NEWS

Franchising Growth Hubs to Watch
By Ma. Alegria Sibal-Limjoco, CFE
CEO , Francorp

I had the privilege of attending the 2008 CEO Business Economics Briefing last September 30 hosted by the Business Economics Club ( BEC ) of the University of Asia & the Pacific. It was an interesting forum for many of us in the retail and franchise industry, particularly those with plans for rapid national expansion as well as those eyeing the global market.

There were many striking trends discussed which I am happy to share with you. In particular, the presentation or Dr. Ramon M. Quesada on the economic state of affairs of Metro Manila and 16 Philippine regions will be very interesting to upcoming and aggressive franchisors who aim to expand their operations strategically - fast and soon.

For example, Dr. Quesada cited that from 1995 to 2006, the region with the highest growth rate is Southern Luzon consisting of MIMAROPA ( Mindoro, Marinduque, Romblon and Palawan ) and CALABARZON with a combined growth rate of 9.73% and population of 14.7 million ( bigger then Metro Manila ). This is followed by Northern Mindanao ( 5.56% ) and CAR ( 5.46% ). Davao region and Central Visayas were not far behind with 5.12%.

From the point of view of Gross Regional Domestic Product ( GRDP ), Metro Manila has always been the prevailing region with 36.9% share for 2008, followed by Luzon at 29.2%. It might interest franchisors, however, that Luzon beats Metro Manila as far as family income ( 44% come from Luzon ) and OFW remittances are concerned. More than half of OFW remittances go to Luzon ( 53% ) and a number of people working in Metro Manila actually live outside the area and send money to provinces ( referred to as "local OFWs" ) This translates to a greater consumer and purchasing power for Luzon, not to mention the capability of its population to invest in an OFW-powered business.

Due to rising fuel cost and volatile financial markets, inflation has notably soared from 2.8% in 2007 to currently 8.8%. Inflation was highest in CARAGA ( from 2.3% to 13.8% ) and Zamboanga Peninsula ( from 3.4% to 13.0% ) while it was lowest in Central Visayas ( 2.2% to 10.0% ) and Bicol region ( 3.4% to 9.0% ).

And where do the biggest spenders come from? According to Dr. Quesada, Western Visayas where else! About 90% of family incomes are spent in the region based on BECs Average Prospensity to Consume ( APC ) study. This followed by CALABARZON and Bicol.

An insightful aspect of Dr. Quesada's presentation focused on the Business Process Outsourcing ( BPO ) industry. Contributing $ 3.6M to the economy in 2006 ( and a projected $12.2M in 2010 ), it was cited that there are a total of 351 existing IT parks and buildings in the country today. These BPO providers are not just setting up call centers but expanding to other fields like legal services, web design, medical transcription, software development, multimedia/animation, shared services, bookkeeping, CAD/CAM, data entry, proofreading/editing, typesetting and even relatively simple tasks as handwriting services. By 2010, it is estimated that the BPO industry will account for almost 1 million of the workforce.

Equally of great impact is Dr. Bernardo M. Villegas' take on current world growth trends. His presentation ( entitled "Can emerging Market Save the Day after Black Monday" ) gave a detailed account of how world economies fare, including a very perceptive outlook at the world oil and financial crises that are currently affecting all our local businesses.

From the franchise industry's standpoint, What I found the most interesting in his talk is that while major economies like the US, Europe, Japan and other so called emerging ones like Brazil and Russia directly impact on Asian economies fare, the ASEAN economy has remained resilient and competitive with its combined population of 568 million and GDP growth of 5.4%. While China, with a growth rate of 10%, remains as the predominant player and engine of growth in the Asia Pacific Region, India is a force to reckon with.

India's 7.4 growth rate and a huge 1.2 billion population may well make it the next market Filipino businesses can consider as it is listed as one of the world's most optimistic consumer markets with great spending power and a large pool of entrepreneurs. All the tell-tale signs are there. Over the years, there has been a significant increase in the demand for their domestic services. They have an export-oriented IT and BPO that continue to perform very well ( and is closely partnered with the Philippines ) and maintains a Free trade agreement with ASEAN countries.

And while domestic markets will continue to power Asian economies, intra-regional trade increases complementarily and inter-country and intra-company outsourcing of manufacturing and services in Asia will continue to grow. He also mentioned that SMEs and micro enterprises will continue to emerge and face challenges on innovations and productivity.

Certainly, the richness and depth of the information we gain from BEC's yearly CEO briefing is, as usual, valuable to us in the franchise community. It provides clearer, more intelligent and strategic inputs to our franchisors, thus, enabling a well planned, sustainable expansion. It is truly worthwhile to be there each time and I encourage our clients and fellow members in the industry to join this forum in the future.