With its strategic location at the crossroads of the world paired with a powerful, open economy, Singapore is the ideal proving ground for franchises looking to expand further into Asia.
Singapore has famously positioned itself as one the world’s most vibrant financial centers. Combined with its government’s avidly pro-business attitudes and policies, it is an extremely attractive destination for all manner of businesses. It is no wonder that more than 7,000 multinational corporations have chosen Singapore as their regional headquarters.
As a result, Singapore is one of the richest economies in the region, both in terms of spending power and talent resource, making it an inviting destination for new and established franchises alike. Even as early as 2012, Singapore was estimated to have more than 600 franchise concepts attracting more than 40,000 franchisees. Consequently, Singapore is an excellent starting point for expansion into Asia, as it allows franchisors to test concepts and hone their strategies before continuing on to more challenging territories.
As with moving into any new territory, however, preparedness is key in deploying a successful franchising strategy. Despite its relative openness to a variety of cultures and business styles, franchisors need to ensure they are well-versed in the city-state’s unique nuances and attitudes before investing in Singapore.
Franchises are very much part of the culture
Singapore’s success has largely been founded on its reputation as an international trading hub. Foreign businesses and brands are very familiar to Singaporeans and foreign investment is very much welcomed. Unsurprisingly then, franchising is very popular and well-received by consumers who associate it with the availability of consistently high-end products and services. Many of these franchises have also been associated with the growth of the ever-popular shopping malls, which is why food, beverage and retail franchises have performed especially well in recent years. With that strong foundation, potential franchisees are especially risk-tolerant when considering buying into a franchise, particularly when it involves a well-known brand.
Freedom from government legislation is both a pro and a con
International business and free trade have always been at the heart of Singapore’s success, and its government has always worked hard to ease red tape and other restrictions on those responsible for creating wealth. For franchisors, this makes Singapore one of the easiest countries in South East Asia to expand into as there are no specific franchise laws that govern their activities within the state.
This allows for a great level of freedom in setting your own contracts and agreements, and there is no requirement in law to have a franchise pre-approved before it can sell and establish itself. This is in stark contrast to Malaysia, for example, where stricter laws demand franchisors register themselves with the government first and show proof of profitability before they can sell their franchise license locally.
“Basing your Asian operations in Singapore is a tried and tested formula that has led to a great deal of success for any number of international brands”
Generally speaking, Singapore’s free trade policies can mean lower costs and shorter timeframes in which a franchise can get up and running – a very tempting environment for those used to tighter legislation. However, this does mean that there is nothing in the way of franchise-specific legislation to back you up should something go wrong between you and your franchisees. For this reason, it is worth spending the extra time to make sure that your franchise agreements cover every eventuality, and working with local consultants is invaluable in ensuring that your paperwork is as water-tight as possible.
An international, but distinct cultural identity
Despite the great success of a number of Western brands in Singapore and its very welcoming attitude towards international investment, franchisors should not assume that what works for them in the U.S. and Europe will automatically work there. While Singapore is arguably the most accessible starting point for expansion into Asian markets, franchisors still need to take great care to research the market carefully before making their move.
The obvious example of this is in F&B, where franchises are well- known to adapt their menus to suit local taste, but this also applies across the board to almost any franchise. This is an area where local experts can help you carry out essential market research, and more internationally experienced consultants can help you to develop the appropriate adaptive strategies.
It may seem obvious, but franchisors from the U.S. and Europe also need to make sure they take into account the time difference involved with working in Asia. This may mean that you will need greater local representation to deal with any problems that arise, and to make sure that your franchisees are receiving all the training and support they need. This will translate to more expense initially, but this short- term investment will pay off in the long-term by providing you with a solid base for further expansion in the region.
The right people in the right place
Considering that many franchisors do view Singapore as the gateway to Asia in so many respects, the need for having the right people on your side is essential. Putting in the time and effort to work with local consultants and international experts right from the beginning is a critical first step in any market, but, in Singapore, it can be particularly rewarding in both the short- and long-term. Having a strong support base here will serve as a building block later for selling your concept further afield in South East Asia and beyond. Basing your Asian operations in Singapore, with the backing of the very best in experience and expertise, is a tried-and-tested formula that has led to a great deal of success for any number of international brands.
THE AUTHORS
Farrah Rose is head of international development at The Franchising Centre and is a long-term member of the British Franchise Association.
Steven Lee is CEO of LSP Global Pte Ltd. and is a partner in Franchise Pool International.
