VF Franchise Consulting

Franchisors need subsidies to help them prepare for AEC

Jul 23, 2013

WITH only two years of preparation left for the advent of the Association of Southeast Asian Nations (Asean) Economic Community, local franchisors are asking the government to provide them with incentives to enable them to go head- to-head with their Southeast Asian counterparts.

In a briefing held a week before the staging of the Franchise Asia Philippines 2013, the biggest franchise event in the region, Philippine Franchise Association (PFA) Founder and Chairman Emeritus Samie Lim said the government should provide subsidies to franchisors to keep them as competitive as their Asean counterparts.

Lim said subsidies for the franchise industry are not new. Asean countries like Malaysia, Thailand and Indonesia have been extending government support and other public investments to their franchisors.

“What we want from the government, as I said, is very simple—do what everybody is doing. Whether it’s Malaysia, Indonesia, Thailand, the government puts their money into franchising,” Lim said.

“We’re strong in the Philippines but we are not strong worldwide. The world market, even just the Asean market of 650 million people, [at the home front] it’s all good but when you look at the world market, we are nothing. And in all of these powerhouse brands, if we [in the Philippines] are happy with 100 franchisees, the franchisors [abroad] have thousands. When these people come in, they have the economies of scale to purchase raw materials, advertising strength,” he explained.

Lim admitted that not all franchisors are ready for 2015 and the possible deluge of foreign franchise brands into the local market. Any assistance from the government would be much appreciated by the industry.

He said some of these subsidies include the government funding the expenses of franchisors to participate in select international franchise shows. These include hotel accommodations, travel expenses and even setting up the booths.

Lim said the industry could come up with an arrangement with the government whereby franchisors will be given funds for three years to attend shows. Lim explained that on the first year, each franchisor can get a subsidy of 100 percent; on the second year, 50 percent; and on the last year, 25 percent.

These subsidies will go a long way, especially now that the international community is starting to hear about the local franchisors in the Philippines. Lim said a recent survey of the International Franchise Association in the United States rated the country as one of the best locations for franchising.

Lim said the survey evaluated countries according to their expected gross domestic product growth, market size, legal concerns for international brands, ease of market entry, ease of starting a new business and political and economic stability.

Countries are given a score of 1 to 5, with 1 being the highest and 5 being the lowest. Chile topped the survey worldwide with a score of 1.3, followed by the US with a score of 1.5; Japan and China, 1.7; Canada, Australia and the Philippines, 1.8; Indonesia and Vietnam, 2; and Malaysia and South Korea, 2.3.

“In Asia, we are proud to say that we are one of the best in spite of no clear support from the government. We hope we get support from the government in the exhibit, [that] they will pay for the plane ticket, they will pay for the hotel accommodations,” Lim said.

Lim said there are now around 1,300 franchisors and 150,000 franchisees nationwide. Franchising also provides employment to around 1.5 million Filipinos, strengthening the PFA’s claim that the industry can be a major job generator if only the government supports it.

He added that the franchising industry accounts for around 30 percent of the country’s total retail revenues, estimated at $13 billion in 2011. Retail sales nationwide, Lim also said, was at $36 billion in 2011 and franchising sales are also included in this amount.

Written by Cai U. Ordinario

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