Venturing into the franchise world provides an almost secure ‘safety net’ to fast-track anyone to own a business
By SHAHEERA AZNAM SHAH / Pic By BLOOMBERG
There are eight Starbucks Corp outlets within walking distance from the monorail stations in Bukit Bintang.
As of August last year, the American global coffee company, which is based in Seattle, has 242 outlets in Malaysia. In 2017, the chain was entertaining coffee lovers at its 27,339 branches across the globe.
Such was the fast growth of the coffee company.
Starbucks is following the footsteps of McDonald’s Corp — to make it big, franchise your brand.
For wannabe entrepreneurs, the opportunity to hitch a ride on the fast-moving train of fast-food chains like McDonald’s and Starbucks removes the many headaches, difficulties and challenges in setting up and running this kind of businesses.
Venturing into the franchise world provides an almost secure “safety net” to fast-track anyone to own a business.
Success may seem and look easy from the outside. The reality is, in any venture, a strong business model remains the key.
Malaysian Franchise Association (MFA) chairman Datuk Radzali Hassan said franchisors must establish a business model that proves to be effective, if the brand is to be run by multiple owners.
“The franchise business involves two sides — the franchisor and franchisee. The original business needs to be solid on the corporate site before it can be franchised and run by someone else.
“In the end, the franchisor will lose control over the franchised dealers and any delinquency of one franchisee will affect the entire business.
“That is why you can see outlets like McDonald’s and Starbucks in every corner of Kuala Lumpur. It is because they have found the perfect recipe to franchise their chain that local ones need to establish,” he said.
Much of the success of the franchisees depends on how a franchisor puts the whole proposal together — from the branding and marketing, to selling the products.
In his first attempt to establish a franchise chain for the restaurant, Asam Pedas Premier Sdn Bhd, director Azmi Ismail said his team invested in centralising the restaurant’s source of menu.
“In running a food business, manpower issues such as finding the right cook, and quality control of the right recipes and ingredients, remain the hardest challenges in making sure that all the foods at all branches are equally good.
“We decided to invest more in establishing a central kitchen and equipment to make sure we could supply ready-made packed foods for individual servings to the franchised branches,” he said.
He said although the technique may take away the ingenuity of a restaurant as customers expect the food to be cooked at the time of ordering, the company believes and invests in the technology that imitates the result of a freshly cooked meal.
“We offer a niche menu that needs to be consistent for the brand to work. And we manage to sustain the freshness of the food by investing in high-technology machinery that could deliver the same result as the foods that are being cooked in the kitchen on the same day.
“In fact, we are using the same model for five of our corporate branches at the moment,” he said.
With that strategy, he said the business is able to eliminate such crucial problems of having franchised branches as employing a skilled cook is not required.
Meanwhile, from a franchisee’s perspective, the franchising agreement can be tough to apprehend for a new entrepreneur, particularly concerning the fraud and scam cases that promise a good return over a short period of time.
Radzali said, like any businesses, franchisement involves calculated risks that new entrepreneurs have to be willing to take.
“For people who want to venture into a business, the franchise business would be an alternative as it reduces risks associated with start-ups.
“In franchisement, you will skip the research and development process, which takes about one to two years, and the master plan has already been set up.
“It is the fast lane in having your own business. It will take at least three months before you can see the turnover,” he said.
Malaysia’s franchise industry is predicted to achieve a RM35 billion contribution to the national gross domestic product by 2020.
He said new entrepreneurs, particularly Bumiputeras, need to be bold in taking risks.
“Just like any other businesses, financing remains one of the challenges in franchisement. But they also have to be aware of the assistance that bodies like Perbadanan Nasional Bhd provide and meet the expectations that these bodies require.
“We have come a long way as Malaysia’s franchise industry is now 80% occupied by local companies and the remaining are international brands,” he said.
In July 2012, the Domestic Trade, Cooperatives and Consumerism Ministry introduced the micro-franchising scheme under the National Franchise Blueprint that assists newcomers to get loans up to 70%- 80% of a start-up cost.
According to MFA statistics, there were 603 franchise brands in Malaysia and some 6,000 franchisees nationwide registered on the year the scheme was implemented. The opportunities are plenty.
Products are fast making headways in the franchise business. But the risk of investing hundreds of thousands and the prospect of losing it all remains a concern to newbies.