Franchising sector may shrink by 45% next year

franchising sector may shrink by 45 next year - Franchising sector may shrink by 45% next year

The country’s franchising sector is expected to shrink by almost half by next year as more franchise owners close shop amid a coronavirus pandemic, according to the Philippine Franchise Association, Inc. (PFA).

The sector started the year with 200,000 franchise outlets, and is expected to end the year with just 130,000, PFA chairman emeritus Samie C. Lim told an online news briefing on Friday.

The number of franchise outlets are expected to decline further to 110,000 by the end of the first quarter of next year, he added.

The group initially estimated P700 billion in earnings for the industry this year, but almost three-quarters of franchisees now expect to lose half of their revenues because of the health crisis, PFA Chairman Richard V. Sanz said at the same briefing.

That would mean P200 billion in foregone revenues, he said.

A PFA poll of 720 members showed that 56% thought the change in consumer behavior was the most challenging aspect of the new normal, followed by consumers’ economic condition (51%), health consciousness (27%), internet connectivity (26%), and lack of transportation (24%).

The group said 48% thought declining consumer confidence was the biggest hindrance to their operations, followed by rental fees (41%), limited public transportation (31%), safety protocols (17%), and the rising cost of goods (9%). These are also draining their profitability, according to the poll.

The franchise group recently identified new market opportunities for the retail sector amid the pandemic.

Stores promoting hobbies, arts, crafts, board games and gardening will start to prosper after the pandemic, Mr. Lim said.

Stores selling fitness products, personal protective equipment, “inexpensive indulgences” such as beer, chocolate, junk food and makeup will also experience growth, he said.

Eye makeup would probably sell like hotcakes in the next two years because it’s the only part of the face that remains visible, without everyone wearing masks, Mr. Lim said.

There will be opportunities in home-schooling, healthcare, mental health and counselling clinics, professional cleaning and crematorium services, he added.

Mr. Lim encouraged companies to go digital and boost their business through loans. — Arjay L. Balinbin

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