Franchising can be a successful and lower-risk model for expansion but small and medium food and beverage companies considering growth strategies should be aware of the challenges, an expert has warned.
The food and beverages franchise sector in the Mena region is expected to grow at 7.4 per cent annually over the next four years, according to Euromonitor International.
The sector grew 4.3 per cent last year and was worth US$79.1 billion, making the region the second-fastest growing in the world after Asia-Pacific. Within Mena, Dubai and Qatar beat that figure, growing at 5.3 and 6 per cent respectively, Euromonitor figures show.
Sary Hamway, the chief operating officer of networking group the World Franchise Centre, said that the franchising route may not be the best option for all businesses.
“Once you are a franchiser you have a second business to run as a manager and service provider,” said Mr Hamway.
“It requires more skills than you needed for the first business. Speedy expansion is not good for a new franchise. One should look at geographical clustering, close to your HQ, so you can offer logistical, managerial and technical support where and when it is needed, and then you need to offer more support than you do to your original outlets. Franchises fail all the time.”
Last year, UAE-based street food retailer Just Falafel was forced to scale back its ambitious target of 1,000 stores internationally by 2020 after some of its franchise outlets ran into difficulties. It has since revamped its menu and has stopped taking new franchise requests.
The local tea retailer Filli Cafe is planning to franchise as a less capital-intensive option for expansion plans to include opening 100 proprietary stores in the UAE and 500 franchised stores in India over the next 10 years, according to its founder.
“The franchise model makes sense to us because we need to expand but don’t necessarily have the capital required and the international experience for the expansion we plan,” said Rafih Filli.
“We have been trading since 1991 with our own manufacturing base in Assam.”
Filli Cafe, started in 2004, has 18 outlets in Dubai, one in Sharjah and sells more than 40,000 cups of tea every day.
Its business model focuses on stand-alone stores away from the malls, and selling cups of tea at Dh6 to Dh9. It will sell franchises for $20,000 over seven years and take a 6 per cent royalty on revenues with 2 per cent charged for marketing costs.
“The beauty of tea shops is the lack of theatricality and training that is needed for the vendor,” says Anselm Godinho, the managing director of International Conferences & Exhibitions, which runs Dubai’s International Coffee and Tea Festival.
“You don’t need a trained barista or a Dh50,000 machine. There are so many types of tea, 200 to 300 types, so the variety is a real crowd-pleaser. However, the UAE is a special case. How many other countries do you know that have a coffee pot on its currency? Coffee is more than a social occasion here, it is part of the country’s DNA – although more tea is drunk in this region than coffee.”
ascott@thenational.ae
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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