Glance Franchise
Malaysia’s economy showed good growth in 2012/2013 and is forecast to exceed 5.4% in 2014 with a similar growth forecast continuing through 2016. Demand is high in Malaysia with over 60% of Malaysia’s GDP contributed by domestic consumption.
In 2013, 480 new franchisees entered the market and in August 2014 there were more than 700 registered franchises with more than 6,000 points of sale. The industry has the potential for growth as it currently represents only 5% of total retail sales. Around 25% of franchises are controlled abroad and national franchisors have a global aspect, being in 51 countries with a total of 1,494 points of sale.
International expansion by national franchisors:
1) Indonesia – 22 franchisors
2) China – 14 franchisors
3) Singapore – 17 franchisors
4) Philippines – 10 franchisors
5) India – 10 franchisors
6) Vietnam – 10 franchisors
7) Brunei – 10 franchisors
8) Saudi Arabia – 9 franchisors
9) UAE – 9 franchisors
10) Australia – 7 franchisors
Malaysia has the Asian government and probably the most franchise friendly in the world. Malaysia views franchises as an important economic engine and as such offers various sweeteners to encourage industry expansion.
The Malaysian government actually has its own franchise development department which created the National Franchise Development Master Plan (PIPFN) 2012-2016. The plan sets challenging goals and strategies:
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Contribute 4.3% of GDP for 2016.
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Contribute 9.4% of GDP by 2020.
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Have a 16% increase in the number of registered franchised companies by 2016.
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Make Malaysia the franchise hub of Southeast Asia.
The plan is reaching its milestones with franchises contributing about 2.7% of GDP in 2012 and the industry generated approximately $ 7.5 billion.
Perbadanan Nasional Berhad (PNS) is an agency owned by the Ministry of Finance Incorporated (MOF Inc.) with a mandate to lead the development of the Malaysian franchise industry. Several great financing schemes and tax incentives are available to help existing businesses grow through franchises and attract new franchises to the country.
For example, the franchise microfinance scheme allows lower-income potential entrepreneurs the opportunity to start businesses with mitigated risk. The PNS allocated RM8 million (approximately US $ 2.5 million) to the program and, in early April 2013, RM6 million (approximately US $ 1.9 million) was delivered. The Ministry has stated that it is not against injecting more funds into the plan.
Another scheme, the Franchise Development Assistance Fund, encourages local entrepreneurs to expand their existing business into a franchise business. Businesses that have already successfully developed as franchises are eligible for reimbursements of up to 90% of overall franchise system development costs incurred, up to a maximum of US $ 31,118.
In addition, low-interest loans of up to 80% are available to new franchises without the need for collateral or collateral, and of particular interest to foreign companies looking to enter Malaysia is the availability of assistance for master franchisees.
To take advantage of these schemes and for more information on Malaysian franchises, visit:
http://www.pns.com.my/franchise/franchise-program/
Malaysian Consumer
Malaysia is geographically well positioned for franchisors heading to Asia. The central location and high domestic consumption have made it a strong starting target for franchisors looking to expand across Asia. As franchisors increasingly enter this market, Malaysian consumers are getting used to global brands and can distinguish between them. The modernization and sophistication of consumers towards global brands is especially prevalent among the most prosperous and promising Malaysian youth. Overall, the population is young, with approximately 70% of Malaysians in the 15-64 age group and 28% 15 or younger.
An impressive 97% of the population is employed and the increase in disposable income of Malaysian consumers has created a relatively new change in shopping habits and this change is not expected to subside in the foreseeable future.
Consumer purchase drivers
Malaysia’s culture and belief system is very strong and will affect consumer purchases, especially in the nondurable goods sectors (including food and clothing), so please be aware.
As in other Asian countries, they consider freshness and quality to be an important factor when buying food and eating out. Product labeling to show these key points can be a good USP for your business and differentiate yourself from national brands.
Low prices, while still influencing, are no longer considered the most important purchasing factor – only 69% of Indonesian consumers consider it their most influential reason for choosing a store. However, they are not going to overspend yet, Malaysian consumers are the most prolific sales seekers in Asia and a brand that offers a loyalty scheme and / or runs promotional campaigns has an advantage.
With the literal rise of supermarkets and shopping malls comes the associated driver of convenience and for the franchisor, concession opportunities. Shopping malls offer a wider range of foreign products / services for the consumer to try. The convenience of longer opening hours and being able to shop under one roof works well with the increasing number of hours Malaysians are working now.
Although there is a trend towards healthier eating, the traditional Malaysian diet is not as healthy. The Ministry of Health findings estimate that Malaysian adults consume the equivalent of 10 teaspoons of added hidden sugar, more than the amount recommended by the World Health Organization. Healthier life awareness, despite being promoted by the government, is not yet fully developed and products containing high levels of salt or sugar continue to be popular with Malaysian consumers.
This is good for franchisors, as there is the best of both worlds. There is a healthy market (excuse the pun) for high calorie or salty products and there is a growing market niche for healthier products. To target the latter market, make sure the entire marketing campaign is 100% targeting the health benefits and quality ingredients used. Some brands are cleverly linking health checks or product comparisons to tone down the healthier properties of their products.
The bottom line
Malaysia is similar to Indonesia. There has been good growth in recent years and it is expected to continue. As a result of the improving economy, consumers are more optimistic and there is new consumer confidence in the market. Demand from domestic consumers is high and Malaysia’s growing middle class has led to increased discretionary spending. It is still a few steps away from the more advanced countries in Asia, but with such a franchise-friendly government, the environment seems healthy.
To conclude: Good fundamentals and strong government support.
Franchise Meets calculates 7/10.
