SAN FRANCISCO-Gap Inc. has signed a franchise agreement with retailer Al Tayer Group to open up to 35 Gap and Banana Republic stores in the Middle East by 2010. Gap says the deal will introduce its Gap and Banana Republic brands into five key markets in the region.

The 35 new locations most likely will work out to about 25 Gap stores and about 10 Banana Republic openings by 2010. The first Gap stores are scheduled to open in late 2006 and the first Banana Republic stores in 2007.

Gap sees the Middle East as an appealing market because of its young and affluent population, according to Joshua Schulman, SVP of Gap Inc.’s International Strategic Alliances and Gap Japan Merchandising. He says that Dubai, in particular, is appealing because it has developed into “a world class shopping destination with some of the largest and most important shopping malls in the world.”

The expansion into the Middle East marks Gap Inc.’s second franchise agreement to extend its reach to international markets. In January, the company announced that Gap and Banana Republic stores will open under franchise and distribution agreements in Singapore and Malaysia.

Under its agreement with a Gap Inc. subsidiary, Al Tayer Group and its local subsidiaries will hold exclusive rights to operate Gap and Banana Republic branded apparel and accessories stores in the United Arab Emirates, Kuwait, Qatar, Bahrain, and exclusive rights for Gap in Oman. Gap execs say the company will benefit from Al Tayer Group’s expertise in building retail outlets in the Middle East, while Al Tayer will benefit from access to the Gap and Banana Republic brands.

Gap owns and operates Gap stores in five countries and Banana Republic stores in three countries. Counting the new stores planned for the Middle East and its previously announced franchise and distribution agreements for Singapore and Malaysia, the company will have Gap stores in 12 countries and Banana Republic stores in nine countries by 2010. The Al Tayer Group is headquartered in Dubai and comprises 20 companies in a broad range of merchandise categories.

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