Franchises: Even big brands have the blues

The franchising business is in a bad way. Industry representatives are warning of a series of closures and bankruptcies, over-indebtedness to suppliers, waves of layoffs, drastic falls in sales in a context marked by rising charges, taxes, exorbitant rents, inflation, and falling purchasing power… In fact, this situation is not new.

It is the accumulation of several difficult years, a gloomy economic situation, plus four years of drought and successive poor agricultural seasons… which have impacted the morale of households and consumers. Among the activities most represented in franchises are fast-food, catering, bakeries/pastries, cafés/ ice-cream shops, ready-to-wear, cosmetics, car maintenance, distribution, and chocolate shops. «Since Covid, most chains have experienced cash flow difficulties, debt rescheduling, credit deferrals… An over-indebted situation that has impacted all players», explains Mohamed El Fane, President of the Moroccan Franchise Federation (FMF).
On the other hand, since 2021 and 2022, most entrepreneurs in the franchise ecosystem have been rolling up their sleeves in the hope of recapturing the growth that would come with economic recovery, added the president of the Franchise Federation.
«As much as 2022 was a rather average year, 2023 will have been extremely difficult for the franchise sector», points out Mohamed El Fane. According to the Moroccan Franchise Federation, inflation has been the crushing blow, rising to 60 or even 70%. What’s more, «with imported inflation, franchise purchases and products have risen by 40 to 60%, but the brands are unable to pass on the extra costs to the end customer, which represents a loss of earnings for the chains», adds the Federation’s President. The inflationary spiral has been compounded by other circumstantial factors, notably the war in Ukraine, the earthquake, the war in Gaza, and other factors. «All these factors combined have weakened purchasing power and impacted business. As a result, entrepreneurs and brand owners are in a state of disarray and uncertainty. Consequently, they are unable to plan ahead for lack of visibility and profitability. Similarly, development projects and network extensions have virtually ground to a halt», explains El Fane, President of the Franchise Association. The fact is, says the FMF president, that Morocco is preparing to host sporting events on a continental and global scale (AFCON 2025, World Cup 2030, and other events). The logical thing to do is to anticipate these events by creating opportunities and an enabling business climate for franchises.
Amin RBOUB