Manchising happily ever after

In the hospitality arena, conflicts have always revolved around the same main players: the owner/investor, the brand owner and the operator. Ralph Nader, CEO of Amber Consulting, gets down to the nitty-gritty of manchise agreements.

Owners wanting to have more control and safeguard their investments are usually faced with two options: to hire the “brand” that operates the asset or engage with a third-party operator through a franchise agreement. However, in order to avoid franchise fees, investors are often enticed by the idea of having a well-established and famous brand managing their assets. On another note, brand operators typically look for long-term contracts of at least 10 to 15 years, thus limiting instability in their brand distribution and avoiding relocation challenges as well as trying to find new positions for key employees, among other things.

A revolution

Luckily, over the past few years, some hospitality brands have announced a shift toward manchise agreements, which some analysts have described as “the great manchise revolution.”

In simple terms, “manchising” is the harmonious combination of the features and benefits of the franchise model with the advantages of a specialist. This unique business model is well designed for investors looking for more flexibility and stability, and for operators seeking growth and expansion of their brands in different markets. By combining a franchise agreement with the option of a management contract upheld by an experienced operator, the win-win situation becomes more secure.

All gain, no pain

One of the obvious benefits of the manchise model is that it gives new entrants the opportunity to learn the business without risking their investment while aiding the brand owner to have access to the appropriate infrastructure in the market. Therefore, manchising offers an attractive growth opportunity with several key advantages for all parties. “Let the experts do the job, even if it costs you more” is the motto many investors believe in when entering a manchise agreement. A manchise generates a stable profit stream, offering investors a guaranteed return and security for the management of their assets. Also, when it comes to human capital and training, owners do not have to worry since the operator hires team members who are knowledgeable in their areas.

As for the operator, direct management enables them to establish strict operating controls and set standards and systems that accelerate stability and maturity of the operation. In addition, this type of agreement accelerates a brand’s expansion and ensures it has access to different markets. Nevertheless, when acquiring a well-established brand, immediate consumer recognition is a valuable marketing plus.

In the Middle East

Experts have revealed that the manchise agreement could be the next big thing in the Middle East. It has started to pick up in the UAE, where OYO Hotels & Homes — one of China’s top five and the world’s fastest-growing chain of leased and franchised hotels, homes and living spaces — is aiming to grow its market share through its manchise business model. “Since our recent launch, we have been inundated with requests from several hotel owners in the UAE to migrate onto OYO’S manchise business model,” said Manu Midha, regional head for the Middle East at OYO Hotels & Homes.

Baker & Spice will also operate the entire F&B offering of a boutique hotel in Jeddah and one property in Dubai under manchise agreements. In an interview, a Baker & Spice director referred to the firm’s new business model as not just about handing over work but also the sustainability of the brand ethos. “We want to make sure that everything is up to quality, that our partners strategically understand that no matter what, we don’t compromise on ingredients, and we don’t compromise on people. If these two things are understood, we are excited to do excellent work with people.”

A mission to Egypt

Egypt has become a hub for manchises, with more than 30 new F&B brands establishing roots there. The Lebanese were pioneers in exposing the Egyptian market to their brands and expertise. Through a manchise agreement, BBQ BROS fired up some of its hottest events and expanded to six outlets. Al Mandaloun group, a large Lebanese F&B group, is also taking advantage of manchise benefits and penetrating the Egyptian market. Furthermore, B-babel and Babel is another well-known brand that is now present in the country. Others include Ginger&co, MYU, Falamnki, Mariolino, Ni Café, Grecco and Double Shake.

Manchising is the harmonious combination of the features and benefits of the franchise model with the advantages of a specialist.

In conclusion, manchising has been labeled the “happily ever after” in the hospitality world because it offers flexible solutions as an alternative to traditional long-term management agreements and creates a more efficient relationship between owners and operators.