Francorp Malaysia

Franchising:
Commercial banks keeping their distance

By Hamisah Hamid

Published: 2008/02/06

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Their reluctance to approve loans to small franchisees is due to their perception towards the industry, says Francorp Malaysia president

MALAYSIA'S commercial banks are not giving enough support to the local franchise industry, industry executives say.

"Banks are still reluctant to give out loans, especially to local franchisees. But they have no problems extending loans to large franchisees," Francorp Malaysia Sdn Bhd president and chief executive officer Affandy Faiz said in an interview with Business Times.

Affandy said their reluctance to approve loans to small franchisees is due to their perception towards the industry.

"Maybe its because the local franchise industry does not take off well enough," he said, adding that bank officials are still unfamiliar with the franchise business.

Although banks have franchise packages, the loans come with too many conditions, he said.

"This has posed a challenge to local franchisees who have just started their businesses. Surely they don't have a track record yet, but banks should see the track record of their franchisors," he said.

Daily Fresh Foods Sdn Bhd food chain manager Md Asyraf Yong said commercial banks in Malaysia tend to see franchise as a risky business.

This is because franchise is relatively new in the country.

"A lot of franchises fail in Malaysia because they don't develop the system properly.

"So, commercial banks see franchising as a risky business, unlike in Australia and New Zealand," he told Business Times.

He said rules should be put in place to monitor franchisors' activities so that the success rate of a franchise business can be enhanced.

Francorp's Affandy said franchising is totally different from a normal business and banks should not treat it like any other business.

"Franchise businesses can grow by 20 to 30 times, and if they are bank clients, imagine how much business this would bring to the banks," he said.

He said the social and economic spin-offs from franchising is tremendous. This is because suppliers to the franchisees and franchisors also grow in tandem.

Affandy said there are franchise funds allocated by the government for aspiring entrepreneurs to be involved in the industry.

However, not many people are aware of the availability of such funds.

Affandy also believes that financial institutions should set up a revolving fund for franchisors and franchisees.

Meanwhile, Daily Fresh's Md Asyraf said development financial institutions like the SME Bank are more familiar with the franchise business.

That is why these institutions are more forthcoming in extending loans to franchisees compared to commercial banks.

Md Asyraf said the guarantee for bank loans comes from the success of the franchisor, who has always been careful in ensuring the high success rate of the business.

He said Daily Fresh, the franchisor of casual kiosk and cafe selling snack food and beverages, works closely with Perbadanan Nasional Bhd and government banks.

Francorp Offices - Francorp Malaysia

Francorp, Inc., the world's foremost franchise development and consulting group, headquartered in Chicago, USA, announced the availability of its services through Francorp Malaysia, a Southeast Asian regional office, based in Kuala Lumpur, to provide services to large and small businesses in Malaysia, Singapore, Thailand and Indonesia. Since its founding 28 years ago, Francorp has counseled more than 8,000 companies, and helped more than 2,000 businesses join the ranks of franchisors in America, Europe, Middle East and Asia. Among its clients are Kentucky Fried Chicken, Omni Hotels, Holiday Inns, Ace Hardware, Damon's, USA Baby, Auntie Anne's Pretzels, Culver's, Jollibee, Jimmy John's, Jersey Mike's Subs, Texaco, Shell and BP Amoco.
This announcement comes in concert with the Malaysian Government's initiative, to convert Malaysia into the franchise hub for the Southeast Asian region. Francorp Malaysia will provide a Full Franchise Development Program to all sorts of business concerns, enabling them to expand locally and into foreign markets (regional and worldwide) in a professional and profitable manner, without the burden of major investments in company owned branches.
Franchising has proven to be the most successful expansion method in the history of business. In the most advanced economies, franchised networks account for almost 50% of retail sales. In fact, most of today's large systems emerged from the obscurity of one or two modest retail outlets and have accomplished worldwide coverage and prestige through franchising.
Franchising, on the other hand, has become extremely competitive, especially since the international expansion exercised by the major companies has brought a completely new business culture to the rest of the world. No franchise should attempt to operate with any less than the highest standards to ensure success. Traditionally, small but successful business owners in emerging economies have encountered that as an insurmountable barrier to take a rightful place in franchising in their own countries and regions. Francorp's services ensure competitiveness in this difficult, but most rewarding, business arena, affording Malaysian businesses the strength and proficiency to franchise even in the United States, with the highest franchising industry standards.
Francorp also offers international brokerage services, bringing together franchise sellers and buyers. This service has proven effective in Francorp introducing 30+ American franchises into Japan and some Asian and Latin American franchises into the US. (Jollibee from the Philippines and Pollo Campero from Guatemala, among others). This service will facilitate both the import of franchises to the region, and the introduction of Asian franchises, particularly the Malaysian franchises, into the major world markets.
Affandy Faiz, Francorp Malaysia's President and CEO declared, "We are convinced that the government programs, supported by professional franchise development services, will place Malaysia in a most prominent place in the franchising map of the world in the years to come. Our reputation as the foremost franchise development and consulting group is committed to that effect and we will play a key role in bringing franchise opportunities to entrepreneurs throughout Asia. With talented individuals on our local and global team, we have not only strengthened our leadership position in Asia, but throughout the entire world."
"Francorp Malaysia is ready and willing to cooperate with the Ministry of Entrepreneur Development and Cooperative and other government agencies, chambers of commerce, business associations, financial institutions and other support institutions in assisting the Malaysian entrepreneurs to expand their business through franchising."
"For almost 30 years, Francorp has been the leader in the franchise consulting industry. In fact, we invented the niche. We have a unique approach that remains unmatched by any other firm in the world. We have assembled a team of experts whose talents are coordinated seamlessly to create customized materials that fit the specific needs of our clients. And as an international company, we have the global reach to help them expand their business, with a local presence to adjust their business to fit each country's unique culture and laws".
"We think global, and we act local". Affandy Faiz further added, "Francorp brings to Malaysia the highest franchising standards in the world. Many of those standards have been Francorp's own contribution to the industry. We created the Franchise Strategic Planning process that allows franchisors to define in advance every single subject and activity that will rule the performance of their network, before they sell the first franchise, so as to avoid hasty, costly decisions. Our method systematizes the managing of the system to ensure the quality of the franchisor's services, cost control and optimum operational performance, within the framework of a mutually rewarding relationship between the two parties".
Francorp provides every single service needed to franchise a business: Strategic Planning and Program Structure, Legal Documentation and Franchise Registration, Operations Services and Manuals, Advertising and Marketing Services, Franchise Sales Consulting, Training and Manual as well as Franchise Marketing and Sales Implementation in addition to General Consulting and Program Review.
Francorp regularly conducts a "Franchise Your Business" Seminar, which is highly recommended for entrepreneurs and business owners expiring to expand their business via franchising. This seminar is designed to provide the business owners a better understanding of the costs, time frame and working capital typically needed to grow through franchising. The upcoming seminars will be held on July 18-20, 2004, which will be led by Ramon Vinay, Vice President, Global Development, Francorp International and on September 3-5, 2004, which will be led by the Guru of Franchising, Donald D. Boroian, Founder and Chairman of Francorp Inc. We also conduct special seminars tailor fit to the clients' franchise needs.