BEST FRANCHISE OPPORTUNITIES IN THE PHILIPPINES

VF Franchise Consulting is continuing its series of brief articles that highlight the franchise opportunities by country within the Association of Southeast Asian Nations (ASEAN), a region consisting of over 650 million people and includes the countries of Brunei, Cambodia, Laos, Myanmar (Burma), Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam. As a region, ASEAN has the 5th largest economy after the US, China, Japan, and Germany.

Today’s focus will be on the best franchises to own for the Philippines market. To start off, let’s highlight some key economics and demographics about the Philippines:

Source: CIA FACTBOOK

The country’s large population (109+ million and ranks #13 in the world), high urbanization rate, high literacy rate, young population (over 50 percent of the population is under the age of 24), and rapidly rising incomes over the past two decades equate to significant spending power now and significantly more so in the next decade.

What is also impressive about the Philippines is that it is on track to have the 19th largest economy by the year 2050, according to a recent Goldman Sachs report. The country has also benefited from having one of the highest GDP growth rates over nearly two decades with an average growth rate of 5.4%, the 2nd highest GDP growth rate of the six largest economies in ASEAN.

FRANCHISE PHILIPPINES HIGHLIGHTS

• One of the most developed franchise industry in Asia with about 2,000+ franchises valued at US$22 billion in 2017 to US$25 billion in 2018 (comprising about 7% of GDP)
• Most profitable franchises are in Food & Beverage (F&B), Retail, Services, Fitness/Health, Entertainment, Lifestyle, Hospitality, Education (young learners, adults, IT, vocational skills)
• Very Pro-Western consumers with special preference for US brands
• Currently there are no specific franchise laws and thus making the country highly attractive to foreign franchisors that wish to expand here
• Virtually all the major international brands in CVS, Snacks/Desserts, Beverages (milk tea, fruit juices), QSR, fast-casual, and casual dining are present as well as the largest retail and fashion brands. The largest franchise systems (in terms of units opened) in the Philippines include Jollibee, McDonald’s, 7-Eleven, Shell, Petron, The Generics Pharmacy, Alfamart, KFC, Yellow Cab, Shakey’s Pizza, Red Ribbon, Max’s Restaurant, Denny’s, Potato Corner, Anytime Fitness, Gold’s Gym
• Of all of the countries in ASEAN, Filipino consumers have the highest preference for franchises from the US
• Many consumers also prefer Asian cuisines, including cuisines from Japan, Korea, Taiwan, Hong Kong, Thailand, Singapore, China, Malaysia, and more
• Revenue in the Online Food Delivery segment is projected to reach US$247m in 2020 and expected to show an annual growth rate (CAGR 2020-2024) of 17.4%, resulting in a projected market volume of US$470m by 2024.
• According to market research firm Kantar, about 60% of consumers voted GrabFood as their preferred food delivery platform, ahead of FoodPanda (30%) and HonestBee (15%)
• While the Philippines has over 7,600 islands, key areas franchisors should enter initially are: #1 Metro Manila (12.9m), #2 Metro Cebu (2.8m), #3 Metro Davao (2.5m)
• X-FACTOR: Over 10M Filipino diaspora that has remitted more than US$33.5 billion in 2019, nearly 4% higher than in 2018, according to the Philippine central bank and accounted for 9.3% of total GDP. Overseas Filipinos are also helping to bridge cultures, fashion, retail, lifestyles, work, dining and entertainment.

The Best Franchise Opportunities in the Philippines:

• Filipinos enjoy eating out and enjoy all types of food & beverages. International standard fine dining restaurants are also an attractive option due to disproportionate demand over supply of such venues.
• Retail, fashion, and lifestyle based franchises (e.g. convenience stores, fitness & health, children’s entertainment, health supplements franchises, health, salon and beauty spas, children’s based businesses, etc.)
• Education & Training and other vocational training franchises (e.g. hospitality, tourism, IT, construction, health and wellness, etc.)

• The abundance of car ownership presents good opportunities for franchises that cater to this segment, including auto parts, repair, and maintenance franchises. According to the Land Transportation Office in the Philippines, there were about 11 million vehicles registered in 2018.
                 
• Recent major franchise deals in the Philippines: Shake Shack, Panda Express

Similar to other Asian countries, education franchise and training franchises that are most popular include:

• STEAM based learning (Science, Technology, Engineering, Art/Dance/Music, Math) and franchises in Robotics, Computer Programming / Coding
• International Kindergartens, International Schools, English Language Training (ELT) and other languages (e.g. Mandarin, Japanese, Korean),
• Professional skills development training for adults, Information Technology (IT), Business Processes Outsourcing (BPO), Finance, and other technical or vocational skills training (e.g. hospitality, tourism, construction, health and wellness, etc.). This training is especially important for the majority of the population that choose not to enter university and/or seeking re-training for other employment.
• According to a recent article from the Department of Education, approximately half of the high school graduates do not enter university and are either entering the workforce directly or taking vocation skills training courses instead of university.
• The Philippines has become the world’s largest destination for business processes outsourcing (BPO), and they are the industry’s leader for contact centre outsourcing due to the bi-lingual capabilities of its workforce. The BPO industry is a multi-billion dollar industry with over 1.2 million workers and has grown exponentially in recent years, and it is projected to double again by 2020.

Brands that are currently seeking franchisees in the Philippines include but not limited to: Little Caesars Pizza, Delifrance, Helen Doron Educational Group (Helen Doron English, Helen Doron Kindergarten, Mathriders), QOOCO, Mathasium, Scholastic World of English, Sureclean, COCA Hotpot and more.

Be on the lookout for the next franchise article about the largest economy in ASEAN – Indonesia.

ABOUT THE AUTHOR:

Sean T. Ngo is Vietnamese-American and has lived and worked in the USA for over 30 years and in Asia for over 15 years. He currently lives and works in Vietnam.

• He is the Co-Founder of VF Franchise Consulting, one of Asia’s leading franchise consultancy.

• Sean is a frequent speaker at various industry and government events in Singapore, Vietnam, Thailand, Philippines, Indonesia, Myanmar, South Korea, and Japan (and soon the UK)

• He has lectured at various MBA Programmes in the topics of Franchising, Entrepreneurship, Project Management, and other subjects, and has taught at the Royal Melbourne Institute of Technology (RMIT), Australian Institute of Business (AIB), and Paris Graduate School of Management (PGSM).

• Prior to co-founding VF Franchise Consulting, Sean worked in finance, marketing, and real estate in the US and has worked for many Fortune 500 companies, including Microsoft, Lockheed Martin, National Semiconductor, Coldwell Banker, and others.