccan franchises will require the introduction of low-cost franchises, with limited capital investments.

4. COMPARISON

OF DIFFERENT COUNTRIES LEGAL ENVIRONMENT

5. HOW
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The course of the candidate: Prepare your project Choose a franchising Build your business plan Negotiate with the franchisor The contract of franchising Negotiate with the banker Negotiate the leasing The selection of the candidates goes through 8 steps: -demand of candidacy -constitution of a folder -interview number 1 with the franchising consulter -interview number 2 with the regional director of the franchising director -training of 5 days in restaurant or a shop franchisee -interview number3 with general director of network and operations -interview number 5 with general director of finances , information system and with the CEO -integration and the beginning of the formation 7 pieces of advices to start properly your franchising: to read attentively all your documents u have signed before starting your business to look for information from other franchisees to be sure about your motivation to start with enough financial resources to choose the sweetable residence of your business to be conform to the franchising of the whole network to know your limits

6. SUCCESS
ZARA

STORIES IN

MOROCCO

Zara is established everywhere in the world. More than 500 stores on the most run places of planet: the Champs Elyses in Paris, the 5th Which occurred in New York, or Street Regent in London.

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Its success, Zara owes it to its head office, Inditex (Industria de Diseno Textil): this one deploys its activity on a worldwide scale in the fields of the design, the manufacture and the distribution of clothing and accessories. Created in 1976 by Amancio Ortega, the mark of Zara clothing changed little by little until becoming today a textile empire with more than 9 billion euros. Zara collects the shops throughout the world: France 78 Isral 12 Portugal 38 Saudi Arabia 10 Mexico 32 Japan 8 Germany 26 Argentina 5 Morocco and Jordan 1

Its Marketing Strategy: Zara can limit the risks, stocks, and the deadlines, thanks to a policy of limited series. The sign produces itself annually 50 millions articles, each one of its collections, adapted according to the local markets, would contain only a few tens of thousands of parts. Once a series is past, we do not renew it, entrusts Maria Jesus Garcia, spokesman of the Inditex group. A season didn't resist in the market more than one month at Zara. It is the marketing of the rarity. In short, the owner does not seek to maximize the number of bought articles but to optimize the frequency of the return tickets in his stores. BIGDIL Bigdil distributes a great diversity of accessories for woman whatever was her age or its social class, within a pleasant atmosphere. In 2000, Creation of the company Bigdil (Moroccan network of stores of franchise). Achievement of the concept Bigdil store and market research. In June 2001, the first Bigdil store opens in Marrakech. Between June 2001 and November 2001, opening of 3 other stores in Own Capital stock to grind the concept effectively and to set up the Knowledge To make Bigdil. On January 19, opening of the 1st store of Franchise. actually the line counts 19 stores established in several cities of the kingdom. - Import duty: 60.000, 00 Dh including all taxes - Personal capital contribution: 50% to 60% of the total investment. -Surface average: A surface sale average is 70 m Total investment: The general direction places at the disposal of franchisee an evaluation of the total investment (local, installations, import duty, orders installation.) according to which the personal capital contribution is defined. The marketing and commercial plan is in the load of Bigdil. Franchisee takes part in it with the rate of 3% of its monthly sales turnover (net of taxes). This participation is indexed on the sales turnover and not on the advertising budget. The tools of

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communication are invoiced at the cost price. The sachets and gifts are invoiced with 50% of the cost price.

7. SOME FRANCHISING
(See the interview)

ENSIGNS IN

AGADIR

We have visited a lot of franchise stores in Agadir, asking the managers how they work and how they started their business in franchising. But the answers were very secrets and limited especially when we asked them about royalties or duty import. They just talked to us about promotional offers or the mode of management they use in their stores but concerning their financial situation they apologize by saying that it is very confidential and they cant communicate with us around this subject. The managers of franchising stores added that they usually: Spend lots of money in local marketing Set up well designed store signage Re-do menus, brochures etc

8. CONSUMERS
(See the interview)

OPINION

According to the different points of view that we have collected, we can say that Moroccan people dont make difference between franchise stores and simple ones; moreover they ignore totally what is the origin of the product they buy. We have asked a customer who has just ate in Mac Donalds: what is franchising ? , she thought we was talking about frankness .we said : do you know that Mac Donalds is a franchise? ;she said no what does it mean? This is just an example of all people we have met. In some cases they knew that the product doesnt contain all qualities required, but they consume it blindly and in the same time they consume living and culture. We asked a girl who has just bought a product from ZARAS store in Casablanca is the quality of the franchise product which attract you or there are some other stimulates to make you favorite those stores to the other ones, she told us that the quality is not always perfect but is the prestige that you have on behaving like that which is important for the majority. What makes costumers get attracted by franchise products? ideas, values, ideologies, style of

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FRANCHISING

IN MOROCCO

POSITION

AND FACTORS OF SUCCESS

People are attracted by the typical marketing tools related to the product like design or promotion more than the product itself or its quality.

FINDINGS

AND

RECOMMENDATIONS

Although franchising in Morocco started in the 1960s, it has only flourished during the last 15 years and has become an investment trend among middle-age entrepreneurs. In fact, the progress of franchising activity shows two periods. Before 1990, the growth rate of franchising was one opening every five years. After 1990, a new franchise appeared every two to six months, with a 73 percent growth rate over the last three years. Today, franchising activity in Morocco is present through 80 networks and 400 sales outlets, owned and operated by 200 franchisees, 40 of which are master franchisees. The distribution of sales outlets shows a strong concentration in the metropolitan area of Rabat-Casablanca due to its high population density and purchasing power. Concerning performance, a survey conducted by the Ministry of Industry and Commerce in 1997 showed that 42 networks generated 1,600 jobs and that 19 franchises posted 27 million in sales. The analysis by country of origin shows the predominant position of French franchises, which represent 34 percent of the market with 27 franchises. American franchises occupy the second rank with 15 brands and 19 percent of the market.

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FRANCHISING

IN MOROCCO

POSITION

AND FACTORS OF SUCCESS

American franchises have the lions share of the food business, car rental, and education. Although 83 percent of the franchises are imported, young Moroccan entrepreneurs have developed 13 franchises, considered as the most efficient way of expanding their businesses, allowing them to acquire national notoriety without tremendous investment. However, the Moroccan market is far from saturation and new niches are worth exploration. Micro-franchising in Europe has proven to be the survival tool for small convenience retail such as grocery stores, butchery, bakery, precooked food etc. In fact, in order to face the competition of large distribution, the smaller retailers are encouraged to be part of a large business group (franchise), and receive the managerial and promotional support of the franchiser. American brands are well perceived and highly appreciated by the Moroccan consumer, especially in food service. However, many potential buyers of a franchise would be reluctant to pay a high franchise fee. They prefer to pay higher royalty rates as they are determined to make the business profitable. Therefore, proposals of franchises with a moderate franchise fee may receive a larger audience.

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