27th June 2016
THE PHILIPPINE franchising sector could grow faster than initially thought amid the leadership transition, an official of the Philippine Franchising Association (PFA) said, with about 300 local and international brands possibly entering the market within the year.
“Initially, the PFA was looking at a 10%-15% growth in the franchise industry,” PFA Director for the ASEAN Integration Sam Christopher Lim told reporters in a June 23 interview.
“They just came back from that economic forum in Davao and actually they’re saying they are much more bullish about the Philippines and they’re looking at a 15%-20% growth in the franchise industry,” Mr. Lim added.
The Philippines currently has 1,500 franchising brands, both homegrown and international, according to latest available data from the PFA.
“By the last count, we had about 1,500 in terms of number of brands. In terms of outlets, it’s almost about 150,000. So, that’s what we were looking — we were looking at another 15%-20% growth in the number of brands in this coming year,” Mr. Lim said.
The franchising sector’s growth, Mr. Lim said, hinges on the local brands now scouting for expansion opportunities in Cebu and Davao, along with the increasing interest of international brands in the Philippines.
“Maybe 900 [of franchising brands in the Philippines] are homegrown, about 600 are foreign but we see more and more of the foreign brands coming in,” Mr. Lim noted, citing the attendance of foreign franchisors to the Franchise Asia Philippines in July.
“Actually, we have to reorganize some parts of [the event] just to accommodate all the brands that want to come in. We have a pavilion from Korea, from Taiwan, another pavilion from Singapore. Even Myanmar is sending a delegation. So, so many people are looking at the Philippines,” Mr. Lim said.
The franchising sector is optimistic with the new government under President-elect Rodrigo R. Duterte, a local politician known for developing Davao City.
“The new DTI Secretary [Ramon] Lopez has promised a lot of support for SMEs (small and medium enterprises] so people are very excited. It’s about following through, making sure that the gains we’ve had will continue and actually even accelerate further,” Mr. Lim added, referring to Mr. Lopez who was executive director of the Philippine Center for Entrepreneurship-Go Negosyo.
The increasing interest in the Philippines is also brought by the economic integration of the Association of Southeast Asian Nations (ASEAN).
“Typically, the Thais always just look at Myanmar, Cambodia, Laos for expansion. The Singaporeans always look at Malaysia and maybe Indonesia. But now, because they’re more aware of all the different brands and slowly they’re looking at tariffs going down, they are looking more and more in investing here. That’s why we’ve seen an acceleration in the past two years,” the PFA official said.
The countryside makes a good market for the expansion of franchising brands or even for their launches, Mr. Lim said.
“Metro Manila has the 12 million people, has a lot of disposable income, but do take note that [in] Cebu, Davao, outside of Metro Manila, the trend is growing,” he added, echoing advice he gave to food and beverage franchisors, who recently flew from Singapore to find local business partners.
“So, for those that are not too high end, whether the cafes or the smaller brands, I told them you should look at outside Metro Manila because that’s where the growth will come from and that’s where competition is a bit less, plus with all the community malls coming out,” Mr. Lim added.
While recognizing the tougher competition that foreign brands could bring to local enterprises, Mr. Lim noted: “There is a lot of room for growth. People have still been overly focused in Metro Manila. There can still be a lot of growth and what’s important is the Philippines sector is actually diversified in food, service education, retail.”