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(Last updated: 16 Aug 2007)
Trends and opportunities
The market
Franchising is a very popular business model in Singapore, with around 350 domestic and international franchise concepts active in the market. Food service concepts dominate the franchise scene in Singapore with well-known international brands such as Starbucks and Subway.
Despite its high levels of personal wealth, Singapore’s small population constrains the overall size of the market. Although, with its excellent regulatory environment and relatively familiar business culture – where English is the lingua franca for business dealings - it can be a good testing ground for Australian franchise concepts in South East Asia, and for first-time Australian franchise exporters.
Essentially, Singapore is a service-oriented market that focuses predominately on its human capital. There is a strong support base from the government to encourage entrepreneurs, and since statistics show that franchise businesses have a five per cent failure rate per year, compared to 30 to 35 per cent for non-franchise businesses, there is a strong incentive for Singapore business-starters to take up a franchise.
The Singapore Government, through the Economic Development Board (EDB), also has an incentive program that encourages international firms to set up their regional headquarters here. This means that major franchise operations with ambitions for Greater Asia can choose to earmark Singapore as their satellite base to branch out into regional markets around Singapore that have a larger consumer population base, and enjoy the concurrent benefits such as tax incentives and training grants, as well as well-educated and professional staff. More details on this EDB scheme is available.
A stand-out example of a franchise success from Australia is Dome, which came into Singapore as early as 1993, with a Singapore-based joint venture, Dome Coffees Asia. It partnered with Hong Kong based Sun Tec Corporation to open two Dome Cafes along Orchard Road. This base in Singapore served as a springboard into Asia, with new outlets mushrooming in Malaysia, the Philippines, and Dubai. Dome now has a factory in Singapore that roasts coffee for the Singapore and Malaysia market. The company is eyeing new ventures in China, Pakistan, Thailand, and India. A quote from one of the partners states that "the only real difficulties in entering the Asian marketplace was in securing real estate and overcoming cultural differences for initial staff training."
Whether it be the non-food consumer retail sector, or the food and beverage services franchise, a key determinant of one’s success in this sector is a clearly-defined and well followed-through unique selling proposition.
Opportunities
Singaporeans’ well-known love affair with cuisines from various cultures dictate that food and beverage franchise concepts are most likely to gain the quickest acceptance in the market. Australian franchises such as Dome and New Zealand Natural are currently available in Singapore, with newer entries like Hog’s Breath Café, Boost Juice, and Juiced Rawbars beginning to carve out their respective market shares.
Largely untapped is the non-food sector, with concepts like Action International, Video Ezy, and Expense Reduction Analysts being the forerunners in this sector. Australia’s storage solutions centre, Howard’s Storage World, has also established a presence with their first store opening in Parkway Parade on 28 January 2005.
Singapore is a great 'first base' for franchising because of its skilled and educated English-speaking staff from management to frontline levels. There are events such as the annual Global Franchising and Licensing Expo that franchisors can attend to publicise their franchise business and recruit qualified franchisees.
While the outlook seems to be skewed towards food and beverage franchises, there is definitely room for more service-oriented businesses that have a unique selling proposition for delivering services that appeal to an increasingly sophisticated and cosmopolitan consumer base.
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