70,000 franchisees in PH close shop

The franchising sector saw a sharp decline of about 35 percent in the number of franchisees to 130,000 in 2020 from 200,000 in 2019 as the health crisis forced many enterprises to close shop.

The Philippine Franchise Association said the decline would be carried over to 2021 amid the lingering effects of the pandemic on the economy and that another 20,000 franchisees would eventually halt operations.

“As the dust of the pandemic settles sometime in 2021, I believe we will only have about 110,000 franchisees left standing. That means 90,000 of franchisees would have closed their businesses,” PFA chairman emeritus Samie Lim said in a virtual briefing Friday.

He said despite the adverse impact of the pandemic, the franchisers were expecting the industry to recover from 2022 to 2025, the “golden years of franchising.”

The group predicted that by 2022, the industry would grow 20 percent annually until 2025 when the country would have about 250,000 franchisees.

“And as we rebuild the industry, we will reach the peak of 250,000 franchisees that will be stronger and more professionally run in in 2025. We will achieve this, hopefully and this will be the golden age of franchising. Meanwhile, in the year 2020, we have to assess objectively and accept the chaotic reality we are in. And we have to act as soon as possible,” Lim said.

He said it took the industry 25 years to grow into a 200,000-strong industry starting with only 500 franchisees in 1995, with foreign franchises dominating the industry at 70 percent share.

The industry generated P700 million in sales in 2018, but the crisis is estimated to erode at least 30 percent of this to P490 million.

The PFA earlier expressed optimism it could export 100 local brands to the rest of the world by 2020.

PFA chairman Richard Sanz said Philippine brands with branches overseas comprised most of the franchises that survived the pandemic.

Brands trending in 2020 are mostly health-related and beauty brands. Mobile delivery apps also gained popularity when the pandemic broke in early 2020.

“Right now, we only have 30 brands that went global. But we are expecting that companies must have smarted from the crisis and would like to disperse investments both local and abroad instead of having 100 percent of the business here in the Philippines,” Sanz said.

He said that before COVID, there were 2,000 franchise brands in the Philippines.

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Article and Photo originally posted by Manila Standard last October 2, 2020 9:20pm and written by Othel V. Campos.