10 Sept 2019
Malaysia Bids to Become Southeast Asia's Preeminent Franchise Hub
This year's Malaysia International Retail & Franchise Exhibition saw the country look to both showcase the strengths of its domestically devised franchised operations and stake a claim to being ASEAN's key business-licensing centre.
Rightly renowned for its burgeoning shopping-mall culture, Malaysia has become a prime target for expansion-minded franchises. For their part, real estate developers – particularly those active in Kuala Lumpur, the national capital – continue to favour mixed-use projects, many of which feature prime retail spaces, while airport upgrades and fast-growing decentralised businesses are also creating a steady supply of new purchase points and food and beverage (F&B) outlets.
Malaysia is home to more than 500 active franchise brands, about 70% of which are of domestic origin, according to the Malaysian Retail Chain Association, with F&B, retail, education, health and beauty accounting for the largest proportion. By the end of next year, the government is trusting the sector to deliver a 9.4% share of overall GDP, while its longer-term aim is to establish the country as the franchise hub for the whole of Southeast Asia.
Against such a backdrop – and with Malaysia's retail economy predicted to expand 4.9% by the of the year – the recent Malaysia International Retail & Franchise Exhibition (MIRF) couldn't have been better positioned or more timely. This year's event – the fourth – attracted 200 domestic exhibitors and 50 from overseas, while 18,000 would-be franchisees from 20 countries and territories passed through its doors.
Overall, the majority of exhibitors seemed intent on finding master developers, as well as individual franchise investors, in Malaysia and a number of neighbouring ASEAN countries. In order to help facilitate this, the show also featured a 'Hatchery' incubator platform, which was designed to both help licensees adapt their business models to local preferences and to instigate a more data-driven operational model.
It's also fair to say that takeaway F&B brands pretty much dominated the event, with the fast-maturing coffee-shop culture now evident in Malaysia and across much of Southeast Asia attracting both familiar and more experimental options. Very much in the former category, Segafredo – an Italian-style coffee-shop brand now active in more than 100 countries – had made its way to Kuala Lumpur to promote its new Segafredo Select concept.
Introducing this latest extension to the brand, Paul Barbone, Director of Southeast Asia and China Franchise Operations for Massimo Zanetti Beverage Services, the Italian holding company behind the Segafredo brand, said: "It's all about specialty brewing and showcasing the very finest aspects of Italian coffee culture, while also remaining eminently flexible. It can run in a variety of formats – from a full-service store featuring a roaster to a cold brew bar serving a gourmet Italian classic menu or even as a stylish mobile coffee cart.
"Our first Segafredo Select outlet is set to open in Miami shortly, with Southeast Asia one of our next priorities. With that in mind, we are looking to appoint a master developer, one that can deliver 15-25 Malaysian outlets within a five-year period."
Slightly better established in the region was the Liang Sandwich Bar. Founded in Shanghai and with a Taiwanese superstar – Jay Chou – onboard as a brand ambassador, it's expanding at an impressive rate of knots. With some 12,800 outlets already operational across China, the US, Japan, South Korea, Australia and New Zealand – Southeast Asia is the next region in its sights.
Outlining its progress in the region, Jarvin Leow, Executive Director of the YS Master Group, the Johor-based plastics company that owns the Liang master franchise for Southeast Asia, said: "We opened our first outlet in Malaysia in December 2017 and now have more than 60 sandwich bars and kiosks, as well as 10 mobile food trucks. We also have eight outlets in Singapore and 27 existing and soon-to-open sites in Indonesia.
"At the moment, we operate half the outlets ourselves, with the rest in the hands of our licensees. It's a model that has helped us expand rapidly, with 60% of our licensees owning more than one outlet. As a result, the Liang brand is now quite well known here, with our customers aware we have adapted our range in line with local tastes. We are, for instance, halal-certified, with our Malaysian outlets offering a roti canai-style sandwich, while in Singapore this has been substituted for chilli crab.
"While most of our current Malaysia outlets are in malls, we are finding new opportunities opening up in hospitals and university campuses, as well as bus and LRT stations. Looking further afield, our next scheduled openings are in Phnom Penh and Manila later this month."
Buoyed by a high level of franchise investment, bubble tea and juice kiosks are now common sights across Asia, with Taipei-based CoCo Fresh one of the lead players in the sector. Founded in 1997, it already has 3,700 outlets and is keen to expand yet further.
Detailing the extent of its current empire, Rita Cheng, a Business Development Manager with Ococo International, the Taipei-based beverages company that owns CoCo Fresh, said: "Most of our franchises are in Taiwan and mainland China, although we also have a presence in Japan, Korea, the US, Canada, Europe and Australia.
"Now, though, we are very much switching our focus to Southeast Asia. Although we have already opened outlets in Manila, Bangkok and Jakarta, this is the first time we have attended a Southeast Asia franchise event. The challenge for us in Malaysia is – while some Chinese people know our brand, we really need to work on building our overall awareness."
In addition to F&B franchises, the event also showcased a number of more service-oriented opportunities, with haircare a particularly popular option. Keen to make inroads here was Singapore-based Kcuts. Founded in 2013, it currently operates 55 '10-minute Korean-style haircut' salons that capitalise on the popularity of K-culture across the wider Asian region.
Introducing the business and its aspirations, Bernard Ng, a Director of the KC Group, the parent company of several personal-grooming businesses, said: "We are Singapore's largest quick-cut brand and operate 29 Korean staffed full-service salons and six beauty centres. We only began franchising this year and have now registered our trademark in a number of target territories. Overall, we believe we have the right brand and the right business concept to expand into Malaysia and several other ASEAN markets."
With similar pan-ASEAN ambitions, domestically founded Cleanpro operates 300 self-service laundry outlets across Malaysia and a further 100 in neighbouring territories, all providing commercial laundry services to businesses and hotels. Detailing the current extent of its franchise network, Terry Yan, Marketing Executive for Cleanpro Laundry Holdings, said: "Although we started in Kuala Lumpur, we now see ourselves as a truly ASEAN company. In line with that, we have a master franchiser in Singapore as well as outlets in Thailand, Indonesia and Vietnam.
"In Malaysia, we also operate Cleanpro Express and two other brands – Aladdin Dobi, which caters specifically to Malay communities, and iBu Sayang, our closed-environment specialist offering that looks to super-serve schools and condo developments, among others."
Perhaps the most forward-looking franchise on offer came courtesy of the CIY Club, with its giveaway acronym standing for Code It Yourself. With the concept originally pioneered in Sydney, this out-of-school technology learning club aims to provide young learners with hands-on computer coding skills. At present, it operates three centres in Malaysia, with a further five at the contract stage.
Explaining the pedigree of the concept and its local application, Linggam Rammoo, General Manager of the ScopeIT CIY Club, said: "The concept has been trialled and tested in Australia, where our sister company – ScopeIT Education – has established an interactive digital technology programme taught in junior schools across the country.
"Here in Malaysia, we are building interest through our bespoke coding clubs. We are also working with an international school in Kuala Lumpur in order to develop the concept within a more formal classroom environment."
The 2019 Malaysia International Retail & Franchise Exhibition (MIRF) took place from 18-20 July at the Kuala Lumpur Convention Centre.
Geoff de Freitas, Special Correspondent, Kuala Lumpur