Franchises retain appeal even in a slowing economy
While the current economic slowdown is hitting most industries hard, the franchise sector, which typically grows faster when times are bad, is healthier than ever.
Greg Lange, managing director of the business brokerage Sunbelt Asia Company, says that his company, which is itself a franchise, is not facing a slowdown because people are still starting new businesses.
”I think when there’s a slowdown our business does quite well because people are laid off and they’re looking for new opportunities,” he says. ”Usually they want security for themselves, they are essentially looking to buy themselves a job.”
When it comes to investing in a franchise, Mr Lange underscores the importance of name recognition. Sometimes a brand that is popular in, say, the United States but not well known in Europe or Asia could fail here despite all the pioneering work the franchise holder puts in.
”Thailand is in fact a graveyard for international food brands that have come over here but were not successful _ Long John Silver, Wendy’s, TGIF, Popeye’s _ they were well-known and established, yet when they came to Thailand they were not able to make that adjustment.”
Mr Lange advises those thinking of investing in a foreign franchise to see whether it’s popular worldwide and not just in one market.
”It’s actually better if it’s well-known in Asia. For instance, Subway (one of the franchises in which Mr Lange has invested) was an ideal candidate. All of a sudden everybody knew it around the world, the perfect vehicle. Rotiboy did really well because it was known in Singapore and Malaysia. Secret Recipe is another one that has done very well.”
If one does become very interested in a franchise that is big in another market and thinks it might be worthwhile doing the pioneering work of introducing it in Asia, it’s essential to check whether the company has the capital behind it to develop the brand.
Sunbelt Asia is a prime example, having grown rapidly over the last five years from being located only in Singapore and Thailand. Now it has offices in Guangzhou, Shanghai, Hong Kong, Australia and even 20 locations in the UK, spearheaded by Sunbelt Asia’s location in Thailand. One also must remember that international franchises are not cheap, which makes local franchises more appealing. ”For a local franchise, the advantage there is somebody can get in for 2-3 million baht total.”
Among the interesting local franchises that Sunbelt Asia represents is Bali Hai, a Phuket-based massage and spa chain. The total investment for a spa is only 1.8 million baht, and 1.2 million baht if massage only is chosen.
”They do quite well in Phuket and they think that the particular system that they have in place will do very well in Bangkok and other resort areas.”
Another promising local franchise is Moby Elite which is an established customer relationship management and integrated marketing company. It runs membership programmes as well as affinity deals between companies, events, loyalty tie-ins, e-mail campaigns, mobile marketing and other activities to increase customer loyalty and maximise profit.
An American franchise that shows promise is called It’s Just Lunch. Its business is to bring busy single professionals together for short lunch dates in discreet surroundings at leading restaurants. It claims to arrange more than 100,000 dates per year.
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