Why US brands are seeking Philippine partners

by Jon Carlos Rodriguez, ABS-CBNnews.com

Posted at Jul 18 2014 07:56 PM | Updated as of Jul 19 2014 10:32 PM

MANILA, Philippines – The Philippines is becoming more and more of an attractive destination for US franchise brands seeking to expand in Asia.

Josh Merin, international affairs director of the US-based International Franchise Association, said that while this wasn’t the case in the past, foreign businesses are now seeing “a growing sophistication of the Philippine business community.”

“It was historically not as important of a market, it’s really over the past 5 or 6 years that it has come to the forefront as a very important market to international franchise companies,” Merin said Friday during a press briefing at the two-day US Franchise Trade Mission.

The trade mission visited the Philippines for the first time to pitch business concepts to Philippine franchisees.

The delegation included representatives from 14 American franchises interested in expanding in the Philippines, namely Edible Arrangements, Jan-Pro Cleaning Systems, Panda Express, Pretzelmaker, Russo’s New York Pizzeria, Title Boxing Club, World of Beer, Great American Cookies, Marble Slab Creamery, PJ’s Coffee, RadioShack, Tilted Kilt Pub and Eatery, Tutor Doctor, and Wow Café.

Merin said applications for the trade mission to the Philippines hit a record-high, compared to trade missions to China and India, which signified high interest in the Philippine business market.

“A lot of the things that have driven this are the ongoing growth of the Philippine economy, the very strong cultural ties that exist between the Philippines and the US, the fact that it is an English-speaking country helps a great deal, and the regulatory environment has improved in recent years to make it easier for franchise companies to come in,” explained Merin.

The American brands are looking for master franchisees in the Philippines to develop their brand.

The master franchisees will then be allowed to sub-franchise and sell off individual units within the Philippines.

“These US brands will be owned by Filipino nationals and the huge majority of the revenue, about 90 percent, would be staying in the Philippines with only a limited royalty stream going back to the US franchisor,” said Merin.

Merin said these successful franchises will not only help improve the business landscape and bring economic development to the Philippines, it will also open doors for more jobs.

“They bring in best practices that have been approved around the world that can then be applied by Filipino business people. They can help the middle-class through small business ownership, especially when sub-franchising takes place, and because they are infinitely scalable, they can help economic development and job growth,” he said.

Meanwhile, Franchise Trade Mission head Kristin Houston said the rising interest of American brands in doing business in the Philippines shows how important the country’s role is in Asia.

“We had a great number of companies interested in coming to the Philippines because they know how important of a market it is for their development in Asia and we ended up selecting the companies that we felt had the best aptitude, compatibility with the market, and also the ones we felt were highly comfortable with the best practices—that have driven their success in the United States and in other countries—and understand that these best practices are much more important when they expand in an international market,” said Houston, who is also a senior international trade specialist of the US Department of Commerce.

Merin noted, however, that government also plays a big factor in the business scene.

“Generally, the friendlier the government environment is for business, that makes it more appealing for franchises as with any other type of business. If there’s more transparency or corruption would to decrease, that would make it more and more appealing,” he said.

The 14 US companies will spend their stay in the Philippines taking meetings with interested Philippine companies, which have been previously screened by the US Franchise Trade Mission, but no deals will be finalized yet.

Based on a 2014 list of US-based magazine Entrepreneur, four of the 14 brands—Edible Arrangements, Jan-Pro Cleaning Systems, RadioShack, and Tutor Doctor—are among the top 150 franchises in the US.