VZCZCXYZ0000
PP RUEHWEB

DE RUEHTU #0907/01 3491534
ZNR UUUUU ZZH
P 151534Z DEC 09
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 7070
INFO RUCNMGH/MAGHREB COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS TUNIS 000907 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EEB/IFD/OMA, EEB/EPPD, AND NEA/MAG 
STATE PASS USTR (BURKHEAD) AND USAID (MCCLOUD) 
USDOC FOR ITA/MAC/ONE (MASON), ADVOCACY CTR (TABINE), AND 
CLDP (TEJTEL AND MCMANUS) 
USDOC PASS USPTO (ADAMS, BROWN, AND MARSHALL) 
CASABLANCA FOR FCS (KITSON) 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ETRD FAO TS
SUBJECT: PROGRESS ON TUNISIA'S OPENING TO FOREIGN FRANCHISES 
 
REF: TUNIS 608 
 
This message is sensitive but unclassified. Please handle 
accordingly. 
 
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Summary 
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¶1. (SBU) According to the Ministry of Commerce, the 
Government of Tunisia (GOT) plans to issue the implementation 
decree for an August 2009 law governing franchises in 
February 2010 -- a decree that will allow international 
franchises to operate under Tunisian law.  In addition, a 
Central Bank representative who spoke at the GOT-organized 
Tunis Med Franchise Show said royalty repatriation would be 
permitted for any franchise receiving Ministry of Commerce 
approval to operate.  The Ministry of Commerce, in essence, 
will treat an international franchise just like any other 
foreign direct investment for the onshore sector. 
 
¶2. (SBU) Coinciding with the first-ever show on Franchising 
in Tunisia, held December 10-12, the Embassy hosted the visit 
of international franchising expert Bachir Mihoubi.  He led 
two workshops at the Franchise Show, met with the Ministry of 
Commerce team drafting new franchise regulations, spoke at a 
Tunisian-American Chamber of Commerce luncheon, did press 
interviews, and met with lenders and members of 
entrepreneurship organizations.  Based on information gleaned 
during Mihoubi's visit, we believe the future for 
international franchises in Tunisia is looking brighter.  End 
summary. 
 
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United States at Center of Franchising Discussion 
--------------------------------------------- ---- 
 
¶3. (SBU) On December 8-12, the Embassy hosted the visit of 
American franchising expert Bachir Mihoubi, whose travel was 
funded by the Commercial Law Development Program (Department 
of Commerce).  Mihoubi led two workshops at the GOT-organized 
Tunis-Med Franchise Show, the first-ever franchising show in 
Tunisia (reftel).  In addition, the Ambassador attended the 
opening of the show and was asked to step up on stage with 
the Secretary of State for the Ministry of Commerce and the 
head of UTICA, the powerful Tunisian employers' association. 
During his visit, Mihoubi also offered advice to the team at 
the Ministry of Commerce responsible for drafting the 
implementation decree of the new law governing franchises, 
spoke at a luncheon with the Tunisian-American Chamber of 
Commerce (TACC), and met with entrepreneurship organizations 
and a representative from the GOT-affiliated Bank for Small 
and Medium Enterprises.  With the exception of the small 
entrepreneurs' lunch, all events were actively covered by the 
local media and garnered positive coverage of the franchising 
issue. 
 
--------------------------------------------- --------- 
GOT Pushing Franchises, Private Sector Has Some Doubts 
--------------------------------------------- --------- 
 
¶4. (SBU) The GOT has said it wants to promote franchising as 
a development tool.  A letter by President Ben Ali, read at 
the show's inauguration, reiterated this GOT policy, although 
it did not specify whether international (and not just 
Tunisian) franchises were included.  The Secretary of State 
for Foreign Trade in the Ministry of Commerce Chokri Mamojhli 
said during opening remarks that it was important to keep 
Tunisia's interests in mind above all.  Noting the U.S. 
Ambassador's presence, Mamojhli also called for the signing 
of a U.S.-Tunisia free trade agreement.  In his speech, Hedi 
Djelani, the head of UTICA (employers' association) called 
for the "internationalization" of the Tunisian economy 
through franchises.  Privately, he also told EconOff that our 
"Gulf friends" (who are investing hundreds of millions in 
real estate projects in Tunisia) wanted American franchises 
here in Tunisia. 
 
¶5. (SBU) The 2009 Tunis-Med Franchise Show, the first of its 
kind in Tunisia, was very well attended.  It featured over 45 
booths, with 70 percent Tunisian franchisors and 30 percent 
foreign franchisors, including a U.S. company, Curves 
International, which licenses health clubs.  Also in 
attendance (but without a booth) were the owners of the 
 
master franchise for Century 21 (for Algeria, Tunisia and 
Libya), who have already submitted their documents to the MOC 
for approval to operate and are awaiting an answer.  The 
show's organizer, the GOT-affiliated Tunis Chamber of 
Commerce and Industry, invited Embassy representatives and 
Mihoubi to a dinner the first night of the show, which 
allowed EconOff to canvas some participants on their 
expectations for the new law.  The general trend was 
optimism, but many franchisors (and Tunisian potential 
franchisees present) were unclear on whether the 
implementation decree would restrict the operation of a 
franchise only to Tunisian companies, and whether royalty 
repatriation would be an issue. 
 
¶6. (SBU) Some Tunisian businessmen present said they already 
operated franchises "under the radar" by signing both a 
distribution contract (which allows them to repatriate 
profits) and a franchising contract with a foreign company. 
To pay royalties, they then take the money from the profits 
and only register the distribution contract with the Ministry 
of Commerce.  We also learned that one U.S. franchise, Dale 
Carnegie International, is already operating in Tunisia, 
though we were unable to learn the details of their royalty 
repatriation structure. 
 
--------------------------------------------- ----------------- 
Details on Implementation and a Key Clarification on Royalties 
--------------------------------------------- ----------------- 
 
¶7. (SBU) On December 12, Emboff and Mihoubi met with the team 
in the Ministry of Commerce responsible for drafting the 
implementation decree, a document the private sector is 
looking to clarify Tunisia's opening to franchises.  Thanks 
to Mihoubi's legal background, the nearly two-hour meeting 
turned into a question-and-answer session about worldwide 
franchising regulation.  The MOC officials admitted they were 
nervous about the "unequal" relationship between franchisor 
and franchisee and foreign brands "invading" Tunisia, 
although they asked about other countries' incentives to 
attract investment by foreign franchisors.  The MOC is basing 
the implementation decree on European legislation, and is 
thinking of using Saudi model franchising contracts.  Mihoubi 
cautioned them against over-regulating, especially in such a 
small market as Tunisia, as it would turn investors away. 
The Ministry team asked to follow up with Mihoubi for comment 
on the actual decree language, which is due out in February 
¶2010.  They also specified that the law would be applicable 
for both international and national franchises. 
 
¶8. (SBU) A Central Bank representative who spoke at the Show 
said royalty repatriation would be permitted for any 
franchise approved by the Ministry of Commerce.  In practice, 
this means that any international franchise will have to go 
through the same steps as any other foreign investment in 
Tunisia (except for export-only companies) -- registration 
through the Ministry of Commerce and other GOT agencies.  If 
the investment is approved, according to the Central Bank, 
authorization for royalty repatriation will just be a 
formality. 
 
--------------------------------------------- --- 
Engagement with Entrepreneurs and Banking Sector 
--------------------------------------------- --- 
 
¶9. (SBU) As part of the Cairo Initiative, the Embassy 
organized a small lunch between Mr. Mihoubi, a representative 
of the Center for Young Entrepreneurs (CJD), a member of the 
National Chamber of Women Entrepreneurs (CNFCE) and the Bank 
for Small and Medium-Enterprises (BFMPE).  The discussion 
centered on the basics of franchising.  The BFMPE 
representative noted they had already made the decision to 
direct some lending to franchises, since financing them is 
less risky than regular start-ups.  The CJD is planning a 
workshop event on franchises in the near future, and asked 
for Embassy assistance in providing materials.  The CNFCE 
representative, herself a business owner, was interested in 
franchising her chain of rug shops.  All remained hopeful the 
decree would clarify whether international franchises were 
allowed and if royalty repatriation would be permitted. 
 
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Comment 
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¶10. (SBU) Mihoubi's ability to connect with the Tunisian 
audience helped drive home the U.S. message that bringing 
international franchises to Tunisia will create jobs, 
stimulate technology transfer, and help cement a culture of 
franchising in which eventually Tunisian companies could 
themselves become franchisors.  The warm reception by both 
the Ministry of Commerce and the Tunis Chamber of Commerce 
and Industry contrasts heavily with the radio silence the 
Embassy has often received from other parts of the Tunisian 
government in broaching the subject.  It was apparent there 
is lack of detailed knowledge about franchising legislation 
within the Ministry of Commerce, although we provided them 
with model legislation text and food for thought on the 
issue.  The information we gleaned on the implementation 
decree and the royalty issue bodes well for international 
franchises seeking to operate in Tunisia.  Although 
international franchises will still have to be approved by 
the Ministry of Commerce, the future is looking much 
brighter.  When the implementation decree comes in February, 
we will have a clearer picture of the details.  End comment. 
GRAY