Fragile global recovery seen a risk for franchise businesses

Published by rudy Date posted on July 15, 2010

FRANCHISERS and their prospective investors should tread carefully as the global economic recovery remains fragile and consumers have become harder to please.

To cope, industry players would do well to pander to consumer demands for more transparency/value for money and also take time to bullet-proof their business plans, experts said at the Philippine International Franchise Conference and Expo yesterday.

The government, for its part, should refrain from over-regulating business and pulling back stimulus measures as these could stifle growth and innovation, they added.

“There are risks. The fragile global economic growth [is one],” University of the Philippines economist Benjamin E. Diokno said as he noted that governments worldwide were leaning towards containing their budget deficits and cutting back on stimulus efforts.

“To me that is a threat. That means the global economy will be slowing down,” Mr. Diokno said.

On top of this, consumers hit last year by the downturn are showing a lot of restraint, said Joselito B. Ortega, chief executive officer of marketing consultancy JWT Manila.

“People are still searching for stability … People are prioritizing purchases,” he said.

They’ve become harder to court, increasingly demanding maximum disclosure about a product and how it is made. With the internet, consumers are also becoming savvy about seeking reviews at the same time wanting to interact in real time, Mr. Ortega added.

“The impact on business is you can’t hide anything anymore,” he said.

The uncertainty, however, shouldn’t deter investors as long as business plans are solid, especially since 2010 is an opportune time to penetrate markets, said Christopher Simnick, president of US-based Synergy Franchise Development, Inc.

“2010 to 2012 would be a good window of opportunity,” he said, adding: “I wouldn’t worry about the economy but your concept and ability to market.”

Those looking to venture into the US, in particular, must make sure to consider more mainstream tastes but also differentiate themselves, he advised.

Mr. Diokno, meanwhile, said the government should push back plans to balance the budget and instead continue on pump-priming the economy.

He said 2016 would be a better target to balance the budget, with the government in the meantime spending on “ready projects that will create jobs and put money into consumers’ pockets.”

Philippine Franchise Association Chairman Emeritus Samie Lim warned against overregulation, especially as the Trade department is currently drafting guidelines for the industry.

Victorio Mario A. Dimagiba, director of the Bureau of Trade Regulation and Consumer Protection, told reporters that the rules would merely encourage interested entrepreneurs to demand more data from franchisers. — Jessica Anne D. Hermosa, Businessworld

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