Franchising as a growth strategy

Singapore

ENTREPRENEURS always aspire to expand their businesses, and often have the desire to enter other markets. Yet, there is little knowledge on how to embark on this process.

One way of achieving this goal is through franchising and licensing, particularly with the help of the Franchising and Licensing Association of Singapore (FLA), which is well equipped with the market knowledge and resources to elevate brands to an international platform.

Signarama is the world's largest sign franchise. It was founded in New York and is present in countries such as Malaysia, the Philippines and Jakarta, among others. The brand decided to expand, not only to grow locally and globally, but also to enable third parties and first-time owners an opportunity to duplicate a proven business model. Alex Butt, president and founder of Signarama Asia says: "It is more fulfilling to enable individuals to grow and fulfil their dreams through the franchise network."

Since becoming an FLA member, the company has participated in FLA organised events, and credits the association with giving them the early market access they needed. The brand has grown to eight stores in three years and recently won the FLA International Franchisor Award in 2014.

Unlike Signarama, home-grown company Barcode Marketing, which owns ladies footwear brand, Pazzion, was not as well versed in franchising until they joined FLA. After establishing a strong brand presence in Singapore, they decided to expand internationally. For Pazzion, franchising is a suitable fit as it gives them the flexibility to achieve multi-unit business expansion, while legally systemising and protecting their assets.

Michele Guan, regional brand manager says: "The association plays a vital role in acting as a springboard for businesses like ours looking to grow in overseas territories."

Specifically, the brand found the programmes offered, such as trade missions, networking and study trips, particularly beneficial.

The Saybons brand - owned by French Food Factory - is a newcomer looking to expand. Despite being a relatively young brand of only eight years, the owners were confident Saybons was a suitable candidate for franchisements. After all, the business setup is straightforward, with simple equipment, recipes and modest real estate requirements. They were, however, unsure of how to start the process. Ian Choo, co-founder of Saybons, explains why they chose FLA to assist in the process: "FLA has the network and more importantly, the desire to want to help new franchisors like us succeed."

Saybons started preparing operational system manuals in 2014, and is looking for franchisees. Mr Choo says: "Saybons is definitely now on the radar of international investors as evident in the increase in franchise enquiries we are getting."

FLA, which was first established in 1993, has grown in membership by 20 to 30 per cent in the past year. Boasting 130 companies and representing over 150 brands, FLA frequently conducts customer research to find emerging trends in the marketplace. Donna Lee, chairman of FLA, says: "We are seeing younger companies coming into play. Diverse industries as well."

According to their market research, the franchising life cycle has grown much shorter, with brands starting to license after as early as six months of being in business. In terms of diversification, a greater portion of private equity and investor groups are buying out franchise concepts as part of their portfolios.

Aside from the more common food and beverage (F&B) and education-based businesses looking to franchise, there is also a rise in the number of logistics and software companies looking to become members of the association.

The appeal of franchising in Singapore is apparent, due to ease of doing business and incentives provided by the government to foreign investments. Emphasising the advantages of franchising in such a strategic location, Ms Lee says: "You can actually grow your business in a much shorter span of time, and with less risk, and less capital injection."

Looking ahead, Ms Lee says: "We see ourselves taking a bigger role not just locally, but overseas as well."

The association intends to provide more incentives to overseas brands to attract them into Singapore, while maintaining Singaporean members and brands outside the country. It also aims to raise awareness and continue brand building for its members.

FLA will also focus greater resources on educating people about the industry through seminars and workshop conferences. Businesses can also expect to see a greater presence of FLA in collaborations with local trade unions and governments.