The economic and financial crisis in Lebanon continues to challenge businesses in all sorts of ways. Major retailers and franchise operators are among affected businesses, as several companies decided to shut down all its branches and exit the market, while others decided to reduce their presence in the face of their inability to handle a deepening economic crisis.
Beirut, which has always been an appealing hub for international brands and restaurant chains, is witnessing an unprecedented collapse. Dareen International, a subsidiary of the Kuwait-based AlShaya Group, closed more than seven brands in Lebanon, such as Pink Berry, Mothercare, American Eagle, and others, and reduced the number of branches for H&M. Mike Sport also reduced the number of branches Recently, many companies such as Louis Vuitton, Golden Goose have shut down. Americana also closed all Pizza Hut branches keeping KFC.
Yehya Kassaa, Head of the Lebanese Franchise Association (LFA), told Sawt Beirut International (SBI): “It is unfortunate that international brands in different sectors are suffering from recession, but what is worse, the confusion and uncertainty it is witnessing due to the blurry future and the absence of any vision.”
He said that Lebanese investors are resilient and keep on fighting for the last breath in order to continue in their country, but what will force foreign companies to stay amid these tragic economic conditions. That’s why local companies such as Miknas Food, the franchisee of McDonald’s, and Azadea, the franchisee of Zara, Bershka, stradivarius and others, are putting efforts to keep steadfast. “They are trying to reduce their profit margin and adapt with the prevailing conditions to survive and sustain in the market,” Kasaa said.
Franchise operators are incurring high costs along with their operational costs, because they are required to pay the franchise fees, and royalty fees to franchisors in fresh dollars. According to Kasaa, this is adding more burdens on franchisees, amid devaluation, decline in purchasing power, and the coronavirus pandemic, which was the final straw for the retailers that were barely surviving.
Glimmer of hope
In the midst of this miserable situation, there is a glimmer of hope, as some franchisors in the restaurant sector have succeeded in expanding abroad, mainly to Egypt, UAE, Saudi Arabia and others. “Franchisors, specifically in the food and beverage sector, have succeeded in creating new concepts that attractive for foreign investors. They have signed franchise deals recently, although with lower prices and fees than those paid previously,” Kasaa said. He added that these deals were the oxygen that ensured the survival and continuity of Lebanese brands.”
Based on this reality, more investors are looking to create attractive brands in order to promote it abroad. Some investors are launching their concepts in Lebanon to test whether it would succeed, to expand abroad, such as Patchi Caffe, which opened in ABC Mall, and after succeeding it expanded to Bahrain and Saudi Arabia. Kasaa added that locally manufactured clothing brands have become more competitive compared to international brands due to the drop in the value of operational costs as a result of devaluation. “There is huge potential for the local industry to compete with international brands in terms of quality and price,” he said.
Investments require prosperity
The uncertainty prevailing in the country eliminates any glimmer of hope, as it is difficult at this stage to attract new brands because investors are not ready to invest amid difficulties in returning investments. He hoped that no more losses will be recorded. “Hopefully, foreign companies’ decisions will be limited to shutting down some branches without exiting the market, because bringing them back will be more difficult and requires at least four years of prosperity.”