Franchising forecasted for the future of local businesses

Knowledge of franchising is still at the earliest stages, hindering development of what could be a high-growth part of the economy, according to local and international experts.

The country’s first franchise association was started last week, aiming to promote the concept as an internationally-tested method to building business.

“When I ask local businesspeople to consider franchises, they say they don’t want to,” said presidential economic adviser U Aung Tun Thet at a seminar yesterday. “They should understand that simply opening branch offices is not enough for economic development.”

Small and medium enterprises count for 97 percent of the total number of companies. With franchises, those small business owners could gain support and ideas from larger companies while still running their own firms.

U Aung Tun Thet said the main hurdle is not a lack of specific laws or associations, but rather simply a lack of knowledge of how franchises operate.

Other ASEAN nations have had considerable success in this area.

Indonesia has 486 franchise brands and 39,000 outlets; Malaysia has 666 brands and 5066 outlets; Philippines has 1500 brands and 140,000 outlets; and Singapore has 500 brands and 3000 outlets, according to a survey by the Phlippines Franchise Association.

Its emeritus chair Samie Lim said franchising can be a powerful tool for economic development that creates thousands of enterprises and millions of jobs.

“Before we changed [to franchising], there were only 45 international-standard franchise brands in Philippines. Now it has reached 1500 brands, of which 65pc are local – but it took 15 years to reach this stage,” said Mr Lim.

Saward Mitaree, president of the Thailand Franchise and Licence Association, said in Thailand there are systematic attempts to transform small business owners into franchisees.

“Myanmar can just start franchise businesses. If they understand how franchises will help business, they will change over,” he said.

Myanmar has no franchise law at present, but neither does Thailand.

“We are pushing the [Thai] government to approve a franchise law,” he said. “But we already have so much legal protection, such as trade laws and so on.”

Myanmar last week launched its first Franchise and Chainstore Association from current franchises in the country, aiming to serve as a third-party association, partly to join together international franchisors with local businesspeople.

Founding member Daw Kay Khine Kyaw Nyunt said it will not be compulsory to join the association, though it will benefit members.

There are currently about 50 main franchise brands in the country.

“Franchising is like marriage. Before you get a franchise, you must study the image and the reputation of the brand you will be franchising,” she said.

Myanmar CP Livestock is one of the largest domestic franchisers. It has taken a detailed approach to adding locations, according to U Zaw Ko Ko, assistant department manager of its food business.

“We first look at the location, which has to be in a crowded area with targeted customers. The second part is capital. The franchisee also needs experience, past income, ethics and an educated background,” he said. U Zaw Ko Ko added franchisees can generate profits of 10 to 15pc.

Others who have taken the plunge say there has historically been relatively little support for franchise owners.

Nan Nan Company has become the local franchisee of Potato Break, opening its first Myanmar branch last June, with more to follow in the coming fiscal year, said its manager Jeremy Kyaw.

There are concrete steps that can be taken to support development of franchises. Mr Lim said Myanmar’s franchise association should be recognised by the government and be free from unnecessary restrictions.

“I know what the government can and can’t do. I think that for businesses like SMEs, the government should set up some infrastructure to support them, but should not pass laws to inhibit them, as laws sometimes restrict growth.”

Philippines had essentially self-regulated the industry in the absence of law, according to Philippines Franchising Association director of legal, governance and ethical standards Leo Dominguez.

“I think Myanmar will not have a real understanding at first,” he said. “As your country is just opening, its economy and businesses are young. When franchising, companies that offer themselves to franchisees is saying that we have been around for years now.”

Source: Myanmar Times

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