"The economic and political uncertainties had a big impact on the sentiment of individual investors who want to enter the franchise business. Most of these people would invest in a business in which they could foresee growth in the future. And any uncertainty would delay their decision to invest in the business," Peerapong Kitiveshpokawat, director of the International Retail and Franchise Business Development R&D Centre (IRF) at Sripatum University, said yesterday.

The IRF's "Thailand Franchise Situation Research 2006-2007" project found a

big drop in investment and number of franchised stores. Growth

of investment in opening franchised outlets dropped sharply from 41.2 per cent in 2005 to

only 18 per cent in 2006. Growth of new franchise investment is

projected at 17-20 per cent this year.

The descriptive statistics survey was conducted between November and January among 416 franchisers.

According to the survey, about 456 franchisers are doing business here with more than 24,000 franchised stores, and they generate total sales of at least Bt83 billion per year. Of the total, 375 franchise businesses are operated by Thais and the rest by international chains.

Peerapong said the franchise industry would enjoy sustainable growth of 20-30 per cent per year as long as the political and economic situation was normal.

Thailand is lagging in the region behind countries including Singapore, the Philippines, Malaysia, Taiwan and China, which enjoy faster growth.

About 20 per cent of the Philippines' retail trade comes from franchises. Each franchiser in the Philippines has a strong network of about 100 franchised outlets on average.

In Thailand, the franchise business contributes less than 10 per cent of total retail trade. About 49 per cent of local franchisers have less than 10 outlets, while almost 20 per cent have between 31 and 100. About 20 per cent have 10-30, and only 13 per cent have more than 100 outlets.

"From the survey, we found that only 48 per cent of the franchisers had committed to expanding their franchised outlets in 2007, while 52 per cent had suspended their expansion plan in order to carefully monitor the economic and political situation," Peerapong said.

The biggest worry raised by individual franchisees was that their franchisers would go out of business.

Peerapong said the estimated number of discontinued franchisers reached 124 last year and at least 1,000 employees had lost their jobs. This increased from 84 failed franchisers in 2005 and 60 in 2004.

"Many local investors still lack a good understanding of franchising, which is based on a strategic clustering technique to support and help all franchisees' stores to make a profit and then contribute some return to the franchiser," he said.

Franchisees also need good business guidelines and strong financial support, he added.

Boonchai Leeraphante, president of the Franchise and Thai SMEs Business Association, said the country was lacking integrated support from the government and local authorities that would help give the local franchise business a solid foundation.

The government and other authorities are rushing to grow the franchise business without any concern or initiative to ensure that the business will enjoy a firm foundation and healthy growth, he added.

Kwanchai Rungfapaisarn

 The Nation