Our client, a several-year old SME, had perfected petrol station operations and management in the Kingdom of Saudi Arabia, a generally difficult market due to the low fuel margins affixed by regulations. As a result of its performance, our client was being approached by other gas station owners for assistance. As an SME, our client desired the growth and value it can generate from it, but did not have the capital to acquire and feared diluting its brand and did not see sustained benefits from entering into short term consultancy or service arrangements.
SME Law and Hammad & Al-Mehdar in consultation with company management built a franchise system for the client through which it licenses its name and brand to gas station owners Kingdom-wide, while maintaining strong controls over, layout, quality, and management. Franchise arrangements are long-term in nature, extending 10 to 15 years. They also provide for very detailed oversight, information, and control rights, allowing the franchisor to maintain its brand image and product quality. Though they are commonly seen in the food and beverage business, the same methodologies were deployed for petrol stations.
- The client secured long-term revenue growth.
- The client grew its brand and network, bolstering its presence in the market, without the significant capital outlays associated with acquisitions.
- The client maintained strong controls and supervision over its franchisees, ensuring that its brand image and quality remain intact.