Franchising in Israel: A great source of untapped potential | Global Franchise
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Wednesday 19th January, 2022

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Franchising in Israel: A great source of untapped potential

Insight

Franchising in Israel: A great source of untapped potential

Israel has all the prerequisites for success by franchisors who take the time to understand the market’s unique dynamics

The time is right for brands to move aggressively to capitalize on the vast potential Israel offers for franchising. With a growing and stable economy, fueled by its highly educated and young population, Israel has a wealth of consumers and young entrepreneurs that can drive franchise growth.

Often referred to as “startup nation,” Israel has a strong entrepreneurial streak running through its economy. A technologically advanced nation, Israel enjoys state-of-the-art communications and connectivity with high-tech innovation at its very core. All these factors, plus the many fragmented market segments without clear market leaders, make Israel ripe for a franchising boom.

While Israel’s business scene is notable for its world-class tech corporations and exciting, well funded start-ups, many industry segments that have well-developed franchise systems elsewhere continue to be fragmented and dominated by independent operators. Among these underdeveloped franchise segments are home and personal service, business services, education/ enrichment and home healthcare Few national players exist and are limited to just several industries, primarily restaurants and fitness.

New Jersey in the Middle East?

Israel is a small country geographically, often compared to New Jersey in size and shape. But Israel and New Jersey share something else in common: just under 9,000,000 in population.

Unlike New Jersey however, Israel is a single media market while New Jersey needs to rely on the expensive New York and Philadelphia markets to reach its population. So, imagine if economically strong New Jersey, with its highly educated and prosperous population, had few statewide competitors in home repair and renovation, automotive services, home health care providers, childhood enrichment, personal services, and pet care in its highly efficient media market. Sounds like franchise heaven, doesn’t it? That’s Israel right now.

A quick drive around the country will reveal many food and fitness brand names, but noticeably absent are franchise systems in those “decidedly unsexy” market segments that provide the base for broad franchise success.

Two built-in advantages

There are two strong factors that make Israel a potential franchising powerhouse:

1) Well educated and trained leaders: Most Israelis must serve in the military following high school. As we know, military veterans make ideal franchisees because of their highly desired experience of “working within a system.” The Israeli military adds a unique twist to this. The Israeli military pushes responsibility and authority downward creating quick thinking, nimble leaders. It is commonplace to find 20 year olds commanding complex units. These lessons in management and leadership create highly confident and competent young managers. In addition to a steady stream of highly desirable employees, this experience also develops ideal franchisees who take responsibility while accepting risk and a willingness to “follow the system.”

2) Business friendly by design: Israel is a leader in community planning. As the population grows, housing is built in very carefully planned communities. These new communities include, in addition to several residential buildings, incorporated open-space, a shopping center or mall, office space and schools.

In turn, a brand new microeconomy emerges supported by ample parking and a communitywide network of sidewalks and bike lanes. In short, they create a viable and dynamic town center surrounded by young professionals and families making them an ideal base for many franchise brands.

“By their late 20’s, many Israelis have achieved a leadership position in the military, have completed university studies, and have traveled extensively”

Who to target for prospective franchise ownership

There are two targets franchisors should target in the Israeli market.

1) Master franchisees/area development (including national masters): As discussed, Israel is a small market so franchise systems will not be very large. It is hard to imagine a franchise system having more than 50 outlets nationally with most in the 15-30 outlet range.

The relatively small scale creates an opportunity for wellfunded investors to enter into large regional or even national agreements without staggeringly high investment. Another strong reason for appointing masters is to effectively manage the language, customs and time difference challenges.

Master franchisees can assume the burden of finding additional franchisees with local knowledge and connections. Another advantage of a master franchisee arrangement would be the ability to take advantage of the highly efficient Israeli media market which allows advertising to blanket the country in a highly cost-effective manner.

Israelis also have deep experience in international business, particularly with the U.S., and the Israeli legal system is similar to the U.S. There are many financial and tax experts who are

The author

Bruce Weinreb is president and founder of ZIZE! Franchise Advisors, LLC., and works with over 400 leading franchises to identify and attract prospective franchisees. Bruce lives in New York and spends several months a year in Israel.

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