Franchising in inadequately protected markets : inhibiting factors in entrepreneurial market entry.

Abstract

As a result of the growing trend in globalisation, Western fast food entrepreneurs are seeking opportunities to expand their operations in the Kingdom of Saudi Arabia. Saudi Arabia, as a developing country, has limited protection of intellectual property, and has limited franchise regulations. Yet, Saudi Arabia is attracting huge foreign direct investments, and fast food franchising is an exponentially growing sector. This study explores the prospects of expanding or starting a fast food business in Saudi Arabia after joining the World Trade Organization. It also explores the barriers, risks and disincentives related to operational quality as well as intellectual property protection. Finally, it explores possible entrepreneurial modes of entry in a similar emerging market.

The study concludes that the fast food market in Saudi Arabia is very lucrative as compared to other markets in the region. Several legal and operational barriers are identified. However, neither is reported as insurmountable or negatively affecting entrepreneurial fast food expansion. The preferred mode of entry varies with different entrepreneurs. A well-established entrepreneurial fast food business, with critical firmspecific-advantages may well adopt a mode of wholly-owned subsidiaries locally, and a joint venture mode overseas.