Franchise Opportunities

I have always been interested about starting my own business. One short cut was to leverage on established businesses and obtain a franchise agreement to operate in your own country or around the region, to become a franchisee.

Most developed businesses now acknowledged that one way to expand their business in a faster way is to be a franchisor, to be the party granting the rights to multiple franchisees. This can help the company to scale up quickly while providing more stable BAU (Business As Usual) income and minimising the risk of capital outlay to set up new outlets.

Over the last few years, I have been attended an annual event called Franchise & Licensing Asia to check out some of the possible opportunities that may work for me. Today was the first day of the 3 days event and I had signed up to attend.

First impressions – as usual, there are mainly F&B (Food & Beverage) franchises on display. Most of them were from Japan, Thailand, Korea and S’pore. The free food sampling helps to draw in potential interest. One big problem that we have here is that the cost of rental and manpower is too high and to break even, the amount of sales you have to make to break even is just too hard to achieve.

For example, there was a company trying to sell stand alone coffee-making machine franchises. With training and coaching, 5 machines will cost $78,000 and 10 for $156,000 . How many cups of coffee do you need to sell? Plenty.

The other one that caught my eye was a local coffee chain called Ya Kun. The initial franchise fee to set up an outlet was between $250,000 to $400,000. Your shop will get training but all stock inventory has to be purchased from them. On top of that, a percentage of your revenue has to be paid to them too (I was told it was below 10%). The rental of your shop premise in a popular shopping belt could be anywhere between $15 to $30 per square feet per month. Manpower cost, assuming you can find good help, will also add up to the overall costs.

These odds are stacked so high against the franchisee from day 1. On the other hand, the franchisor minimises his risk while collecting new income.

Guess its back to the drawing board to look at new business opportunities…