THROUGH franchising, small and medium enterprises (SMEs) can expand their businesses domestically and internationally without incurring huge investments. However, despite the potential of franchising, not many SMEs realise its benefits and scope. The good news is, slowly but surely, the Government is taking proactive steps to encourage more entrepreneurs to embrace franchising.
Malaysian Franchise Association (MFA) chairman Abdul Malik Abdullah says the Government, via the Domestic Trade, Cooperatives and Consumerism Ministry (MDTCC) and the International Trade and Industry Ministry (Miti) have embarked on initiatives to draw more SMEs into franchising.
He adds that the MDTCC has set up a committee not only to encourage SMEs to venture into franchising, but also to scout for small businesses that can be developed into franchises and to facilitate the issuance of loans and licenses related to franchise-based businesses.
Abdul Malik: ‘We now have 36 local brands that have successfully penetrated 50 countries worldwide.’A franchise allows a company to expand with better management and operate with lower costs. The US Department of Commerce statistics show that in 1998, one-third of all US retail sales were through franchised establishments and this figure is expected to surge going forward.
In terms of securing loans, which is one of the main challenges for SMEs venturing into franchising, Abdul Malik says MDTCC is working closely with the relevant financial institutions to provide loans to companies that are committed and have strong potential for franchising.
“Besides organising franchising road shows and exhibitions locally and internationally, the Ministry also offers booths for free to companies participating in such events overseas. Four to six such international events are held annually. Due to these initiatives, there are now 16 Malaysian franchise brands each in China and Indonesia, and more are expected to follow suit.
“We now have 36 local brands that have successfully penetrated 50 countries worldwide. Some of the notable ones are Secret Recipe, Marry Brown, D'Tandoor and Smart Reader,''' he told StarBizWeek.
Among the international roadshows that the MDTCC has organised to promote franchising were those in Beijing, Bandung, Jakarta and Jeddah.
There are currently 530 franchise brands in Malaysia, of which 70% are local and 30% foreign. Abdul Malik says the Government, in collaboration with MFA andPerbadanan Nasional Bhd, wants to build and expand more homegrown franchise businesses locally and abroad.
Miti also provides 50% discounts for accommodation, flight fares and exhibition space to businesses participating in overseas franchise exhibitions, he notes, adding that MFA too conducts franchise training for companies, including SMEs, to help them understand and be better equipped when carrying out franchise operations.
The overseas markets, Abdul Malik says, where the Government wants to promote Malaysian franchise brands are India, China, Indonesia and the Middle East.
“I feel that franchising local brands abroad will help boost Malaysia's foreign exchange through the inflow of monies in the form of franchise fees, royalty fees, advertising and other related payments, and further drive the local economy.
“In addition, it will also help to grow our exports since some of our raw materials and products are sent overseas to the franchised outlets,” Abdul Malik says.
In collaboration with the MDTCC, the MFA is organising the Franchise International Malaysia 2011, a conference and exhibition from July 22 to July 24 at the Putra World Trade Centre in Kuala Lumpur. The event will feature 14 speakers, including five foreigners, who will be giving their expert views on franchising. About 120 booths will be set up for the event and 25% of the exhibitors will be foreign companies.
Abdul Malik says MFA expects about 10,000 visitors for the event (from 8,000 last year) and total transactions worth RM347mil compared with RM327mil in 2010.
MFA was represented among the speakers at The Star Outstanding Business Awards (SOBA) 2011 forum held in Kuching on Wednesday. The association's topic was “Choosing a Franchise.” The event was the third in a series of business forums across the country to help local companies get to the next level.
Themed “From Mediocre to Merit,” the forums feature experts who share views, strategies and experiences to help fledgling companies become future industry leaders. The first two forums were in Johor Baru and Penang, and the final leg will be in Kuala Lumpur on July 26.
Abdul Malik says the MFA is keen to support SOBA because this can spark interest in the awards among the association's 600 members and 6,000 franchisees nationwide.
SOBA is presented by EXIM Bank with BMW as gold sponsor and is supported by Bursa Malaysia. BDO is the auditor for the awards. Other partners include the Royale Chulan KL as official hotel partner, Bernama TV as official TV news partner, Shang Hai as official business magazine, and 98.8FM as official radio station.
The SOBA submission pack can be obtained from The Star or the forms can be downloaded from www.soba.com.my. The deadline for entries is Aug 15. For more information, call The Star at 03-7967 1388 ext 1475 (Eric), 1436 (Kimmy) or 1244 (Mariati).
