Market Intelligence
Franchising Philippines Export Potential Trade Opportunities Trade Practices

Philippines FRANCHISE Market

The Philippines, with its growing middle class, is a good market for franchises. The market is extremely fond of American brands, where more than 90% of all foreign franchises are of U.S. origin. Brands that have disappeared from the United States are still prominent in the Philippines, and nearly every mall hosts the same listing of standard American brands. For such reasons, the Philippines is considered one of the largest franchise markets in Southeast Asia. Metro Manila alone, with a population of 20 million during the day, is a target market for foreign franchises. The 4 million daily consumers dine and shop in the metropolis while visitors flock to stores that are in Manila to buy in bulk, and bring things back to their provinces. Eating at a brand name establishment or purchasing brand name items signal societal status in one of Asia`s most social media savvy populations.

There are about 1,300 franchises in the Philippines covering food, retail, and service sectors. As local businesses have experienced success and continued expansion, there are more local franchises now than there were 10 years ago. There are about 55% local franchises vis-à-vis 45% foreign ones. Recently, local franchises such as Jollibee have even expanded overseas.

The average GDP per capita of under $3000, does not include the $33.5 billion in remittances from Filipino overseas workers that contribute to the growing purchasing power of the middle class. Young working professionals, living in the city and away from their families, tend to purchase pricey coffee beverages, clothing, or products.

The younger generation Filipino consumer is not as emotionally tied to American brands as the

pro American Baby Boomer generation. They now choose between Japanese, Korean, Chinese, and European options, and enjoy Korean cosmetics and makeup brands more than American ones. Price is also a major consideration.

New U.S. brands wishing to enter the market must identify a qualified local partner and come up with a detailed marketing and business plan. Filipinos follow trends via social and other advertising media. Filipino franchisees tend to invest in brands that are already popular in the Philippines – one with name recall and also popular with consumers. If the brand is unknown in the Philippines, substantial effort will need to be invested in generating brand awareness and the local partner will likely expect significant investment from the foreign principal. The highly saturated market will also present stiff competition, and new brands must prepare to spend 2 years before being able to determine if their business model is sustainable. New brands always receive great attention that can wither months after an opening; thus, developing a steady clientele is key in business continuity.

There are only about 10 local firms with experience in franchises and they tend to dominate all the American brands. These include:

• Max`s Group (Krispy Kreme, Jamba Juice)

• Ramcar Foods (KFC. Also Mister Donut, which used to be American)

• Philippine Pizza Corp (Pizza Hut, Dairy Queen, Taco Bell)

• Jollibee Food Corp (Burger King, Panda Express, with investments in U.S.-based Smash Burger, CBTL)

• Rustan’s Group (Shake Shack, GAP, Old Navy, DKNY, etc.)

• Am-Phil Ventures, Inc. (Chili’s)

• Foodee Global Concepts/Food Link

• Udenna/Eight-8-Ate Holdings (Wendy’s)

The Bistro Group* (Buffalo Wild Wings, Denny’s, Texas Roadhouse, Italianni’s, Fridays, etc.)

*Bistro Holdings has about a dozen concepts and has partnered with a venture capital company in some of its restaurant operations.

The Philippine Franchise Association (PFA) reported that franchise investors are now also looking at new opportunities in wellness (spa, gym, anti-aging centers), health (dental, optical, primary care), and retirement (retirement homes and travel/tourism opportunities). The key to success would be identifying a capable local partner and bringing a unique concept that can be priced according to Philippine standards. Consumers are willing to pay more than expected but there is a realistic ceiling given income level.

Many popular franchise brands participate in the Philippine Franchise Association (PFA)-organized Franchise Asia. This show is a good opportunity to understand the lay of the land.

For more information contact Dey Robles
Commercial Specialist for Franchising