Exciting Days Ahead (In Spite of the Pandemic) for Franchising in Asia

30 November, 2020

Let me begin by using one of the paragraphs in HSBC’s ASEAN Connect webpage: The last 50 years has seen a transformation of historical dimensions as the nexus of global activities shifted towards Asia. The magnitude of this seismic shift in economic authority towards Asia is on par with the discovery of the New World and the subsequent rise of North America as a major production and consumption centre… Are Vietnam, Cambodia and Myanmar the next Asia tigers?

GDP growth in ASEAN nations averaged 5.5% a year between 2010 and 2018.

At the risk of sounding simplistic, I maintain that the growth or decline and the trends in franchising are very much a reflection of the economy and the needs and wants of the society in question. Raging ahead, as far as their economy is concerned, are the likes of Vietnam, Cambodia, Myanmar in the ASEAN (comprising ten nations in South East Asia) region. Until the Covid-19 pandemic hit in early February 2020, developed ASEAN countries like Singapore, Thailand and Malaysia were still experiencing economic growth, albeit at a slower pace.

A quick click on my company’s website on the franchising shows in Asia in 2019 will tell the story. Note: I have only listed those that my company is participating. Smaller shows in other cities (e.g. Makassar, Indonesia; Penang, Malaysia) or those mainly organized by entities that are not members of the World Franchise Council (there are many) are not listed.

In my opinion, big national strategies e.g. China’s Belt and Road Initiative (BRI) that will affect 60 nations across the world, with many in Asia, will give positive spins to the said nations, thus making many parts of Asia even more vibrant.

Using Maslow’s “Hierarchy of Needs” as my argument, many franchise brands that are being ‘aspired’ will find many wooers in these now-more-developed nations. I have often heard friends in the Western world lament the fact that their governments are not as ‘generous’ as those in Asia when it comes to supporting franchising. True. In Singapore and Malaysia grants and subsidies are available for aspiring franchisors to engage consultants and lawyers to embark on the franchising journey. There are also government assistance in the promotion of franchise brands in , other than Singapore and Malaysia, economies/countries like Thailand, Philippines and Indonesia, Taiwan and Korea.., all at varying degrees.

Judging by the number of western brands that have approached my company in the past few years or so to help them find franchisees in Asia, it is evident that these franchisors are cognizant of the above scenario. And not just western brands, but also brands from within Asia (e.g. Korea, Japan and Greater China).

At our booth (we go to over 30 franchise related events a year—except this year 2020 no thanks to the pandemic), we have been getting franchise inquiries from many nationalities including individuals and business development managers from China, Vietnam, India, Indonesia, Myanmar and Sri Lanka – all wanting to become franchisees of established brands. This is despite the fact that there are occasional reports about the disputes between franchisors and franchisees, or a certain franchise brand going bust.

At this juncture, just to balance the optimism with a note of caution concerning franchising, I would like to share an extract from renowned US lawyer Andrew Sherman: “Many companies prematurely select franchising as a growth alternative and then haphazardly assemble and launch the program with an approach towards franchise development that parallels the sale of used cars. Other companies are urged to franchise by unqualified consultants or advisors who may be more interested in professional fees than in the long‑term success of the franchising program. And still others move too quickly in the development of their franchising program without devoting the time and resources to the development of an effective and viable business and economic model.  This has caused financial distress and failure at both the franchisor and franchisee level and usually results in litigation (and of course, termination of the franchise relationship). Current and future members of the franchising community have a duty to take a responsible view toward the creation and development of their franchising programs and embrace the notion that this is a get what you give relationship-driven business model and expansion industry.”

In closing, based on my 31 years of passionate involvement in this arena , I opine that franchising will continue to be a popular expansion model. And as long  as the various parties adhere to the right principles (e.g. ”get what you give”) and stick to the basics (e.g.” the right product; the right location; the right pricing; the right marketing methods; the right timing) and know that the end-consumer is sophisticated, well-informed, and will take to the social media to share their experience, the future remains rosy for franchising.

Please also take time to read some editions of our Asia Franchise & Business Opportunities (bilingual, quarterly) magazine, the only English-Chinese franchise magazine in the world since 1994.

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