Two years of double-digit declines in tourism and persistently weaker domestic demand are pushing operators of several international food and beverage franchises to downsize their operations and reconsider store portfolios in Lebanon. “Everybody is facing a very difficult time, and there are multiple problems including worsening security and political situation in the country, plummeting tourism and soaring energy and labor costs,” Charles Arbid, head of the Lebanese Franchise Association, told The Daily Star Tuesday.

“Many chains are [barely] making profits,” he added. “The industry is down by at least 20 to 25 percent.”

The Beirut office of Kuwaiti-owned food company Americana Group denied reports by several blogs and other social media outlets that it was suspending several international franchises in Lebanon.

The reports said Americana would shutter Costa, Krispy Kreme, TGI Friday’s and Signor Sassi.

“Americana is not exiting the Lebanese market but, given the situation, they are downsizing some brands. … Some shops are being closed and others are relocating from one area to another,” Arbid said. “Other brands are in fact still expanding.”

Arbid said energy bills were emerging as a main contributor to costs, particularly given that many food chains need to run generators at all times during power cuts — which have been increasing over the past months even in central Beirut.

Rent costs also remain extremely high in spite of a sluggish real estate market, Arbid said.

Last month, the LFA sounded the alarm over slowing business activity due to the security situation, calling on leading malls to reconsider rental fees for struggling franchise holders.

Arbid said that coffee shops in malls and other indoor areas had seen their business decline by up to 40 percent since Parliament enacted a smoking ban last year.

Earlier this month, the World Economic Forum’s Global Competitiveness Index [PDF] showed the competitiveness of the Lebanese economy had decreased rapidly over the past year.

The country retreated to 103rd in the ranking, 12 positions down from 2012. Regionally, only Libya, Egypt and Yemen were behind Lebanon.

In the “basic requirements” subindex, Lebanon’s performance lagged compared to last year, retreating to 126th from 116th.

Challenges to the institutional environment are also mounting for business with the subindex showing a decline from 125th last year to 138th this year.

The macroeconomic environment subindex did not perform any better and the country declined to 148th from 135th a year earlier.

Lebanon only improved its ranking in the area of of health and primary education, moving up to 28th up from 32nd a year earlier.

“We have all become victims of the political situation,” Arbid said.

Photo Credit: People gather near the site of an explosion in Beirut's southern suburbs. Issam Kobeisi / Reuters