Until recently, the franchise industry in Israel has been dominated mainly by local home-grown brands. Of the approximate 350 brands currently selling franchises in Israel, only a hand full of well-known global brands stand out, but that is rapidly changing.
As of now, the QSR footprint of international brand names in Israel have been dominated by the likes of McDonalds, Pizza Hut, and Domino’s Pizza. Recently however, KFC has successfully reentered the Israeli market and the Papa John’s local office has successfully sold numerous franchises.
In the property sector, RE/MAX stands out with over 100 locations, and in other retail sectors, brands such as American Eagle, Zara, H&M, Sketchers, and Nike concept stores are seen in many major shopping areas.
Room for development
Even though the above list of international brands in Israel looks impressive, their percentage to the number of local brands should be a lot higher. Indeed, there are many bright opportunities for international brands to expand their operations into Israel. The way I see it, this is for two reasons.
The first is that Israelis always welcome the arrival of well-known international brands. I vividly remember seeing lines of over 100 people, snaking around corners queuing to enter through the doors of mega brands such as American Eagle, Zara and H&M. In the early 90’s when Pizza Hut first came to Israel, security guards were hired by the company to maintain order at the front door for several months after their opening.
The second reason is that in the absence of franchise law and regulation, I strongly believe that the Israeli franchise community is in dire need to step up its franchise standards in so far as franchise ethics and regulation are concerned, so having to compete with the higher franchise standards and values of international brands will be a big positive for the franchising sector in Israel.
Why is this so? Brands which are required to follow rules, laws and regulations – such as brands from regulated countries like the U.S.A. and Australia – by default, tend to incorporate their franchise disclosure policies and best practices into the DNA of all their international development strategies, regardless of whether those countries have local franchise regulation or not.
For example, you’d be surprised at the number of local brands that don’t invest enough time, resources, and energy in creating top-class franchise training systems within their organizations, not to mention other aspects such as well-written and effective operations and training manuals.
For someone like myself who worked with multinational brands for more than half of my franchise career, the injection of best practices in franchising by foreign brands into Israel can only raise the bar of what good and proper franchising is all about. By the way, this goes for any other country lacking in franchise law, ethics and regulation as well.
Light on the horizon
The good news, however, is that the landscape of franchising in Israel will, in my opinion, change rapidly during the next few years – and for all the right reasons.
The recent announcement of 7-Eleven signing a master franchise agreement with Electra Consumer Products Ltd., as well as announcements posted on LinkedIn and in the Israeli online business newspaper, Calcalist, that Carl’s Jr. and Hardee’s are on their way to Israel, shows a new level of confidence in foreign megabrands to take Israel seriously.
In the forefront of these changes, we cannot help but also be in awe of the rapid changes in geopolitics taking place before our eyes in so far as Israel’s latest diplomatic ties with the U.A.E., Bahrain, and Morocco, which will no doubt lead to even more global business opportunities for Israel and the rest of the Middle East.
“Israelis always welcome the arrival of well-known international brands”
On a regular basis, business executives from Israel are meeting with their business counterparts in Dubai and Abu Dhabi to discuss business opportunities, something that just a few years ago would have been unimaginable.
Another reason for all this international interest in Israel is its strong economy, which has no doubt resulted in Israel’s general population to have a lot more spending power. The GDP per capita in Israel now stands at $49,840 – number 19 in the world.
Being the first country to vaccinate most of its citizens against the COVID-19 virus, life in Israel has pretty much returned to normal. Our borders were reopened to tourists on November 1, so combined with Israel’s strong economy and its recent peace treaties with its neighbors, Israel is now in the mood to get back to business as soon as possible.
International brands, which until now have not thought of including Israel into their expansion plans, should definitely put Israel on their radar now. In the light of the above, more and more major brands have set their sights on Israel. Second Cup, one of Canada’s leading coffee brands have also announced that it has decided to expand into Israel, and EGS (Edwards Global Services, Inc.), which assists numerous global brands, is working closely with their local associate and representative in Israel, towards sourcing master franchisees in Israel for a number of its major clients.
While until now, Israel might have only been geographically situated in the Middle East, the recent peace treaties with the U.A.E., Bahrain, and Morocco have, in my opinion, brought Israel a lot closer to its neighbors. This will no doubt lead to many changes in the new Middle East, which will overflow into all business sectors, including the franchise industry.
Steven Wolfson is the founder of IFI – Israel Franchise Institute Ltd. Steven is also the chairman of the committee for franchise regulation for LAHAV, and a certified arbitrator and mediator (University of Bar Ilan) for the Israeli Center of Mediation and Arbitration