22 Nov 2016
Bringing Franchise Partners Together
Ever since American fast-food chain McDonald’s opened the first of its Hong Kong outlets in 1975, franchised operations have been a stalwart of the city’s SME landscape.
As noted by the Hong Kong Franchise Association (HKFA), a support organisation established under the Hong Kong General Chamber of Commerce (HKGCC), Hong Kong is ripe for individually-operated franchises.
“The legal climate is conducive to franchising in Hong Kong,” explained Shirley Yuen, HKGCC CEO. “As a free market open to all, there are no barriers to trade, no restrictions on investment, and no foreign-exchange controls.” The city’s well-developed infrastructure, excellent telecommunications network and industrious workforce also help franchised SMEs to hit the ground running.
While there is no official record on the number of operators in Hong Kong, HKFA research suggests that 42.7 per cent of existing franchises are in the catering industry, 37.3 per cent in services and 20 per cent in retailing.
As every sector in Hong Kong is placing more focus on quality and innovation for both products and services, Ms Yuen said, opportunities abound for enterprises equipped to meet the rising expectations of consumers.
Hong Kong serves as a stepping stone for franchisors to roll out their networks in the Chinese mainland. According to HKTDC research, 90 per cent of international franchisors surveyed have their eyes on the vast mainland market.
For those brands, Hong Kong is a focal point in a region of growth. By 2019, the number of franchise brands in Asia is expected to exceed that of the United States, the European Union, Australia and New Zealand combined.
Launched in 2015 to facilitate new franchise business, the Hong Kong International Franchising Show debuted with 103 exhibitors. It returns this year to the Hong Kong Convention and Exhibition Centre on 1-3 December, alongside the World SME Expo.
Exhibitors this year include local and overseas brands, including US pizza chain Papa John’s, which is looking for a franchisee to develop its brand in Hong Kong.
“Papa John’s is known for our better [quality] ingredient platform,” said Erin Snyder, International Business Development Manager. “We use fresh dough, fresh packed sauce, fresh vegetables and high-quality meats.”
Recipe for Success
Founded in 1984 by John Schnatter, the chain now has 5,000 restaurants worldwide, including in all 50 US states as well as 43 countries, said Ms Snyder. Of these, 740 are corporate restaurants run by the parent company in the US, while the remaining locations are franchised.
“We currently have 2,677 franchise locations in the US, and 1,574 franchise locations internationally,” Ms Snyder said. The network includes the Chinese mainland (235 outlets), India, South Korea, Malaysia, the Philippines, Singapore and Guam. “We are very interested in finding a franchisee in Hong Kong and expanding our presence to this market,” she said.
Canadian brand Crepe Delicious will also exhibit at the fair. “We are excited to participate in the Hong Kong International Franchising Show and are delighted to grow our business in this part of the world,” said Oded Yefet, President.
Building the business from the ground up, Mr Yefet, as a teenager, opened a small kiosk at a local community centre, selling snacks and drinks. This led to various jobs in the F&B sector, including his own catering company.
Mr Yefet founded Crepe Delicious in 2004 and began franchising the following year. “Today, we have more than 30 locations in North America and 10 in the Middle East, operating in prime shopping malls as quick service, and street front as full-service restaurants,” Mr Yefet said.
The brand’s franchise system is well-developed, offering on-site training and grand opening support, as well as concept design, menus and support throughout the development and launch process, as well as operating support and manuals.
Its concept serving healthy crepes and gelato is also “strongly developed,” and well-suited for export to Asian markets, Mr Yefet said.
Eyeing Regional Markets
Crepe Delicious is looking to expand throughout the mainland, Taiwan, Japan, Singapore, Indonesia, Malaysia, Thailand and India.
“The Hong Kong International Franchising Show is the core franchise show in Asia and attracts investors and operators from all over the region,” he said. “This is an important show for us to showcase our opportunity and meet prospective business partners. We are looking forward to meeting area developers, franchisees and master franchise partners.”
Another exhibitor will be Sprouts Concepts International, a specialised franchise licensing and value-added business consultancy. Established in 2011, the company is headquartered in Hong Kong with regional offices in Tokyo, Japan; Seoul, South Korea; Taipei, Taiwan; and Shanghai and Guangzhou in the mainland.
“We provide effective business solutions and professional services to maximise the success of each customer,” explained Johnson Lo, founder and Chief Executive.
The company specialises in tailoring restaurant businesses to local markets. “We provide the total package to help clients create and operate their brand,” Mr Johnson said.
Customised Franchise Solutions
Its services take into account cultural differences. For instance, a menu that works for Western consumers may benefit from adjustment to Chinese tastes, which can vary across the different regions of China, according to Mr Lo. Sprouts Concepts’ knowledge can also help incoming and/or emerging brands use local procurement and logistics networks, secure their IP, and train staff.
For new entrepreneurs, Mr Lo said that franchising is the most effective and quickest method to start a business. “It is a simple business model that individuals could easily understand with less start-up funding.” He added that entrepreneurs can rely on the expertise of franchisees when it comes to staffing and resource allocation.
To date, the consultancy has successfully helped Korean restaurant brand Shingrildong, and Hong Kong dim sum start-up, The Peak Tower, to open outlets in the mainland.
For many brands, Mr Lo says, Hong Kong is the test ground to gain exposure and refine their offering before venturing into broader regional markets. “Hong Kong is a great platform to China,” he said.