SOCIAL FUND FOR DEVELOPMENT SFD EGYPTIAN FRANCHISE DEVELOPMENT ASSOCIATION EFDA

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SOCIAL FUND FOR DEVELOPMENT SFD EGYPTIAN
FRANCHISE DEVELOPMENT ASSOCIATION EFDA
FRANCHISEING A MODEL FOR ENTREPRENEURSHIP IN
EMERGING MARKETS EGYPT CASE

• MR. HATEM ZAKI
• hzaki_at_sedo.org
• FRANCHISE DEVELOPMENT MANAGER OF SFD
• EXECUTIVE BOARD MEMBER EFDA
• June 3rd , 2004

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Historical background

• Franchising is known in Egypt long ago though
  multinationals in different sectors such as
  soft drinks, petrol stations,etc..
• Since the 70s franchise in food sector is
  actively growing.
• Since the 90s non-food sectors started to develop.

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Egyptian Franchise Development Association EFDA

• EFDA is a central NGO and non-profit
  organization.
• Established in 2001 by elite business people who
  adopted franchise businesses for long time.
• SFD joined EFDA 2003 as an active board member
  to empower its role

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EFDA mission

• Create franchise awareness in Egypt
• Develop local Franchisors.
• Establish a healthy environment for the franchise
  industry
• Establish a liaison between all players in the
  franchise arena.

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Social Fund for Development SFD

• SFD was established in 1991 to offset the
  negative effects of the economic reform program.
  www.sfdegypt.org
• SFD core programs
• 1- Social Infrastructure Development
• ( public works, community develop. Re-training )
• 2- Small Enterprise Development Organization
  SEDO www.sedo.org

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Importance of SMEs to Egypt economy

• SMEs represents 98.7 from total projects in
  Egypt.
• SMEs represents 2/3 of the labor force.
• SMEs produce 80 of GDP.

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SEDOMission

• Create job opportunities through the
  development and support of new and existing
  SMEs.

Social Fund for Development- Egypt
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SEDO
TARGET GROUPS

• New graduates
• Small entrepreneurs
• Unemployed
• Redundant labor from Privatization
• Women

Social Fund for Development- Egypt
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SFD Contribution to National Needs for Job
Creation 20 - 25 Non Farming sector
Social Fund for Development- Egypt
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Performance from mid1992 till 31/12/2003

• Enterprises Supported 191,256
• Value of Loans LE 3,92 B
• Number of jobs created 720,000
• Cost / Job LE 5,500
• New 67 Existing 33
• Male 76 Females 24

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Major problems FOR small business

• Heavy influence of owners attitudes biases.
• Limited financial resources.
• Limited managerial capabilities.
• Limited marketing competencies.
• Short life cycle.
• Limited RD capabilities ( if any )

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Reasons for small business failure

• Poor feasibility studies.
• Unsuitable location.
• Inappropriate technology
• Lack of trained human resources.
• Insufficient capital base.

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What can franchising provide to our clients?

• Identifiable package.
• Proven System ( production, management..)
• Ability to transfer knowledge.
• Agreement to support.
• Tested products.
• Market acceptance and demand oriented.

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SEDO Franchise Schemes

• Fuji Image and Kodak Express.
• Wawis ( local fast food)
• Mobil Oil and GM auto-quick services.
• Cristal bakery chain.
• Panting shops(color mixing machines)
• FedEx courier ( only to their outlet managers)

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Role Objectives OF The Franchise Department

• Provide awareness promotion for the franchise
  business
• Promote and finance small business franchisees
• Introducing international Franchisors to Egypt
  SMEs
• Help local Franchisors to export their franchise
  world wide
• Supporting Egyptian franchise associations
• Provide technical, legal and business support to
  SMEs and to successful Egyptian producers who
  wishes to franchise their business

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SFD plans 2004

• Non-financial
• Franchise census
• annual Int. franchise conference exhibition
• Specialized franchise training
• Franchise info network

• Financial
• Introduce 20 franchise concepts in the next 4
  years.
• Disburse equivalent to U.S. 20M of franchise
  loans to franchisees

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MIFE 2004

• The 2nd International Franchise Exhibition and
  Conference , for Middle East and North Africa
• 2-4 June 2004
• In Cairo

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Capacity and Potential for Franchise Expansion in
Egypt

• Franchise has increased by 400 over last 5 years
  ( from approximately 25 to 100 franchise systems)
• March 2003 , Egypt is listed in USA cooperating
  countries in Intellectual Property Rights.

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INTERNATIONAL CO OPRATION

• SFD signed MOU with South African Namac Trust to
  assist in establishing a franchise information
  network in Egypt and to use their world-class
  business tools and expertise.
• Cooperate with the African Development Bank
  AfDB, Private Sector to implement a new
  financial scheme especially tailored for
  franchising.
• EFDA to sign MOU with FASA, FASA to build the
  capacity of EFDA
• Coordinate with all stakeholders (donors) to
  develop franchising in Egypt.

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• IMPLEMENTATION CHANNELS
• Participating Actors
• SFD Regional Offices
• Private Sector Franchisors
• Banks Financial Intermediaries
• Franchise service providers
• Egyptian Franchise Association EFDA

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Franchise Scheme Differential Interest Rates
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COLLATERAL GUARANTEES

• Cooperative Insurance Society
• Guarantee up to 80 of the loan , Max. LE 500K
• Charges 2 of outstanding balance each year

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Benefits to Franchisors

• 1- Attractive package for their potential
  franchisees including
• 5-10 years tax exemption for start-ups
• Willing to finance start-ups.
• Subsidized simple interest rates
• Collateral schemes.
• Various non-financial services.

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Benefits to Franchisors cont

• 2- Technical assistance for indigenous
  Franchisors.
• 3- Help to export local franchise systems.
• 4- Match-making
• 5- In near future, advertise on The Egyptian
  Franchise Information Network
• 6- Special Training seminars and courses for
  Franchisors , franchisees and for services
  providers.

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WHO IS ELIGIBLE

• Franchisors
• 1- Well established and profitable business
• 2- Proven track record
• 3- Capacity to handle the proposed franchise
  system.
• 4- Pilot project in Egypt with at least 12 months
  consecutive profits.

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WHO IS ELIGIBLE

• Franchisees
• 1- Meets SFD general conditions.
• 2- Meets franchisors requirements.
• 3- Equity participation 10-30

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Mechanism of Delivery
Franchisors
SEDO
proposal
approval
BANK
Franchisees
credit
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HOW TO APPLY

• Franchisors
• 1- Meet with SFD franchise department.
• 2- Submit a proposal.
• 3- Disclosure Document.
• 4- Franchise contract.
• 5- Last 3 financial statements.

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HOW TO APPLY

• Franchisees
• Apply to SFD regional offices, or franchisor, or
  directly to the bank.

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• THANK YOU