Growth of franchising hinges on Visayas and Mindanao

FOREIGN franchise brands are eager to set up businesses in the Philippines to take part of the country’s impressive economic growth and take advantage of its expanding consumer sector, officers of a franchising organization noted.

Based on the figures of last year’s expo of the Philippine Franchise Association (PFA), some 45 foreign brands were keen on entering the Philippine market and were seriously looking for potential partners in the country.

PFA president Alan Escalona, in an interview yesterday, said the industry is expecting tougher competition this year, as more international brands eye the Philippines as their next business destination.

He said many foreign brands and concepts are looking for local partners or master franchisees.

“Every year from Japan, Korea, Taiwan, US, Canada, Europe, they talk to us, always wanting to have local partners,” said Escalona.

Foreign brands

The latest is the entry of Smashburger in the country through Jollibee, whose wholly-owned subsidiary Bee Good! Inc. completed the purchase of 40 percent stake of SJBF LLC, the parent company of firms comprising Smashbuger from Smashburger Master LLC (Master).

Smashburger is an upscale burger chain headquartered in Denver, Colorado. It has about 339 restaurants (184 company-owned and 155 franchised) worldwide in 35 US states and seven foreign markets.

Another new entrant is Panda Express, a fast casual restaurant chain that serves American Chinese cuisine that has about 100 branches in the US.

“We expect more foreign brands to enter the Philippines this year,” said Escalona. The association is targeting 60 foreign brands to participate in this year’s national franchise expo.

Escalona was in Cebu yesterday for the PFA’s general membership meeting.

From April 8 to 10 this year, PFA will be holding Franchise Visayas 2016, featuring a franchise summit, franchise seminars and a franchise expo at the Activity Center of Ayala Center Cebu.

VisMin market

Kenneth Lim, PFA director for Visayas, said part of the PFA’s direction is to establish its foothold in the Visayas-Mindanao area, following the accelerated developments in retail, tourism, and information technology-business process outsourcing (IT-BPO) sectors in the region.

“We would like to make Visayas-Mindanao as part of our growth factor,” said Lim, who owns the homegrown brand Dessert Factory, which now has four branches in Cebu.

“Big malls are expanding in the Vis-Min area, which is already an indication of growth. Although there is still a lot of money in the National Capital Region, the industry has already become saturated and the next source of growth is now outside Luzon,” said Escalona, president and chief executive officer of Fruit Magic, referring to the opening of two big malls in Cebu last year.

Lim said there is a lot of potential for franchising to grow in Cebu, as brands and concepts popping out are all prepared to be franchised.

After the Cebu leg, PFA will mount the 24th Franchise Asia Philippines on July 20 to 24 at the SMX Convention Center in Manila.

Highlights

The capacity building event that will have over 1,000 local and international delegates will come with information and updates about regional and global franchising. The conference is also a venue for networking opportunities and strategic partnerships.

The bulk or 32 percent of the exhibitors’ profile last year came from the food sector followed by service-related businesses (20 percent), retail (17 percent), and international businesses at 15 percent. The expo last year logged over 40,000 visitors.

Economic development

Escalona said mounting franchise expos is the association’s strategy to promote and sustain the growth of franchising as a tool for economic development. It helps members in their national expansion efforts.

“Franchising is still one of the best ways to propagate and increase the number of stores because you use other people’s money, time and management,” said Escalona.

The country’s franchising industry registered double-digit growth last year, backed by the strong growth of the IT-BPO sector and the strong inflow of overseas remittances.

“Franchising has become a byword now. When people know you have a brand or business the next thing they’ll ask from you is if the business is franchisable. The definition of franchising is clearer now,” Escalona said.

Filipinos, he added, are now open to franchising, especially among overseas Filipino workers (OFWs), unlike years ago.

Investing

“Because of the excess of funds of Filipinos, particularly those working abroad, they are now learning where to invest their hard-earned money. A good number of them now buy a franchise business because of its proven success rate at 90 percent,” said Escalona.

He noted that most of the OFWs choose the P500,000 franchise package or investment because they find it more attractive and effective.