In a virtual briefing held last Friday, October 2, Philippine Franchise Association (PFA) chairman emeritus Samie Lim projects the local franchise sector will lose 90,000 outlets in 2021—a 45% decline from the 200,000 outlets for this year.
As such, it would take five years for the local franchise sector to bounce back and exceed the existing number of outlets as a result of the coronavirus disease 2019 (Covid-19) pandemic which has forced countless franchise holders to shutdown their businesses.
Lim’s outlook is that by the end of 2020, franchise outlets will decline to 130,000 before reaching around 250,000 stores by 2025.
Further, Lim added that the majority of the outlets that will not survive amid the global health crisis are those deemed as “fake and mediocre” which have no business and operations plans.
However, as the sector recovers, Lim expects new franchise businesses would serve the health and beauty needs of consumers.
PFA vice chair Alegria Sibal-Limjoco sees a silver lining for the franchise sector amid the struggling Philippine economy saying that, “When the economy is down, there are many entrepreneurs that are born.”
She mentioned that during the Asian financial crisis, those who were retrenched and retired from work, as well as displaced overseas Filipino workers, bought franchises, and about 90% of them are still around and have flourished with their franchise businesses.
PFA chair Richard Sanz noted that the projected revenue for the industry this year was around PHP700 billion. However, due to impacts of the global health crisis, 72% of those in franchising business expect over 50% losses in revenues for 2020.
Among the top concerns of the franchising sector include potential global recession, decrease in consumer confidence, lack of comprehensive and tested company emergency plan, effect on workforce and productivity, and displacement of workers.
He mentioned that among the assistance that the industry needs from the government are tax incentives, loans with longer grace period and relaxed terms, and wage subsidies.
Despite gloomy conditions, PFA president Sherill Quintana said that due to the lockdown measures in the Philippines which is one of the longest lockdowns in the world, many franchisors have been inspired to grow their business outside the country.
“If you have a company or franchise operating outside Philippines, the chances for you to keep afloat are higher. Aside from having stores outside Philippines, now the interest also is to grow their franchise in far-flung areas or outside metro centers,” said Quintana.
Sanz also noted that PFA’s vision of bringing Filipino franchise brands abroad has paid off during the pandemic as oversees franchise outlets became the lifeline for Philippine-based stores that were forced to close due to community quarantine measures. Sanz further added that the PFA eyes to bring 100 Filipino franchise brands overseas. Currently, there are 30 Philippine brands with international presence.