State Bank Makes It Easier for Global Food Chains to Enter Pakistan

The State Bank of Pakistan (SBP) has revised the franchise fee structure for local investors to set up and operate foreign food chain outlets in order to promote ease of doing business as per market dynamics. This should help global food chains to enter Pakistan more easily than before. The owners of local outlets will be allowed to remit an amount of up to $250,000 as an initial payment to foreign food chain outlets, which had a previous limit of $100,000 in the country. Further, these local outlets could also remit recurring payments of up to 8 percent of their net local sales (after deducting sales taxes and the cost of imported items) to their foreign collaborators (brands) once the operations commence under their respective RFT (Royalty, Franchise and Technical Service) agreements for 10 years. Previously, these outlets were allowed to remit recurring payments of up to 5 percent of their net local sales for the same period. Over the past few years, a number of new outlets have been opened in the food-loving country by established and new foreign food chains, employing nearly 1 million workers along with local restaurants and hotels. The revised regulations from the banking regulator will attract foreign food brands to set up their operations in Pakistan in the coming years. According to the circular issued by the banking regulator, a similar revision has also been made to the franchise payment structure for entities operating in agriculture, social, infrastructure, and service sector projects, including international food chains. Entities belonging to the above sectors may be allowed by authorised dealers to remit recurring payments of up to 8 percent of their net local sales (after deducting sales taxes and the cost of imported items) under their respective agreements for the remittance of RFT fees.