The document discusses the growth of the franchise business model in the UAE real estate industry. It notes that the franchise model provides benefits to both new entrepreneurs and established real estate brokers. Specifically, the franchise model allows brokers to leverage an established brand for marketing and business solutions while keeping initial investment and operating costs low compared to starting from scratch. The document also outlines the franchise fee structures of Asteco and Driven Properties, the first companies in the UAE to offer real estate brokerage franchises.

1. PW 9ReportProperty Weekly
August 3, 2016
Franchisemodel
seesgrowth
Realty businesses in the UAE talk about the benefits
of the franchise business model
F
ranchise business has
been well established
in the developed mar-
ket for many years –
not only in the real estate but
also in other sectors, such as
retail and hospitality. How-
ever, this model has started
seeing growing demand in
the UAE in recent times
when some of the home-
grown companies, such as
Asteco and Driven Proper-
ties, saw business opportuni-
ties in this.
Dubai being a highly
fragmented market presents
tough competition – which
means small-size brokerage
firms or new entrepreneurs
looking to establish them-
selves have to work in a slim
margin, ostensibly though,
their cost of operation or ini-
tial investment remains high.
Whereas, if they opt for a
franchise partnership, it can
provide them an immediate
access to high-end services,
business solutions and train-
ing of an established bro-
kerage firm. Although this
comes with a franchise fee or
a fixed percentage of revenue
that they will have to shell
out to the franchisor, the
business model allows them
mitigate risk by keeping their
initial investment and cost of
operation low – something
that is very important in to-
day’s market scenario.
Asteco, which was
among the firsts to offer
franchise solution in this
region, launched its Licens-
ing Services division back in
late September 2014. Omar
Binder, Director – Licensing
Services, Asteco, says, “For a
company to develop a high-
producing business, it re-
quires more often than not,
a significant investment of
cash and marketing to raise
brand awareness and build
brand equity.” He says it’s
a fact that many new busi-
ness don’t survive. “With a
franchise, essentially you are
gaining access and leverag-
ing the franchisor’s value to
each of these business ele-
ments ensures your success
rates are much higher,” adds
Binder.
He says the market has
been very much receptive
to this business model. Last
year, Asteco signed its first
two franchisees with Dubai-
based Livington Properties
and Asset Value Real Estate
Brokerage.
The company is current-
ly working with 10 licensed
franchisees located in the
three key Middle East gate-
way cities. “This year we will
By S.A. Kader
SpecialtoPW
be exploring new opportuni-
ties further afield, with pros-
pects in the GCC, Europe
and North Africa,” Binder
adds.
Another company to start
a franchise business last
year is Dubai-based Driven
Properties, which the com-
pany claims, is the first of its
kind in the UAE. “This is a
traditional, tested model in
the US and Europe, with the
likes of REMAX and Century
21 taking the franchise route.
This model is new to the
region and we are looking to
pioneer this space and ben-
efit from the first mover’s
advantage,” says Abdullah
Al Ajaji, Managing Director,
Driven Properties. He says
the franchise model virtu-
ally eliminates the risk that
an entrepreneur is taking by
starting a new operation.
“Operating a franchise
allows the entrepreneur to
spend much less setting up
a platform than if they were
to do it all from scratch. In
doing so, the franchisor acts
as the advisor and mentor
for the franchisee and guides
them through every step
of the way until success is
reached,” says Al Ajaji. The
company has entered into a
joint venture with an inter-
national player to operate
the Driven franchise out of
Saudi Arabia.
Benefits of the franchise
model
Technically, a franchise
is granted to an individual
or a firm to run a business in
an assigned territory using
another firm’s proven brand
and systems. In reality, Bind-
er says, it is also a partner-
ship between the franchisor
and the franchisee, which,
although, underpinned with
a legal agreement, is depend-
ent for its success on the de-
livery of the products and
services by the franchisor
and the commitment of the
franchisee. “At the end of the
day the franchisee runs their
business their way and Aste-
co is on hand to support,” he
adds.
According to Al Ajaji,
the benefits of the fran-
chise model are seven-fold.
Picture: Supplied
✚ The franchise model could add value to both new entrepreneurs and established ones
It gives immediate expo-
sure and market presence
through brand recognition,
and access to diverse data-
base of investors and end-
users. “They can also get to
use a state-of-the-art CRM
system designed specifically
for Driven Properties that
would cater to the business
rules of the company and its
franchisees. Besides, they
receive marketing support
through our award-winning
marketing team,” he says.
Also, Al Ajaji adds, Driv-
en Properties’ presence in
different locations in differ-
ent cities allows franchisees
to use any of the company’s
facilities and offices. “Other
important services such as
HR and talent acquisition
also come through a cen-
tralised system that caters
to all franchisees. This also
involves ERP solution link-
ing all functionalities of the
business such as payroll, fi-
nance, HR, and marketing,”
he adds.
Franchise fees
Although, there are many
benefits, some high-produc-
ing franchisee companies
may feel they will end up
paying too much to the fran-
chisor since the fees are of-
ten based on company sales.
Al Ajaji says this is why
they have adopted the mod-
el of fixed fees as opposed
to a percentage of company
sales. Typically, a franchisor
is entitled to a percentage
of a company’s top-line.
“But we have adopted a
model that is different and
more adoptable to the lo-
cal market, whereby a fran-
chisee pays a fixed monthly
fee, therefore allowing the
franchisee to expand be-
yond reach and incentivis-
ing them to continue being
a part of the Driven family,”
he explains.
“Instead of limiting the
growth of a franchisee by
claiming a percentage of
revenues, which can be sig-
nificant, we empower fran-
chisees to exploit their full
potential. We, of course,
need to ensure that the fran-
chisee has the operating and
financial means to do so,” Al
Ajaji adds.
Established or new?
Industry experts say
franchise model could add
value to both new entrepre-
neurs and established ones
who are looking to revitalise
their business. “If we take
the UAE residential property
market as example, we know
it’s a very competitive, fast
changing environment so an
Asteco franchise may suit an
existing real estate brokerage
operator looking to revitalise
and relaunch his business or
an ambitious employee wish-
ing to set up on their own,”
explains Binder.
Al Ajaji agrees that in a
fragmented market like the
Middle East, competition is
extremely fierce. “Having
an established firm with a
strong brand, this risk is mit-
igated. With the right tools
and innovative solutions,
franchisees have the oppor-
tunity to benefit from our
knowledge, resources, and
systems to grow their op-
eration.” The Dubai property
market has the problem of
plenty with too many agents
chasing the same number
of properties. Many feel the
franchise model can help im-
prove this situation. n
AbdullahAlAjaji
Managing Director,
Driven Properties
OmarBinder
Director, Licensing
Services, Asteco