Every entrepreneur or businessperson aims to expand their business in a thriving market. Brands are doing everything to increase their visibility in the global business market.
Licensing and franchising are the two major approaches for business expansion in an international business hub. Brands often adopt these models according to their business needs. Whether it’s a franchising or licensing strategy, both approaches help businesses position themselves in competitive international markets. Licensing and franchising are similar at a few levels, but there are also a few differences that set them apart.
As we all know, Dubai is one of the most competitive markets in the world. Data reveals that Dubai’s franchise market is expected to grow by 12% annually and can reach up to 44 billion USD by 2026.
This informative blog will help you understand Dubai's expansion strategy and guide you through licensing and franchising factors.
What is licensing?
Licensing is an agreement between a company and a third party. In this process, the licensor grants permission to the third party to use their intellectual property.
To be more specific, intellectual property includes copyrights, trademarks, patents, and other proprietary rights. In the licensing model, the company retains 100% ownership of IP, and third parties are only allowed to use it within the given licensing period.
Data suggests that the international brand licensing market is set to grow from 274.9 billion to 385.4 billion USD by 2027.
The reason behind the surge in the licensing market is that industries like entertainment, software & IT, and production use this approach to grow exponentially. These sectors leverage their IP to double down the growth rate. Department of Economic Development issues the business license to the parties.
Understanding the franchise strategy
In contrast to the licensing strategy, the franchise model is also booming rapidly in the Dubai market. This strategy attracts global companies to invest in the fostering business ecosystem.
Franchise strategy is an arrangement between the company and third parties. In this approach, the other party uses the brand’s IP and business model to operate the business in exchange for fees and royalties.
Many reports show that the franchising model in the Dubai market has grown by 15% annually. The food and beverage, healthcare, hospitality, and technology industries are approaching this strategy. Due to the multicultural population of the city, with a sufficiently large number of visitors and expats, a variety of services are required, thus making franchising a very effective way to grow.
When considering the kind of franchise business model, factors such as brand reputation, operational direction of the franchisor, and model scalability in the local surroundings need to be considered.
Benefits of Licensing in Dubai
Obtaining a valid Dubai license offers the following benefits:
- Protection Under Law: Running a business with a valid license guarantees legal compliance, builds investor trust, and protects your business activities.
- Market Access: A Dubai license opens doors to both domestic and international markets, capitalizing on the emirate’s global connectivity.
- Tax Exemptions: Businesses holding valid licenses can enjoy zero personal tax and appealing financial benefits in designated free zones, such as VAT and customs duty exemptions.
- 100% Foreign Ownership: Free zones in Dubai offer 100% foreign ownership, removing the need for a local partner. However, 100% foreign ownership is now permitted for the majority of mainland operations.
A Comparative Study of Franchising and Licensing
Authority and Autonomy
Franchising is more of a supervisory nature. Franchisees have to comply with certain procedures and marketing standards so that the franchisor can maintain the brand identity.
In contrast, licensees operating under the licensing scheme enjoy much latitude. The licensor allows intellectual property usage but does not control the licensee's general business conduct.
Marketing
A reputed brand that comes with a franchise tends to have instant credibility. Franchisees benefit from the marketing campaigns and the well-established reputation of the brand.
Licensing strategies can provide similar profit opportunities if the technology or brand IP is well-known. However, licensees are typically in charge of their advertising. This creates an opportunity for creative flexibility in the system, but to maximize brand recognition, aggressive marketing should be a necessity.
Potential for growth and scalability
Franchising fast-tracks a company's ambition and vision for expansion and profitable scalability. Franchisees fund outlet expansion, while the franchisor ensures strong branding with training and support.
Licensing drives growth by partnering with local experts, especially for global expansion.
To summarise this, licensing allows third parties to use intellectual properties with minimal control and royalty, perfect for short-term business.
On the other hand, franchising offers A to Z brand usage, support, and high engagement in exchange for upfront fees.
Markai Corporate Services offers technical support in creating and implementing effective licensing and franchising plans. Our skilled staff is ready to assist you in growing your business.
