The Department of Trade and Industry is eyeing a more robust growth and development of the country's franchise industry, expecting more entrepreneurs and investors to enter the sector.
Speaking at the Franchise Asia Philippines 2022 Virtual Conference on Tuesday, Trade Secretary Alfredo Pascual highlighted how the past years changed the Philippine franchise industry and attracted more entrepreneurs to invest in franchises.
"Aspiring entrepreneurs are going the franchise route because establishing a business through franchising provides a higher success rate. Unlike starting a business on your own, franchisees build on tried-and-tested business models. A team of experts guides franchise owners to achieve management and operational efficiencies, as well as excellent quality control systems," Pascual said.
He noted that market-wise, franchisees have an advantage in terms of brand recognition. "Name recall makes franchise brands popular, making sales easier. Building up new brands requires substantial expenditures to generate brand awareness, and new brands also need to develop a steady clientele."
During the event, Pascual encouraged investors to set up franchises in the Philippines because of the healthy business climate.
"The Philippines is the seventh-largest franchise market in the world, contributing 7.8 percent to our country's gross domestic product and creating 2 million direct and indirect jobs. With a growing middle class, our country is considered one of the largest franchise markets in the Southeast Asian region. Eating at a popular establishment or owning branded items signals societal status in one of Asia's most social media savvy populations. That is people in the Philippines," Pascual stated.
According to the Trade chief, of the two basic franchise categories, food takes precedence over non-food. Food makes 43 percent of the estimated 1,800 franchise brands in the Philippines. Data from the Philippine Franchise Association showed that food franchises have an aggregate value of P538 billion ($10.8 billion).
"Pandemic or not, the Philippine food service sector is growing as demand for convenience grows. The liberalized retail trade landscape and, to some extent, the reduction of import duties have contributed to the growth of the food service sector. In Philippine manufacturing, food accounts for nearly half of its total output, growing at an average annual rate of 8 to 10 percent per annum. This excellent growth prospect stems from the country's resilient economy and strong consumer base," Pascual explained.
In fact, about 90 percent of the food and beverage (F&B) processing industry's output is consumed domestically. Pascual said the growing consumption, in turn, contributes to the rapid expansion of the processed F&B subsector. "This trend presents excellent opportunities for raw material and high-value ingredient producers. As quality and efficiency improve, such producers can exploit export opportunities due to the country's strategic location and free trade agreements with other countries," he added.
On the other hand, the non-food service and retail subsectors each serve close to one-third of franchise brands in the country-service accounts for 29 percent of franchise brands in the Philippines, and retail, for 28 percent. The contribution value of retail and service franchises amounts to P67 billion ($1.34 billion).
Non-food franchising trends cover health and beauty products, affordable indulgences, clinics, laundry services, homeschooling and microfinance, among others.
To further spur growth on the country's franchise industry, Pascual said the DTI is directing its efforts to support micro, small and medium enterprises by providing them access to capital, technology and marketing resources.
"[The] DTI has been extending financial assistance to MSMEs to provide them access to capital. We assist them in their debt obligation payment, repurposing existing business capital, and acquiring new technologies and systems. We help them adjust their business processes to adapt to the new normal," he said.
SOURCE: The Manila Times
September 28, 2022
