Kazakhstan - FranchisingKazakhstan - Franchising
Overview
The COVID-19 pandemic has hit franchise businesses particularly hard in Kazakhstan due to government-imposed shutdowns, growing unemployment and a dramatic drop in consumer spending among other challenges. Clothing retail brand business closures are expected post-pandemic. Larger U.S. franchises have survived by optimizing their operational models. Food franchises have seen sales stabilize after resumed operations following government-imposed lockdowns.
Fueled by the consumer boom of the late 2000s, the franchising sector has demonstrated steady growth, particularly in the food and retail sectors (McDonald’s, Starbucks, Burger King, Hard Rock Cafe, KFC, Lacoste, Marks & Spencer, Papa John’s, Saks Fifth Avenue). In the past several years, spending patterns in Kazakhstan have begun to resemble those of the Western world, creating a demand for name brands and quality products. Kazakhstani companies have accumulated financial resources that, combined with a lack of available investment instruments, are also stimulating interest in franchising. Kazakhstan can serve as a gateway to the growing economies of the Central Asian countries.
Despite the rapid development of franchising generally in Kazakhstan, several negative factors continue to hinder its growth. They include weak intellectual property protection, limited access to capital and a lack of understanding of franchising as a business model. While the government sees franchising as a promising sector that helps diversify the economy and attracts brands with international quality standards, the government’s ability to promote franchising is limited by its own poor understanding of the sector. Commercial banks are actively promoting financing of franchising projects.
Leading Sub-Sectors
According to local experts, franchising is attractive for businesses engaged in sales of business support services (e.g., business consulting - audit and accounting services, advertising, HR related services and technical consulting), education services (tutoring, foreign language courses), leisure and entertainment, fast food, medical and cosmetic services and retail sales and other personal services (laundry, footwear and clothing repair, delivery services etc.)
Notwithstanding the COVID-19 pandemic, franchise opportunities continue to present opportunity in the following sectors:
Opportunities
The franchising market is expected to recover as the pandemic eases, consumer spending picks up and economic growth accelerates. Expect growing demand for education technology, community-building online platforms and delivery franchises. Franchises specializing in business education and training services will also see strong demand. Post-pandemic, fast food restaurants are expected to continue to be of great demand for U.S. franchise models.
According to the Kazakhstan Franchising Association, health and fitness focused franchises are growing in popularity. On the downward trend are restaurant business and fast food models, according to the Association. Only a limited part of the Kazakh population - mostly young people and the urban upper middle class - is willing and able to dine in food courts and restaurants. Owing to household incomes and a change in consumption patterns, the expansion of the food services segment will be a marathon rather than a sprint.
Kazakhstan has a large young adult population, which makes up approximately a third of its total population in 2019. Furthermore, Kazakhstan has a growing number of households that fall into the middle-income segment with a household disposable income of USD 10,000 and above. Kazakhstan’s share of middle-income households is expected to rise in the coming years, presenting opportunities for expansion of franchise businesses.
Resources
Virtual Trade Show: International Franchise Expo, October 15-30, 2020.
Eurasian Kazakhstan Franchising Association
For more information contact Commercial Specialist Aliya Shaikhina Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.
The COVID-19 pandemic has hit franchise businesses particularly hard in Kazakhstan due to government-imposed shutdowns, growing unemployment and a dramatic drop in consumer spending among other challenges. Clothing retail brand business closures are expected post-pandemic. Larger U.S. franchises have survived by optimizing their operational models. Food franchises have seen sales stabilize after resumed operations following government-imposed lockdowns.
Fueled by the consumer boom of the late 2000s, the franchising sector has demonstrated steady growth, particularly in the food and retail sectors (McDonald’s, Starbucks, Burger King, Hard Rock Cafe, KFC, Lacoste, Marks & Spencer, Papa John’s, Saks Fifth Avenue). In the past several years, spending patterns in Kazakhstan have begun to resemble those of the Western world, creating a demand for name brands and quality products. Kazakhstani companies have accumulated financial resources that, combined with a lack of available investment instruments, are also stimulating interest in franchising. Kazakhstan can serve as a gateway to the growing economies of the Central Asian countries.
Despite the rapid development of franchising generally in Kazakhstan, several negative factors continue to hinder its growth. They include weak intellectual property protection, limited access to capital and a lack of understanding of franchising as a business model. While the government sees franchising as a promising sector that helps diversify the economy and attracts brands with international quality standards, the government’s ability to promote franchising is limited by its own poor understanding of the sector. Commercial banks are actively promoting financing of franchising projects.
Leading Sub-Sectors
According to local experts, franchising is attractive for businesses engaged in sales of business support services (e.g., business consulting - audit and accounting services, advertising, HR related services and technical consulting), education services (tutoring, foreign language courses), leisure and entertainment, fast food, medical and cosmetic services and retail sales and other personal services (laundry, footwear and clothing repair, delivery services etc.)
Notwithstanding the COVID-19 pandemic, franchise opportunities continue to present opportunity in the following sectors:
- Fast-food and casual dining;
- Retail sales (clothing, footwear, furniture, sporting goods, supermarkets, gasoline stations);
- Auto repair and maintenance services, gasoline stations;
- Hotel chains for low- and medium-income travelers;
- Printing and copying services, photo-shops, etc.;
- Body/health care services (beauty salons, gyms, etc.)
Opportunities
The franchising market is expected to recover as the pandemic eases, consumer spending picks up and economic growth accelerates. Expect growing demand for education technology, community-building online platforms and delivery franchises. Franchises specializing in business education and training services will also see strong demand. Post-pandemic, fast food restaurants are expected to continue to be of great demand for U.S. franchise models.
According to the Kazakhstan Franchising Association, health and fitness focused franchises are growing in popularity. On the downward trend are restaurant business and fast food models, according to the Association. Only a limited part of the Kazakh population - mostly young people and the urban upper middle class - is willing and able to dine in food courts and restaurants. Owing to household incomes and a change in consumption patterns, the expansion of the food services segment will be a marathon rather than a sprint.
Kazakhstan has a large young adult population, which makes up approximately a third of its total population in 2019. Furthermore, Kazakhstan has a growing number of households that fall into the middle-income segment with a household disposable income of USD 10,000 and above. Kazakhstan’s share of middle-income households is expected to rise in the coming years, presenting opportunities for expansion of franchise businesses.
Resources
Virtual Trade Show: International Franchise Expo, October 15-30, 2020.
Eurasian Kazakhstan Franchising Association
For more information contact Commercial Specialist Aliya Shaikhina Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.