The July 2018 Philippines Franchise Association conference and expo had thousands of attendees and over 30 speakers from around the world extolling the benefits of franchising.
There are an estimated 200 million middle class consumers in South East Asia. The Gross Domestic Product (GDP) growth for these countries average almost 6%. Franchising is often a preferred new business development model.
Food and beverage (F&B) franchises continue to be the leading franchise type in South East Asia, but education, retail, and service sector brands are becoming increasingly desired. For example, Asian families spend an unusually high percentage of their income on the education of their children to give them an edge when growing up. For this reason, U.S. education franchises like Abrakadoodle® are highly sought-after across the region.
Indonesia
The world’s fourth most populous nation is experiencing a rapid expansion in the middle class, which includes over 30 million households. Most international franchises are in the food and beverage sector. While it is still early days for service franchises, the Mosquito Squad® country licensee recently had their grand opening in Jakarta.
U.S. F&B brands are growing in Indonesia, such as KFC Pizza Hut Dunkin’ Donuts, McDonald’s, Carl’s Jr.®, Caribou Coffee, Starbucks, WingStop, Jamba Juice and Coffee Bean and Tea Leaf.
Indonesia data
Country Population: 260,580,000
Median Age: 30.2
GDP per capita: US$12,400 (2017)
Projected 2018 GDP Growth: 5.3%
Malaysia
With the recent change of government, “Malaysian consumers have rarely been more optimistic. They were pleased with the change of government in May and are more confident about the future…. it is the fundamentals of Malaysia’s economy that have enabled consumers to translate the feelgood factor into higher spending. FT Confidential Research, July 31, 2018
Approximately 40 percent of the franchise concepts operating in Malaysia are foreign owned. Malaysian entrepreneurs and investors are increasingly savvy on franchise concepts. Although the Malaysian government encourages promotion of franchising as a means to improve the number of new businesses and jobs, they have a policy called Bumiputra that favors locally started brands.
Malaysia data
Country Population: 31,382,000
Median Age: 28.5
GDP per capita: US$28,900 (2017)
Projected 2018 GDP Growth: 5.7%
The Philippines
More than 90% of all foreign franchises are U.S brands. U.S. players in the food franchise market include McDonald’s, Burger King, Wendy’s, Johnny Rockets, Pizza Hut, Dominos, Papa John’s, Dunkin’ Donuts, Krispy Kreme, Buffalo Wild Wings, Wingstop, KFC, Starbucks, Seattle’s Best, Coffee Bean and Tea Leaf, Dairy Queen, Baskin Robbins, Mrs. Fields Cookies, Texas Roadhouse and Denny’s. In the Philippines, the Bistro Group, which owns the country rights to TGI Fridays, Buffalo Wild Wings, and Texas Roadhouse. This group has also opened six Denny’s restaurants in two years. The country’s largest casual dining chain operator is Max’s Group Inc. who is the country licensee for Krispy Kreme and Jamba Juice and operates 12 different F&B franchise brands.
The Philippines data
Country Population: 104,256,000
Median Age: 23.5
GDP per capita: US$8,200 (2017)
Projected 2018 GDP Growth: 6.6%
Singapore
According to the U.S. Commercial Service, Singapore is home to a wide variety of franchise concepts. Unlike some South east Asian countries, service and retail franchises are well developed in Singapore. McDonald’s, Burger King, KFC, Wing Zone, Krispy Kreme, Subway, Starbucks, Ben and Jerry’s, Gymboree, New Horizons, Mister Minit, Avis, Toys R Us, Comfort Keepers, Abrakadoodle, and many others have operations in Singapore.
Singapore is seen as a showcase for franchises in the region. Investors from nearby countries come to Singapore to see how a local, regional or international franchise works and then want to bring it to their country. Singapore also has the strongest intellectual property and corporate business laws in the region which often makes it the first stop for international brands seeking to enter this region. But, competition is very high in Singapore, as are the retail rents.
Singapore data
Country Population: 104,256,000
Median Age: 23.5
GDP per capita: US$8,200 (2017)
Projected 2018 GDP Growth: 3.2%
Thailand
There are over 550 franchise brands operating in Thailand. Food restaurants, quick service and casual dining have the largest market share of about 24 percent, while ice cream and beverage (including coffee shops) are second with about 22 percent. International franchise systems control 60 percent of the total market value of the F&B sector. A key regional Thailand-based player is the Minor Group which controls several major brands including Dairy Queen which has almost 400 treat outlets in the country. Minor is also the Thailand licensee for such international brands as Benihana, Swensons, Burger King and Sizzler.
Thailand data
Country Population: 104,256,000
Median Age: 23.5
GDP per capita: US$8,200 (2017)
Projected 2018 GDP Growth: 4.1%
Vietnam
Most franchised businesses in Vietnam are in the F&B sector with the major international burger, chicken and pizza brands being present. Vietnam is another Asian growth market for franchising, especially in the coffee sector. The Coffee Bean & Tea Leaf is well established, and PJ’s Coffee of New Orleans recently opened its first coffee shop in Ho Chi Minh City (Saigon). Vietnam is in the process of easing its franchise laws and regulations to encourage more franchise business growth. More franchises equal more jobs and this is a focus of the Vietnam government.
Vietnam data
Country Population: 96,100,000
Median Age: 30.5
GDP per capita: US$6,900 (2017)
Projected 2018 GDP Growth: 6.9%
Other South East Asia countries seeing new international franchise business growth include Cambodia, Laos and Myanmar. These markets are in the early stages of franchise development with most brands being in the F&B sector such as Carl’s Jr in Cambodia and KFC in Myanmar.
ABOUT THE AUTHOR
William Edwards is CEO of Edwards Global Services (EGS). This article was created by EGS’s U.S.-based team, who collectively have 150 years of international franchise experience. Contact him at bedwards@edwardsglobal.com or 949-224-3896. Statistical data for this report is from ‘The Economist’ magazine and the CIA World Factbook.
