Discusses opportunities for U.S. franchisers and legal requirements in the market
The franchise industry is still very popular among Thai investors and has been successful in the Thai market. Experts identified 576 franchise concepts in 2018, representing 5% year-on-year growth in the last 12 months, according to the Thai Franchise Association report. Franchise revenue was $7 billion in 2018; 95% of that was from local franchise businesses and the other 5% from international franchise businesses. It is expected that the number of international franchise brands will be increasing by 10% in the next 3–5 years due to interest by Thai businessmen in bringing more international brands into Thailand and diversifying their investment portfolios. Restaurants, quick-service, and casual dining have the largest market share of about 23%, while food and beverage (including coffee shops) are second with about 22%. Education service franchises (including education and child development) come in third with approximately 18% of the share. Though international franchise systems are few in number, they control 60% of the total market value.
The United States is the leader among international franchises and controls 65% of the international market. The quality, standards, brands, and innovations offered by U.S. franchises are well known to potential Thai investors. Franchising fees required by U.S. companies are perceived as very high, and start-ups require a huge capital investment. Hence, only a few strong financial Thai investors are able to apply for a franchise license, set a new management team, and operate the brand. Thai investors are also interested in partnering or setting up joint-venture companies with well-known foreign companies to promote brands and accelerate expansion of local outlets.
Pioneers of American franchise brands include KFC, McDonalds, Burger King, Carl’s Junior, Starbucks, Swensen’s, Au Bon Pain, Pizza Hut, Krispy Kreme, IHOP, Cinnabon, Baskin Robbins, A&W, Subway, Coffee Beans and Tea Leaf, 7 – Eleven, Outback Steak House, Sizzler, Domino’s Pizza, Dunkin Donuts, Anytime Fitness, and Taco Bell to name a few. American franchise brands face strong competition from Taiwan, Japan, and Korean franchises, especially in food and beverage franchise concepts, that have gained popularity among local consumers and account for the majority of new market entrants in recent years.
Potential demand for American food franchises exists among expatriates and tourists. Thailand’s growing affluence and the increasing popularity of American products also enhance the growth potential for American franchises. In addition to offering products and services that are well-liked by Thai consumers, identifying a strong local partner, with strong financial capabilities and experience in franchising, is a key factor.