The domestic franchising industry expects full recovery in 2025 fueled by new creative concepts as the industry is strongly bouncing back from the debilitating impact of the two-year pandemic.
Sherill Quintana, chairman of the Philippine Franchise Association (PFA), told reporters at the opening of the 2022 Franchise Asia Philippines Expo, the first face to face expo after the pandemic, that more than 500 franchising companies are participating in the three-day expo at the SMX Convention Center.
Of the 500 firms, Quintana said, more than 40 percent are new concepts, primarily food and services. Notably, only one-fifth or 100 are foreign concepts. There are also four foreign pavilions from Taiwan, Thailand, Malaysia and Singapore promoting, their respective domestic franchisees.
Before the pandemic, Quintana said the franchising industry contributes 7.0 percent of GDP.
“We have to sustain that and exceed our GDP contribution. We want to be in the line of eight or nine percent or even 10 percent of GDP,” said Quintana.
She expressed confidence the industry can exceed its current GDP contribution because 2022 is the first year of the Golden Age of Franchising 2021-2025, but had been delayed by two years because of the pandemic.
The Gold Age of Franchising for the Philippines would be marked by the hosting of the World Franchise Council Meeting and the Asia Pacific Franchise Confederation Meeting in October next year to be hosted by the PFA.
“We have already booked the entire SMX for next year,” said Quintana.
“It (World Franchise Council Meeting) is a good platform. It is an opportunity for us to boost our growth momentum,” said Quintana.
She noted that the global franchising event next year would help the domestic industry recapture the two year setback brought about by the pandemic.
“We can recapture what we’ve lost by 2025 or hopefully in two years because if you lost two years it needs four years actually to recover,” said Quintana, who owns the acclaimed Oryspa, the first and finest maker of rice bran based spa products in the Philippines.
WORLD FRANCHISE
Quintana emphasized that the success rate of a franchise is at 90 percent because both the franchisee and the franchisor are working together to grow the business.
She shared that Oryspa was launched during the last Philippine hosting of the World Franchise Council Meeting in 2010. The Philippines was supposed to host again in 2021 but this was moved to 2023 because of the pandemic.
Since then, Oryspa has grown its franchise not just nationwide, but globally. “What more can a better example of an MSME leveling up,” she said. “We are able to expand to realize our dream through franchising,” she added.
Quintana also became chairman of the Franchise Asia Philippines Expo in 2016 and serves as current PFA chairman. “We’re very proud of how the Franchise Asia has grown,” she said. In fact, they also started the MSME concepts by encouraging regional brands to showcase at the annual franchise event.
HYPER LOCALISM
The two-year pandemic has also resulted in some positive impact for the industry. First it has forced the franchising industry to be creative, Quintana noted.
From the brick and mortar or the physical store, franchising can be done from home. This gave rise to mainstream retail brands creating franchise distribution and home service for the services brands.
“Now, we have mobile clinics, mainstream brands have learned to package retail frozen foods, pet grooming, mobile car wash, mobile laundry, that’s the silver lining,” she said.
Hyperlocalism has become the norm. Hyperlocalism means bringing opportunities to the communities. Before the pandemic, the model was for the customers to go to a place or the mall where these brands or services are located.
Now, these brands go straight to the communities. “So even if you are based in the province you can bring your business to those in need because people prefer convenience and during the pandemic, there was mobility problem,” she said.
With the high cost of fuel and cost of living, customers can save more when they do their business or transact online. “People will be by those near their houses. So,
hyperlocalism is very present,” she emphasized.
LOCAL BRANDS
Quintana also cited the growing awareness among Filipinos to patronize local brands.
“One of the highlights the pandemic had one was the higher appreciation among Filipinos for Filipino brands,” she observed.
In fact, Quintana said, it was during the pandemic that she launched her book “Yes, the Filipino Brand Can” because “we were bereft of inspiration and motivation.”
But she also said that Filipino franchisees need to work hard because the foreign brands are coming.”The local brands have to level up because there is strong interest from the foreign brands,” she added.
She emphasized the need for franchisees to adopt the digital way of doing business. Those that really survived the pandemic are those already digitally-present because they were able to pivot easily, but those that were not, they just perished.
Those that permanently lost their business during the pandemic were mostly the mall-based and complacent, thinking that the pandemic could only last for a few weeks and they can go back to the malls.
“It is not going back, this is survival of the fittest,” she said.
CHALLENGES
As the franchising industry is recovering, Quintana said they are also facing some difficulties.
Quintana explained that since most people went into homebased business during the pandemic, they were already content of earning from their meager business and are no longer interested to work again in other companies.
Workers are also getting hesitant from returning to offices as they prefer the work from home arrangement.
“The scarcity of a nimble workforce has become a challenge for business owners,” she added.
Another challenge is financial inclusion. The Bayanihan Act was only for a year, but with the prevailing high interest rate businesses now have to face interest rate of 8.5 percent to 10.5 percent.
With the high cost of money, weak peso and high inflation, Quintana has urged Filipinos to go into business to earn more.
“Withdraw you money from the banks because the banks are just earning from your money. Start a business because that is the best way to beat inflation,” she said. Other investments could be through the stock market, but she said, it could also be risky.
“Going into business can be rewarding, you just have to be on close guarding,” she said.
Lastly, Quintana has warned against fake franchises. Thus, she said, the PFA ensures that their members are well protected and interested franchisors are safe to do business with them.