THE Philippine franchising sector is expected to expand to as much as $24 billion by 2020, industry leaders said, as it is seen to overcome economic challenges brought about by the weakening peso and rising inflation rate.
The Philippine Franchise Association (PFA) is confident the industry will grow by at least 10 percent this year, and that it will stand firm in the face of an economy muddled in challenges. This will bring up the sector’s value to nearly $20 billion, from the $18.1 billion it posted last year.
PFA President Richard V. Sanz said if the franchising industry continues to grow at this rate, it will most likely hit $24 billion by 2020. “Last year was $18.1 billion, so we’re projecting [that] by 2020, our revenues for the franchise sector is $24 billion,” he said in a news briefing on Wednesday.
Sanz said franchising is currently valued at 6 percent of the country’s GDP. This could still expand in the years to come, as he explained the industry is growing steadily at 10 percent annually.
“Conservatively speaking, [we are looking to grow by] 10 percent to 15 percent [this year], but we are internally looking at 15 percent to 20 percent. [To grow by] 20 percent is very doable, and I’m optimistic we can hit 20-percent growth,” Sanz added.
He asserted that indicators favor the sector, starting with the number of registrations in the first half of the year, which jumped by 250 percent year-on-year. “In fact, we’ve seen more and more people go to franchising. The registrations, if you look at that indicator, it grew 250 percent from the same period last year,” Sanz said.
The PFA chief said he expects this number to expand this month, with the group’s hosting of the Franchise Asia Philippines 2018. “It means the interest is high, and, of course, we’re looking at at least P3 billion of investments for [this event],” he added.
“That’s quite an increase from the previous year. That’s additional new
investments. That’s how alive [the sector is], despite high inflation. Even if we are experiencing high inflation and now the peso is very weak, if there is a slowdown in franchising, it would reflect in the registrations,” Sanz pointed out.
Asked why the industry is stable in spite of economic challenges, he pointed to to the “outlier” characteristic of franchising as an industry. “It is really different from the other sectors, mainly because what we are offering is not just a product, but a business, a livelihood. Given the success rate, people want to put their money in hard times into something that is safe. When you look at the success rate, [it is at] 90 percent—very attractive and high return—and that’s why franchising is very vibrant during hard times,” Sanz said.
According to the PFA, the Philippines is currently home to 2,000 franchise brands, is ranked eighth in the world, and has over 200,000 franchise stores nationwide employing more than 1.2 million Filipinos.
If there is one challenge the industry is facing, PFA Vice Chairman Maria Alegria Sibal-Limjoco pointed to the lack of government support for franchising. She said the sector learned to walk on its feet alone without backing from the government.
She said the best the government can do is to continue bringing franchises abroad through trade shows, which she noted the Department of Trade and Industry (DTI) did twice—one in Dubai, and the other in Indonesia. She also said the PFA will appreciate it if the DTI carries on with this initiative, as it entices foreign businessmen to buy Filipino franchises.
Sanz, for his part, said it is enough that the DTI is persistent in developing micro, small and medium enterprises (MSMEs). He added that funding is welcome, but capacity-building programs for MSMEs are more than enough.
The 26th edition of Franchise Asia Philippines is slated from July 18 to July 22 at the SMX Convention Center in Pasay City. The annual event is expected to attract huge number of conference delegates and expo visitors, as it averages about 1,000 participants and 50,000 guests.