DTI calls for creation of more franchises

MANILA, Philippines — Trade Secretary Alfredo Pascual is urging investors to put up more franchises in the country, citing the country’s healthy business climate.

At the Franchise Asia Philippines 2022 conference yesterday, Pascual shared that the Philippines is the seventh largest franchise market in the world, contributing 7.8 percent to the country’s gross domestic product (GDP) and creating two million indirect and direct 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, “ Pascual said.

He explained that aspiring entrepreneurs in the country are going the franchise route because establishing a business through franchising provides a higher success rate compared to starting a business on your own, as franchisees build on tried-and-tested business models.

Pascual said that market-wise, franchisees have an advantage in terms of brand recognition.

“Name recall makes franchise brands popular, making sales easier,” Pascual said.

Of the two basic franchise categories, Pascual shared that food expectedly takes precedence over non-food, with food making up 43 percent of the estimated 1,800 franchise brands in the country.

He cited data from the Philippine Franchise Association, showing that food franchises in the country have an aggregate value of P538 billion or $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,” Pascual said.

He further explained that in Philippine manufacturing, food accounts for nearly half of its total output, growing at an average annual rate of eight to 10 percent per annum on the back of the country’s resilient economy and strong consumer base.

Pascual said almost all, or about 90 percent, of the food and beverage (F&B) processing industry’s output, is consumed domestically.

He said the  growing consumption 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,”Pascual said.

In contrast, Pascual noted that 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  (28 percent).

Non-food franchising trends cover health and beauty products, affordable indulgences, clinics, laundry services, homeschooling, and microfinance among others.

Pascual said  many franchisees in the  country are micro, small, and medium enterprises (MSMEs).

“DTI (Department of Trade and Industry) is directing its efforts to support MSMEs post-COVID-19 by helping them access capital, access technology, and access to marketing resources,”Pascual said.

He said that through the Small Business Corp., 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,”Pascual said.

Pascual said the DTI conducts boot camps, seminars, and business matching events to promote franchising to overseas Filipinos and export Philippine franchises overseas.