The Concept Of Franchising In Singapore and Some Of The Most Success Franchise
Starting a business may be demanding in terms of marketing and branding, and thus it is easier to venture into an already established business. Franchising involves joining an already tried and tested business and operating a branch under their name. This is a direct route of investing instead of beginning a business from scratch and struggling with issues to do with marketing and branding.
The concept of franchising
Franchising is a business strategy that has been around for ages, and it is an approach that businesses use to enhance productivity and improve revenue. Usually, it offers a quick way of investing and accessing the market. It involves the signing of a franchising agreement with an established business, the franchiser, for one to use the business’ trademark, brand, and other products to gain market access. This strategy requires one to put some liquid capital into the franchisee and also some royalties, which are a fraction of the sales.
For example, if one wants to open a McDonald’s outlet in Singapore, they will have to pay some amount to McDonald’s, which is the franchiser, and then they can set up and operate the outlet as their own. However, every month, McDonald’s will take a percentage of your sales for letting you continue using their brand.
Interestingly there are specific rules that the franchiser can impose on the Franchisee because this affects their brand image. How you market and run the business matter, and for this, sometimes, the outlet has to look exactly as the franchiser in terms of décor and branding. Some even have to take the franchisee through training on how the business is run.
For the franchiser, this is an option of growing the business, especially if there is a need to raise capital compared to raising a loan or selling equity. This is an easy way to grow the business because the franchisee will be motivated to manage their franchise unit properly, considering they have invested a significant amount in it in the form of the franchise fee. In Singapore, franchising is quite easy because of the liberal laws of the city-state. There are no specific franchising laws, but it is important to understand legal issues associated with franchising.
Franchising Laws in Singapore
Singapore does not have a separate law governing Franchising or franchise registration requirements. The country’s general laws govern the process of franchising or the agreement between the franchiser and the franchisee. However, the Franchising and Licensing Association of Singapore (FLA) provides a Code of Ethics that governs the process, and it is only binding on FLA members. Interestingly, registration with FLA is not mandatory for the franchisor.
The Code of Ethics contains provisions regarding agreements of existing franchisees, disclosure agreements, business guidance, and proper training, a notice of breach, standards of conduct, right of termination as well as dispute resolution, among others. Singapore’s general laws do apply to all franchisees and franchisors, notwithstanding their membership with the FLA, and this might impact the enforceability of the franchise agreement.
Before starting franchise operations, it is important for the franchisor to protect its intellectual property rights through registration or any other necessary enforcement action. In Singapore, there is no obligation for the franchisor to reveal its franchise system and other finer details to the franchisee.
In Singapore, there are no pre-contractual disclosure guidelines in regard to franchising besides the common laws. But the FLA Code of Ethics does offer some prohibitions of its members from the offering, promoting the sale or selling any franchise, service, or product through means that might deceive or mislead consumers. Equally, it requires the franchise investment to be detailed in a manner that avoids misleading.
Successful franchises in Singapore
In Singapore, there are several F&B and retail franchises, as well as childcare franchises. Here are some of the most popular franchises
- Old Chang Kee franchise: Popular of its curry puffs that are popular in Singapore as a home snack. It requires an initial capital investment of between $200,000 and $300,000 to open an outlet. Old Chang Kee offers training to franchisee about customer care, sales operation, outlet setting up and product knowledge
- LiHo franchise: Formerly Gong Cha, this is a bubble tea chain that has risen to popularity because of its signature cheese teas. There is no information provided on the franchise fee, but this can be gotten from Parent company Royal T.
- 7-Eleven franchise: one of the most ubiquitous franchises in Singapore that are popular for its Magnum ice cream. To open an outlet, you need $30,000 in the franchise fee and an initial capital investment of around $40,000
- Prima Deli: This is a chain that serves Asian, French, Western, and Singaporean pastries, cakes, bun sand bread. It needs an initial capital investment of between $120,000 and $250.
- My little Genius: Besides F&B, there are also childcare franchises, and My Little Genius is one of them. It is an early childhood enrichment center involved in child development through various activities. Franchise fees range from $50, 000 (single unit) $150,000 (area) and $300,000 (Master).
The outlook of the franchise in Singapore
Singapore’s liberal laws make the country to be a favorable market for franchisors. The open economy with free trading regimes makes Singapore one of the countries where doing business is easy. The number of franchisors has continued to grow over the years, so has the number of franchisees with most in the food and beverage industry, retail, and business services. Franchising contributes significantly to the economy of Singapore.
Singapore expects to continue seeing more franchisors and franchisees going forward. According to Asiawide Franchise Consultants CEO Albert Kong, the region is racially and culturally diverse, so there are different needs for different groups. There are emerging trends in Singapore, and as a result, more fast foods are expected to be coming to the country through franchising. Equally, STEM-type enrichment franchises are expected to become more popular where children can get an opportunity to learn, especially in futuristic and high tech industries.