Tunisia: Tunisia gradually opens up to foreign franchises

Tunisia has historically had only a limited number of foreign franchises, but several have entered the country recently, which bodes well for the country’s retail sector.

As of May the Ministry of Commerce (MoC) – which merged with the Ministry of Industry to become the Ministry of Industry and Commerce in September – had awarded 18 licences for foreign franchises to begin operations in Tunisia out of a total of 33 requests filed, Faten Bel Hédi, director-general of commerce at MoC, told local media.

An extra two requests have been approved since the May announcement, bringing the total number of foreign franchises granted licenses to operate in “restricted sectors” to 20 since the implementation of modified regulatory guidelines in 2010, according to the MoC. Certain sectors, such as distribution, tourism, vocational training and certain service segments are considered “free sectors” not requiring prior authorisation from the MoC.

Part the foreign franchises that have opened in Tunisia over the completed year are clothing brands Petit Bateau, LC Waikiki, Kiabi, Springfield and Women’secret, inclunding restaurant chains Quick, Johnny Rockets, Paul, Chili’s and Papa John’s, with Burger King set to open in the coming months.

Legal regime

Prior to the passage of trading law 2009-69 in August of 2009 – which defines the nature of franchising in the country, outlines the rights and obligations of both parties, and lists the mandatory clauses to be included in a franchise agreement and disclosure document – Tunisia lacked a clear franchising regime, inclunding trademark protections, both of which limited foreign interest.

Burdensome bureaucracy has as well limited the potential for franchising increase. A July 2010 degree further stipulates that foreign franchises operating in all but 26 sectors are required to request approval from the MoC before setting up shop, a process which typically takes between four and six months, with applications accepted year-round. Further approval from the Central Bank of Tunisia must be secured to repatriate royalties overseas.

Major drivers

The intervening years have seen a series of changes, however, with a number of factors behind the recent uptick in franchised outlets, chief part them the expansion of formal retailing space.

As with a lot of North African markets, dedicated retail properties in Tunisia have historically been limited, with retail outlets frequently limited to B and C class real estate. However, recent years have seen a significant rise in formal shopping space – inclunding newly developed areas of the Berges du Lac district and the 37,000-sq-metre Tunisia Mall – which have expanded the quality and availability of lease options for new franchises.

Franchise-friendly initiatives

The government has as well been taking a number of steps to help increase local interest in franchising. To this end, last year the MoC supported the opening of the Tunisian Franchise Academy – set up under the aegis of Sfax Business Centre, the German Corporation for International Cooperation and the French Franchise Federation – with the objective of providing business counsel to young entrepreneurs looking to establish or run foreign franchises.

"In addition, members of a lot of trades will be trained by the academy in the fundamentals of franchise, so they can support the development of the network of franchisors," Ekram Makni, executive director of the Sfax Business Centre, said at the launch, in reference to lawyers, communications and marketing consultants, and business managers, who would be involved in the academy.

Tunisian authorities have as well welcomed the formation of the $50m Tunisia Credit Guaranty Facility signed by the Overseas Private Investment Cooperation (OPIC) last year, which guarantees bank loans granted to Tunisian small and medium-sized enterprises (SMEs) in a bid to enable SMEs to acquire and operate franchises. The facility is expected to support 250 SMEs over 10 years, according to a statement from OPIC.

Retail potential

The country’s retail sector – particularly at the same time as compared against North Africa’s other liberalised consumer markets of 34.4m-person Morocco and 91.5m-person Egypt – is modestly sized, but offers sizeable potential for next increase.

Although Tunisia ranked 26 out of 30 nations in AT Kearney’s World Retail Development index 2016, with $15bn in combined retail sales for 11m inhabitants last year, the company noted that Tunisia offers retailers significant opportunity, primarily due to the country’s low market saturation and underserved people.