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U.S. Franchises Coming to Tunisia

Tunisian companies have capital, a well-educated work force and desire for Western brands.

In late February, Tunisia welcomed franchisors from Europe and the United States to the capital, Tunis, for the TunisMed Franchise Expo. Five International Franchise Association-member franchisors in the education, food and retail sectors attended the event in person, through representatives or with materials. It was an eye opening experience, and in the following week, events confirmed the favorable impression that was made.

Franchising Prompts Tunisia-U.S. Interaction

But first, some background. It is not a coincidence that brought us to Tunisia; it was a unique set of circumstances. When the “Arab Spring” erupted there in January 2011, the U.S. Department of State announced a partnership with that country to raise the level of economic development in a range of ways. One of the first steps the department took was to ask the Middle East Investment Initiative, a nonprofit organization formed at the behest of the Aspen Institute to spur lending to small- and medium-sized businesses in Gaza and the West Bank, to replicate that model in Tunisia.

That’s exactly what they’re doing, through collaboration with the Overseas Private Investment Corporation, the international financing arm of the U.S. government.

Groups of Tunisian businesspeople accepted the U.S. Department of State’s offer, and began trekking to Washington. When asked about their priorities, very high on their list was franchising. That became the catalyst for the MEII OPIC program: a $50 million credit facility providing the basis for loans by Tunisian banks to Tunisian businesses, enabling them to invest in U.S. franchises and operate them, and loans to Tunisian suppliers of goods and services to the franchisees. The loans will be guaranteed in part by OPIC, thus lowering the collateral requirements and rendering it feasible for U.S. franchisors to grant franchises, their confidence sustained by the assurance of guarantees in the event of default.

It was Tunisians’ interest in franchising that brought them to IFA and to DLA Piper. And that, in turn, was the spur which brought us to Tunisia.

Focusing on Tunisia

The country is strategically located on the north coast of Africa, across the Mediterranean from Italy and France, and is a favorite summer tourism location for Europeans. Tunis has numerous airports, the principal one just a few minutes from downtown, and a safe, modern port that is a jumping off point for land shipments to Algeria and Libya. Tunisia and Morocco, while Arab countries, share a French colonial past. Arabic is the first language and French the second, but English is widely spoken. In several days of meetings with business and government officials, the group met no one who could not converse in English, and while the conferences were conducted with three language simultaneous translation devices, remarkably few in the audience seemed to need them. It reminds us of Dubai in 1989 just before rapid growth transformed that emirate into a current franchising hotspot.

When the Arab Spring began in Tunisia, it led to the overthrow of a long-time, one family dictatorship. Subsequently, a fledgling democracy has formed and economic growth has sprung up all over the country. Tunisia is having the typical ups and downs associated with becoming a democracy, as was the case in Eastern Europe after the fall of Communism in 1989. Unlike Egypt and Libya, there is no sign of the army in the streets of Tunisia. There was not a time during our visit when we felt even momentarily insecure.

Tunisia is largely secular and is trying to stay that way. Women’s rights are protected and women lead major corporations, as well as the Tunisian version of the U.S. Chamber of Commerce. Repeatedly the people we were led to as government and business leaders and lawyers were women, and an unscientific survey of the audience (a fancy way of saying “looking out from the platform”) suggested that less than one- third of the very substantial number of women present were wearing “native” attire, and then, simply, a head scarf.

As in other countries without a U.S. Commercial Service office, the U.S. Embassy’s Economic Counselor filled that traditional role. Briana Reenshuler, economic/commercial officer of the U.S. Embassy in Tunis, and her excellent staff manned a booth at the TunisMed Franchise Expo and provided potential licensees with information on Carl’s Jr., Denny’s, Rita’s Italian Ice and The Vitamin Shoppe, as well as on IFA (whose “Franchise Opportunities Guide” was on display and in high demand). Tutor Doctor, represented by Rogelio Martinez, CFE, vice president, international franchise development, had a booth and saw excellent traffic from potential franchisees.

A Growing Market for Franchising

The franchise industry is just beginning to grow. Ramada, Novotel, Sixt Car Rental and Benetton are currently operating in Tunis. Under the dictatorship from 1987 to 2011 it was very difficult to bring in a foreign franchise because the government always wanted the franchise to be granted to a family member or an acquaintance. Overwhelmingly, Western franchisors declined. With this deal-breaker now gone, many European franchisors are looking at this highly educated, growing market, already adjudged the most transparent economy in North Africa in which to do business. Tunisian companies have capital, a well-educated work force, and a desire for Western brands. Pizza Hut has just been granted a license and Johnny Rockets has announced it will also be entering the Tunisian market.

New laws recently adopted in Tunisia that establish a legal framework for franchising set out a listing of industries, which may be franchised without the need for any further government approval. One of the very few sectors not yet on that list is the food industry, but the TunisMed Franchise Expo conferences were replete with demands for that final liberalization and with government officials providing assurance that that would soon occur. Less than a week after the conference ended, the Minster of Commerce responded by announcing that five units of Pizza Hut had been authorized, with more companies in the pipeline.

All evidence indicates that Tunisians are moving forward. Make no mistake, years of dictatorial rule have taken their toll on the familiarity with modern business practices, including franchising, by the business community. This left us unprepared for the next surprise: Government and business people already boning up on the ins and outs of franchising, such as the relative advantages of master franchising and area development; a proposal for a chair in franchising at a Tunisian business university which operates exclusively in English, and follows American teaching methods; and the suggestion for a region-wide program in franchise education. n

William Edwards, CFE, is CEO of Edwards Global Services, Inc. and vice chairman of the International Franchise Association’s International Committee. Edwards can be reached at 949-224-3896 or bedwards@edwardsglobal.com.

Philip F. Zeidman is a senior partner in the Washington, D.C. office of DLA Piper. The firm is IFA’s general counsel. Zeidman can be reached at 202-799-4272 or philip.zeidman@dlapiper.com.

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