The franchise industry in the Philippines has emerged as a key pillar of the country's economy, experiencing steady growth in recent years. The sustained growth of the franchise industry in the Philippines is reflected in its significant contribution of 7.8% to the GDP. Globally, the Philippines franchise industry is the 7th largest with over 1800 brands operating in multiple areas.
90% of franchises in the country are of local origin, showing that local brands have a great role in the franchise market. Nevertheless, international franchises have also found a place in the Philippine market, taking advantage of the growing demand for foreign products and services. Although American brands had previously dominated the market, the younger market has started to move towards other franchises in the consumer sector, mainly European, Japanese, Korean, and Chinese options.
Sectoral diversification is a distinctive feature of the franchise industry in the Philippines. Approximately 46% of operating franchises are in the food and beverage sector and 34% are in services, while the remaining 20% are in retail and other categories. This demonstrates that franchising opportunities extend beyond the more common fast food or beverage categories, demonstrating more opportunities for a wide range of sectors.
There are also challenges that industry players must face. Legal and regulatory aspects can be complicated, and it can take some time to achieve clearance from the government to operate a business. Additionally, competition has started to become intense due to the strong growth, with an industry failure rate of around 20%. This highlights the importance of strong management and continuous adaptation to emerging market needs.
Despite these challenges, the future of the franchise industry in the Philippines remains bright. According to the Philippines Franchise Association, it is expected to grow by 12-15% in 2023, fueled by a growing middle class. Further urbanization is expected to continue driving demand for franchises in various sectors, while technological advancements continue to reshape the industry. Franchises represent an attractive option for investors and entrepreneurs in the Philippines, especially in Metro Manila, whose population of 15 million represents a huge target customer base to be tapped into.
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