Young entrepreneurs intending to set up small and medium enterprises (SMEs) should go into franchising, the Riyadh Chamber of Commerce and Industry (RCCI) advised recently.

Franchising is a form of business by which the owner (franchisor) of a product, service or method obtains distribution through affiliated dealers (franchisees).

Mohamed Almajaal, a member of RCCI’s board of trustees, said that SMEs contribute about 21 percent to the Kingdom’s gross domestic product and constitute about 53 percent of the manpower in the labor market.

However, he said that studies indicate that the survival rate among SMEs is 67 percent for the first three years and 94 percent among those who went into franchising.

Talking to Arab News, Almajaal said: “If they have a good or special idea which they believe in, they could compete. But they must go into franchising, which is a practical tool to expand.”

However, he added that the franchisee should know the franchising system and should not embark on business without knowing about it 90-100 percent.

“He should know the core of the franchising business. He should know the problems to be encountered and how to solve these,” he said.
Almajaal said young entrepreneurs may face initial challenges in marketing and accounting but the franchisor provides the system.

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