Overview

Taiwan is well-known for its high concentration of franchises throughout multiple industries, including dining, shopping, beauty and health, real estate, technology, and education. As of May 2022, the top ten U.S. franchises in Taiwan by number of stores were Starbucks (533), McDonalds (402), Pizza Hut (279), Domino’s (157), Kentucky Fried Chicken (177), Subway (135), Burger King (64), Cold Stone Ice Creamery (40),

Haagen-Dazs (38), and TGI Fridays (15).

The food and beverage franchise market in Taiwan is highly saturated and extremely competitive. Fierce local competition and the dominance of well-known brands make it difficult for new foreign firms to enter the market unless the brand is very well-positioned. Taiwan’s consumers enjoy a moderately high standard of living and pay close attention to famous or high-end brand names, as well as exciting new products coming into the market. Consumers often line up for hours to attend the grand opening of internationally recognized franchises that are new to Taiwan. Another challenge is high real estate prices, particularly in Taipei, which can cause difficulties when negotiating reasonable rent and lease terms with local landlords.

To increase their competitiveness, major players look for vertical or horizontal integration. Several recent deals have reshaped the market landscape. For example, the French retailer Carrefour acquired 199 stores of Wellcome Supermarket and 25 stores of Jason’s Market Place to expand its business in Taiwan in June 2020. While hypermarkets, supermarkets and convenience stores started working with food delivery service providers during COVID-19, Foodpanda opened panda marts, an online supermarket, to make the competition even more intense. 7-11 Taiwan acquired foodomo, a food delivery service provider, to extend its services to more customers. With the current labor shortage and COVID-19 concerns, utilizing food delivery services will be very important for the survival of the food and beverage industry.

Taiwan authorities’ Fair Trade Commission reported that an increasing number of franchisors moved to various digital channels to recruit franchisees. The channels are not only limited to company websites and mobile apps, but also include online franchise matchmaking platforms, Facebook pages, and LINE* Biz- Solutions. Besides broadening the franchisee network, franchisors also started to work with food delivery service providers such as Uber Eats and Foodpanda to generate more revenue.

*LINE is the most-used mobile instant messaging app in Taiwan.

Current Market Trends & Needs

Taiwan was one of the earliest markets to lock down borders in response to the COVID-19 pandemic. Because of this, the pandemic had a relatively minor impact on Taiwan’s economy in the last two years. Taiwan’s GDP grew 3.36 percent in 2020 and 6.45 percent in 2021.

Consumer behavior and demand in Taiwan inevitably changed during the pandemic. Online sales in the retail industry equaled $14.33 billion in 2021 with an annual growth rate of 24.5 percent. The food delivery service industry grew by nearly 200 percent in 2020. This highlights the importance of digitalization, not only in sales channels but also in business operations and supply chain management. Digitalization is essential for companies to be responsive to rapid market changes and heightened risks during the pandemic. Therefore, digital tools that franchisors can offer have become more and more important for franchisees to assess their investments. For example, Uni-President Enterprise, the parent company that runs the convenience store 7- 11 in Taiwan, has become the largest franchisor with 690 company-owned stores and 5,734 franchise stores in Taiwan. 7-11 Taiwan offers its franchisees a digital platform, including marketing management, financial management, store management, human resource management, and Point-of-Sales applications to provide a wide range of different services, such as printing, scanning, faxing, calling taxis, collecting online shopping packages, and even dry cleaning.

According to research by the Taiwan Chain Stores and Franchise Association (TCFA), franchise brands in 2022 decreased by 1.2 percent to 2,888 brands; however, the number of stores increased 4.8 percent. This research covers the retail, food and beverage, and other service sectors. There are a total of 113,158 chain stores in Taiwan, including 52,007 company-owned stores that have reported an annual growth rate of 6.9 percent, and 61,151 franchise stores that have reported an annual growth rate of 3.1 percent. Growing store numbers can be attributed to several factors, including but not limited to:

• Online enhancements – offline integration capability
• Continuous investment in stores with the most economic benefits
• Growth of digital technology-related businesses because of the increasing number of professionals working from home
• Rising competition costs are reshaping the food and beverage market landscape, furthering market concentration
• Although the number of brands decreased, medium and large brands in recent years have still actively expanded their stores in the market.

Although Taiwan had COVID-19 under control in 2020 and 2021, the Omicron variant caused Taiwan’s most serious COVID-19 outbreak starting in May 2022, with over 90,000 reported cases per day for a period.

Taiwan authorities evolved from a zero COVID policy to “co-existing with the virus.” According to the local Chamber of Commerce’s research, sales in the service sectors, including food and beverage, tourism, lodging, and retail, decreased by more than 50 percent during the Omicron variant spread. This major drop in sales may cause companies to withhold their investments in these sectors.

Best Prospects for U.S. Franchisors

The pandemic changed consumer behavior and demand in Taiwan. Healthy diets have become the new fashion. According to the Nielsen Company, food with no sugar, extra fiber, and more nutrition has seen higher growth rates than regular products. For example, soymilk product sales grew by 13 percent in 2020 while soymilk with no sugar sales grew by a remarkable 21 percent.

Taiwan has three million vegetarians, 13.8 percent of the population, which ranks second place globally. The vegetarian market value is $2 billion per year. In 2019, chain restaurants started to serve plant-based meat and milk. However, there is still a lot of potential for this growing green diet market.

The Taiwan National Development Council reported that Taiwan will become a super-aged society in 2026. At least 20 percent of the population is 65 years old or older. Taiwan authorities amended the regulation to provide tax deduction incentives to encourage private-sector investment in long-term care. Elderly care and services franchises will enjoy massive demand in the near future.

Market Entry Considerations

In recent years, due to high initial capital investment costs and increasing competition from local franchises, Taiwan’s investors have adopted a more conservative attitude toward new foreign franchises. Plus, the market is gradually recovering from the COVID-19 outbreak in May 2022. The investors still withhold investment in the service sectors including food and beverage, tourism, lodging, and retail that are significantly impacted by the pandemic.

To succeed in the Taiwan market, U.S. franchises should provide considerable support to their local partners by implementing best-practices, systems integration, personnel and customer service training, and quality assurance protocols.

Local Regulations:

• Fair Trade Commission Disposal Directions (Guidelines) on the Business Practices of Franchisors
• Consumer Protection Act
• Act Governing Food Safety and Sanitation
• Trademark Act
• Commodity Labeling Act
• Business Entity Accounting Act
• Personal Data Protection Act

Local Franchise Association

• Association of Chain and Franchise Promotion, Taiwan
• Taiwan Chain Stores and Franchise Association

Trade Events

In most major industries, industry associations work with the Taiwan External Trade Development Council (TAITRA) to organize local trade shows. Participating in major trade shows and advertising in relevant Taiwan trade publications are useful and effective ways to boost sales in the market.

Information about upcoming trade shows in Taiwan is available on TAITRA’s website. TAITRA also offers several helpful lists, including a frequently updated calendar of TAITRA-sponsored trade shows, international conferences, and exhibitions held at the Taipei World Trade Center and the Nangang Exhibition Center.

The largest local franchise exhibition, International Chain and Franchise Exhibition, is organized by the Association of Chain and Franchise Promotion, Taiwan (ACFPT). There are two exhibitions (summer and autumn) in Taipei, one in Kaohsiung, and one in Taichung. ACFPT also organizes online matchmaking events from time to time.

U.S. firms interested in learning more about the franchise market and seeking to expand their export opportunities to Taiwan are encouraged to contact CS Taiwan Commercial Specialist Kelly Lee at Kelly.Lee@trade.gov.