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Expanding into Israel: what you need to know

Expanding into Israel: what you need to know

If you have not considered expanding your brand into Israel, now is the time to do so.

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Here in Israel, we are quickly returning to normal. At the time of me writing this article, 87 per cent of Israelis have been vaccinated, leading the world towards becoming the first country to get ‘back to business’.

So now that our major lockdowns are behind us in Israel, we are getting back to work. One million Israelis are now looking for ways to create new channels of income and franchising will no doubt play a major role in what I believe will be part of our next upcoming financial boom period. I have already seen a substantial increase of franchise enquiries through our Israel Franchise Institute portal, where I list over 30 franchise opportunities, 12 of which are international brands.

The Israeli economy

Since I believe it’s safe to skip the statistics of the 2020 ‘COVID year’, here are some statistics of Israel’s economy as of the end of 2019:

• Our GDP was $387.717bn, with an annual growth rate of 3.5 per cent

• Our GDP per capita was $43,641, ranked 21st in the world, and in 2020 we ranked 19th (despite COVID)

According to Wikipedia: “The economy of Israel is a highly advanced free-market and knowledge-based economy, ranked 19th on the latest UN’s Human Development Index, placing Israel in the category of “Very Highly Developed”, allowing the country to enjoy a higher standard of living than many western countries. Israel is also a major tourist destination, with 4.55 million foreign tourists visiting it in 2019.”

Some of you may already be familiar with the bestselling book Start-Up Nation, which describes the economy of Israel, explaining how Israel is now almost on par with the Silicon Valley of California, and how Israel has reached an economic growth which now has 80 Israeli companies listed on the NASDAQ, making us the country with the most companies listed on NASDAQ outside the U.S.A. (after China).

Franchising in Israel

Like in most western countries, franchising pays a major role in the Israeli economy. There are currently around 300 franchise brands in Israel, of which the vast majority are local. During the past 20 years, many franchises have evolved with most of them being in the coffee shop and fast-food sector.

“One million Israelis are now looking for ways to create new channels of income”

A surprisingly large number of our local brands have close to 100 franchised stores, which for a small population shows the potential of what brands can achieve in Israel. In the non-food categories, we have fashion, real estate, wellness, supermarkets, pet foods and not surprisingly, a lot of educational brands as well.

High tech (IT) franchises

A whole new ball game in franchising. The IT space is not in the typical retail arena of franchising, but with IFI being the start-up nation’s franchise authority, my company has recently been tasked with creating master franchise business formulas, centralizing the IP of such IT brands for global expansion. We are currently testing such a format – specifically with an Israeli virtual reality educational franchise abroad, making us pioneers in this space.

International brands in Israel

Surprisingly, there are only a handful of international brands in Israel, and here is where the opportunity is. Our market is wide open to welcoming many more international franchised brands. Israelis travel a lot – I get asked all the time why there are not more international brands available to the Israel population.

Franchise law and regulation in Israel

Insofar as legal requirements for franchising in Israel, there is no franchise law per se, and franchisors are not required to exhibit an FDD. The legal relationship between the franchisor and franchisee is bound by a commercial legal agreement between the parties, which are subject to general applicable commercial laws in Israel. The only specific regulation of franchise agreements in Israel may include certain antitrust rules, which define certain requirements in order for a franchise agreement not to be deemed as a “restrictive arrangement”, which may be subject to the approval of the Israeli Competition Authority.

“There is no franchise law per se, and franchisors are not required to exhibit an FDD”

As for the future, I am personally involved in forwarding regulation within my role as the chairman of the Committee for Franchise Regulation for LAHAV, the largest association in Israel of independent small- to medium-sized businesses.

Abraham Accords and Recent Peace Treaties

The recent peace treaties with the United Arab Emirates, Bahrain, Morocco, and Sudan have opened many doors for international brands to enter Israel. It’s no secret that many international brands were reluctant to expand into Israel due to international public opinion, but since the signing of these accords, I have been inundated with international brands showing interest in entering Israel. The long-awaited Peace Treaty with the U.A.E. has been especially warm, which has already led to a strategic partnership between my company and my counterpart in Dubai, which has already resulted in a number of deals.

IFI – The Israel Franchise Institute

Founded by myself in 2011, my organization takes pride in upholding and proactively forwarding franchise ethics and international standards. We see ourselves as the gateway to franchising in Israel, so anyone reading this article, is more than welcome to reach out to me personally (steven@ifi.co.il) to learn more about how we can help you bring your brand to our dynamic, ‘never a dull moment’ country of opportunity. Working with IFI offers you the highest level of exposure possible in Israel, as well as a dedicated team of franchise professionals who can help localize your brand as needed.

THE AUTHOR

Steven Wolfson is the founder of the Israel Franchise Institute (IFI); the chairman of the committee for franchise regulation for LAHAV; and a certified arbitrator and mediator (University of Bar Ilan) for the Israeli Center of Mediation and Arbitration.

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