Due to pandemic lockdown
An estimated 70,000 franchise outlets or 35 percent out of the 200,000 franchised firms at the start of 2020 have already shut down or closing shops by the end of the year due to the pandemic, but this sector is expected to recover as early as the second quarter of 2021, according to the Philippine Franchising Association (PFA).
PFA Chairman Emeritus Samie Lim said during a virtual press conference that the industry started the year with a bustling 200,000 outlets (company owned and franchised), but because of the pandemic and the long lockdowns the industry would be left with only 130,000 franchise outlets by the end of this year. Pre-COVID, the PFA estimated around 2,000 franchise brands in the country, foreign and local.
Although COVID-19 spared no one in the franchising sector, Lim said that most of those affected are mostly the so-called pseudo or fake franchises and the mediocre franchise systems that are going to fall by the way side.
Some of the established franchises are also affected because they ran out of capital and the constraints in movements during the pandemic.
The adverse impact will further aggravate by the end of the first quarter of 2021 with more closures resulting in only 110,000 franchised outlets left. The following quarters, however, and the years after would see a steady recovery of the industry.
By 2025, the franchising guru of the Philippines and the world predicted that total franchise outlets in the country will hit a high of 250,000 outlets. This would be a far cry from the 500 outlets, 70 percent of them foreign, when Lim founded PFA in 1995.
He said those that closed will be replaced by stronger franchise firms, supported by new technologies are partnerships for better operations making them more profitable.
Calling the years 2021-2025 as the Golden Age of Franchising, Lim projected of a 20 to 30 percent annual increase in the number of franchised outlets until 2025.
He said small entrepreneurs must learn to pivot to the Golden Age of Franchising by applying the 3 As: Assess and Accept, Act ASAP, and Accelerate aggressively.
According to Lim, the new trends in franchising after the pandemic would be in the areas of health and beauty. “After hiding for six months, people want to go out and want to look good,” he said.
Christopher Lim, PFA Board for ASEAN and Special Projects, said that another trend in franchising would be the new technologies such as online delivery apps are looking at how to franchise their business as they expand operations in the provinces.