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Tuesday 4th October, 2022

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Who’s open for global business?

Insight

Who’s open for global business?

The answer is that many key international franchise markets are looking for new development and investment in 2022 and 2023, despite the well-documented challenges, says Bill Edwards

Over my four decades in international franchising, I’ve always been impressed with the flexibility and resilience of franchisees and franchisors around the world. Despite various economic and political challenges, the global franchise development sector is looking robust overall as we come out of the pandemic.

There’s currently a pent-up demand for new franchise investments in many countries. However, as has always been the case, the key to putting a new franchise brand in any new country is often down to whether there are local investors who feel comfortable starting a new business.

Here’s an update on the current and 2023 franchise investment outlook across key global markets, derived from reliable published information sources and from our Edwards Global Services’ team on the ground, along with a commentary from international franchise experts about where they see opportunities in the current global market.

Philippine dine-in sales are up

“During the COVID pandemic, the Philippine F&B sector suffered from the government’s limits on dinein seats. With easing restrictions starting February 2022, there is a resurgence in dine-in sales for restaurants. F&B brands who wish to establish a presence in the Philippines should have a strong support for off-premise segments to secure revenue even in the most stringent dine-in capacity limits.”

Aimee Flordeliza, country manager, Franchise World Link Philippines

F&B market franchises thriving in Mexico

“Food and beverage concepts make up approximately 30 per cent of all franchised businesses in Mexico. Mexican consumers associate F&B concepts with the franchise model, and they are widely and positively accepted. The appetite for international F&B brands in Mexico is healthy and expected to continue for the foreseeable future.”

Roberto Litwak, COO, Feher Consulting

Denny’s expanding globally

“We’re seeing a significant amount of our current active franchise development in Canada and Mexico. As we look towards 2023 and beyond, we see the Middle East as a strong area for development, and Asia is on the radar screen as well.”

Steve Dunn, executive vice president and chief global development officer, Denny’s

Focus on new platforms and robust business models

“As COVID restrictions continue to ease, we expect to see a 20-25 per cent YOY uptick in new restaurant openings across our three regions (Latin America, EMEA and APAC). That said, we recognize concerns that the key global economies may slide into a recession, triggered by monetary policies aimed at lowering inflation, which could dampen the enthusiasm to grow.

We continue to innovate new platforms that underscore our brands’ core equities, thus offering our franchise partners business models that can withstand economic headwinds. For these reasons, we’re also experiencing an increase in franchise candidates who are interested in developing our brands in new markets, across our three regions.”

Bob Bartley, global franchise director, Chili’s

CKE investing in new global markets

“CKE Restaurants is seeing some interesting trends emerging on new investments in 2022, and is looking forward to 2023.

CKE is well established in the Middle East, with a 40- plus year presence throughout the region, except in Israel. Now with the opening of trade relations with the U.A.E. and other regional markets, Israel is being targeted for new growth, and CKE has entertained interest from multiple investor groups.

Another area that’s proving to be very hot with investors happens to be the Carl’s Jr. market, with its long history in Mexico. Major private equity groups, backed by strong operators, are acquiring key markets to grow and develop Carl’s Jr.

CKE has devoted considerable energy and resources to expansion in Europe, and in the post-COVID environment, investors are showing strong interest in the DACH region (Germany, Austria, Switzerland).

We’re also seeing strong new investment interest in our existing business in Australia and New Zealand.”

Marc Mushkin, vice president, international franchise sales and development, CKE Restaurants

Franchisees are seeking quality of life

“We have seen the demand for quality businesses grow, along with a shifting focus from seeking long-term jobs in the corporate world to that of being focused on family and putting a priority on the location of living. The current interest rate rises, and inflation issues are seeing a slight cooling, but we expect to see strong sales and development for the next 24 months for brands that can create an emotive connection.”

James Young, head of DC Strategy Franchise Sales & Development, Sydney, Australia

Global opportunities at a glance

Despite the sometimes too ‘exciting’ world we live in today, the bottom line is that there are numerous franchise-friendly countries with investors seeking new franchise brands this year and into 2023:

Argentina – A very high level of inflation and resulting decline of the local currency has diminished the interest of local investors to acquire and develop new franchise brands.

Australia – This country is now open to business travelers, and interest in new franchise investment is at a 10-year high. All types of franchises are seeing strong interest.

Brazil – Political and economic challenges remain and there’s an upcoming presidential election this year which may or may not be positive for business. Significant new franchise brand investment is likely to be delayed until 2023.

Canada – The Canadian investor remains slow to take on new brands, as the country recovers from its uneven pandemic economic impact. It remains a challenge to find companies that are able to develop across Canada.

Chile – The new government is not pro-business and a new constitution, which is due to be voted on soon, will impact business sentiment towards new franchise development short term.

China – The zero-COVID policies of the Chinese Communist Party (CCP) has shut down small and medium-sized businesses sporadically. New franchise investment is possible in 2023 for existing brands.

Columbia – While this country is doing a good job of coming out of the pandemic from an economic perspective, the new president is not a friend of business, which will cause companies to delay new investment.

Ecuador – Economic growth in Ecuador rebounded in 2021 and economic freedom has been trending upwards.

Egypt – There’s immense new investment going into building the New Cairo and high-end shopping malls that need new brands in the country with the largest population in the Arab world.

France – The presidential election is over and good post-pandemic recovery is underway. Interest in new franchise brand investment is projected to be strong in 2023.

Germany – Multi-unit, multi-brand franchise operators are seeking new brands, which is encouraging interest from new foreign franchise brand investors.

India – This country may have the highest GDP growth level in the world as they recover from the impact of the pandemic. New franchise brand investment should be multisector throughout 2023.

Indonesia – This country is normally very pro new franchise investment and should show strong post-pandemic economic recovery by fourth quarter 2022, followed by interest in new franchise development.

Isreal – Seeing vibrant industrial and consumer growth. The relatively small population size is offset by a high GDP/capita and high consumer spending.

Japan – The country is slowly opening to business travelers, enabling candidates to meet in-person for new brands, which is critical in Japan.

Italy – Business is recovering from the pandemic at a rate that may encourage new investment in franchise brands by fourth quarter 2022.

Mexico – Despite challenges with a government that’s not pro-business, there’s increasing interest for new franchise brand investment in major cities.

Poland – As with Hungary and the Czech Republic, capital availability for new investment projects remains a challenge due to the Ukraine/Russia war.

The Philippines – The presidential election is over, the pandemic’s impact on the economy is starting to improve, and the GDP growth projections for the rest of 2022 are high. This foreign franchise-friendly market is expected to recover in 2023.

New Zealand – After two years of being closed to travel, this highly franchised country is finally open to tourists and business.

Peru – Major political challenges continue, which have put a hold on new business investment. It’s hoped that the political and economic environment will begin to improve in 2023.

Romania – Despite the nearby Ukraine/Russia war, both Chuck E. Cheese and Popeyes have started licensee operations this year.

Spain – Interest in new franchise development is high, despite the slow return of tourists, post-pandemic. EGS will have two client licensee marketing events in Spain in 2022.

Saudi Arabia – Interest in bringing new franchises to this country is at a high level, with the government promoting franchising nationally.

Sweden – Sweden’s rapidly growing economy is resulting in new franchise investment interest. EGS will hold its first client marketing events here for many years in 2022.

Thailand – Tourism is about 40 per cent of the economy and is very slowly coming back from the pandemic. New franchise investment is probably a 2023 event.

Turkey – Inflation for 2022 is over 70 per cent based on government figures. The currency has lost 40 per cent of its value this year, making new foreign franchise investments very costly.

United Kingdom – The emergence of a substantial MUMBO (multi-unit, multi-brand operator) sector is causing interest in the F&B and services sectors, despite economic headwinds.

United Arab Emirates – There’s renewed interest in new franchise investment and the Global Restaurant Leadership Conference will be held in November for the first time in three years.

Vietnam – The pandemic has had a major impact on new franchise investment. Franchising is well developed and this is a 2023 target country for seeking new licensees.

The author

William (Bill) Edwards is CFE and CEO of Edwards Global Services (EGS) and a global advisor to franchisor executives, having been both a master franchisee in five countries, and the SVP for international operations and development for a U.S. franchisor. Contact him at bedwards@edwardsglobal.com or +1-949-224-3896

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