We often read about the large-scale reforms being implemented in Uzbekistan aimed at supporting entrepreneurship, creating new jobs, and accelerating economic growth. However, one of the key instruments that has proven effective in the global economy for stimulating economic development — the franchising system — has not yet been fully developed in our country.
In fact, franchising is a powerful mechanism that can accelerate economic growth, strengthen small and medium-sized businesses, and create thousands of new jobs.
What is Franchising?
Franchising is a specific form of business cooperation in which one party obtains the right to conduct business using another party’s brand, business model, technologies, and service standards. In return, a specified fee is paid.
In other words, an entrepreneur does not start a business from scratch, but instead operates based on a business model that has already been established and tested.
One of the most important advantages of franchising is that it significantly reduces entrepreneurial risk. According to global experience, 80–95 percent of newly established businesses close within the first 1.5 to 3 years. In contrast, for businesses opened under a franchise model, this figure ranges between 15–40 percent. In other words, starting a business through franchising can reduce risk by up to ten times.
How does franchising benefit the economy?
Franchising generates strong positive effects not only for individual entrepreneurs but for the economy as a whole.
Firstly, it contributes to gross domestic product (GDP) growth. Currently, the share of franchising in Uzbekistan’s GDP is only around 0.1–0.4%, which is very low.
For comparison:
- In Turkey — 4.2%
- In the USA — 4%
- In Germany — 2.2%
- In Russia — 1.6%
If Uzbekistan approaches the levels of these countries, the franchising market could grow 4–16 times, generating billions of dollars in additional economic value.
Secondly, franchising creates hundreds of thousands of new jobs. Currently, approximately 10.000 businesses in Uzbekistan operate under a franchise model. However, the market potential is much larger — it could expand to 70.000–100.000 businesses. This expansion could generate between 350.000 and 1.5 million new jobs. Importantly, these jobs would not only be concentrated in the capital but also across regions and remote districts, contributing to more balanced economic development.
Thirdly, small businesses can achieve sustainable growth. Businesses launched under a franchise model have a survival probability 10–12 times higher than ordinary startups. This is crucial for the state as well: bank loans are used more efficiently, bankruptcies decrease, and tax revenues become more stable.
For the government, the most important benefit is an increase in tax revenues. The development of franchising can generate significant additional income for the state budget. Estimates show that within five years, a growing franchising market could bring billions of dollars in extra tax revenues. Another key advantage is the transfer of advanced technology and management expertise. Franchising introduces foreign best practices, service standards, and management experience into the country, which quickly spreads among local entrepreneurs.
Why has franchising not yet developed in uzbekistan?
Despite its large potential, several factors currently limit the development of franchising in Uzbekistan. First, there is a shortage of local franchises.
According to recent data, Uzbekistan has 381 franchising brands, but more than 80% of them are foreign. Local companies have not yet tried to scale their business through franchises. Additionally, public awareness is low. Many entrepreneurs do not fully understand what a franchise is or how to choose one effectively.
Another significant factor is the absence of a specific law regulating the franchising system in Uzbekistan. This increases risks for investors and entrepreneurs, ultimately affecting their decision to open franchises in the country. By comparison, neighboring Kazakhstan has established clear legal frameworks for franchising.
When discussing the development of the sector, state support plays a crucial role in countries like Uzbekistan. However, in the field of franchising, mechanisms for government support are currently insufficient. For example, there are hardly any special loans, grants, or subsidies available for opening businesses under a franchise model.
How have other countries addressed this issue?
Many countries actively support franchising as a tool for economic development.
As mentioned earlier, neighboring Kazakhstan has adopted a specific law on franchising. In the United States, franchising is regulated at the federal level. The Russian government provides grants and loans to entrepreneurs opening businesses under a franchise model. In Belarus, there are also franchising literacy programs, including educational courses and industry forums.
What needs to be done to develop franchising in Uzbekistan?
Experts recommend several key steps to advance franchising in the country. First and foremost, a dedicated law on franchising should be adopted. Such a law would clearly define the rights and responsibilities of franchisors and franchisees, ensuring a transparent and secure market. The second important measure is providing financial support for businesses opening under a franchise model, such as concessional loans, grants, or subsidies. The next step is the development of national franchises. Uzbekistan has many successful companies operating in restaurants, service sectors, education, retail, and other industries. These businesses could expand further through franchising.
Of course, in addition to the above, there is also the issue of increasing public awareness and literacy about franchising. This can be achieved through various franchising forums and seminars, as well as programs and exhibitions. Such initiatives provide entrepreneurs with the opportunity to see and learn from ready-made business models.
Franchising represents a significant opportunity for Uzbekistan’s economy. If this system is properly developed, it could become a new driver for the country’s economic growth. This means billions of dollars in economic expansion, hundreds of thousands of new jobs, strong and sustainable small businesses, and national brands capable of entering international markets.
Franchising is not merely a business format. It is a way to develop entrepreneurial culture, diversify the economy, and create new opportunities. If this system is organized correctly, hundreds of national franchise brands could emerge in Uzbekistan in the coming years. This, in turn, would contribute to taking the country’s economy to a new level.
Diana Kurbanova
Vice President of Uzbekistan Franchise Association
International franchise expert
Farangiz Ismailova
Junior Research Fellow at the Uzbekistan Franchise Association
