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Saudi youth urged to consider franchising as a serious option. RIYADH: 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. ANSWER THE FOLLOWING QUESTIONS: Discuss the pros and cons and challenges of franchising by young entrepreneurs in KSA?

Answer :

The individual circumstances and goals before deciding to pursue franchising.

Franchising can be a beneficial option for young entrepreneurs in Saudi Arabia. Here are the pros, cons, and challenges associated with franchising:

Pros of franchising:
1. Established brand: By becoming a franchisee, young entrepreneurs can benefit from the recognition and reputation of an established brand. This can attract customers and provide a head start in the market.
2. Support and training: Franchisors often provide comprehensive support and training programs to help franchisees understand and operate their business effectively.
3. Operational systems: Franchise systems come with established operational procedures and systems, making it easier for entrepreneurs to start and run their business.
4. Marketing and advertising: Franchisors usually handle national or regional marketing campaigns, which can help attract customers and increase brand visibility.
5. Reduced risk: Compared to starting a business from scratch, franchising offers a lower risk since the business model has already been proven successful.

Cons of franchising:
1. Limited control: Franchisees must adhere to the franchisor's guidelines and standards, limiting their freedom to make independent business decisions.
2. High initial investment: Franchising often requires a significant upfront investment, including franchise fees, equipment, and inventory costs.
3. Royalty fees and profit sharing: Franchisees are typically required to pay ongoing royalty fees or share a portion of their profits with the franchisor.
4. Restricted territory: Franchisors often grant exclusive territories to franchisees, limiting their potential for expansion.
5. Dependence on franchisor: The success of the franchisee's business is dependent on the overall success and reputation of the franchisor.

Challenges of franchising for young entrepreneurs in Saudi Arabia:
1. Finding the right franchise: Young entrepreneurs need to thoroughly research and choose a franchise that aligns with their interests, skills, and market demand.
2. Financial considerations: Acquiring the necessary funds to invest in a franchise can be challenging for young entrepreneurs, especially if they lack a strong financial background or access to capital.
3. Understanding the franchise agreement: Young entrepreneurs must carefully review and understand the terms and conditions of the franchise agreement, including the obligations and restrictions imposed by the franchisor.
4. Managing operational complexities: Operating a franchise requires managing various aspects, such as hiring and training employees, maintaining inventory, and providing quality customer service.
5. Building a customer base: Young entrepreneurs may face the challenge of establishing a customer base and competing with other local businesses in their market.

The young entrepreneurs to conduct thorough research, seek professional advice, and consider their individual circumstances and goals before deciding to pursue franchising.

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