Franchising Investments to Soar as Local Players Go Full Blast on PHL Food Sector

The best time to invest in the Philippines is now, and there’s no better way to do just that than to be part of the local food sector.

The Philippine franchising industry, according to Trade Secretary Gregory Domingo, has consistently been one of the strongest performing pillars of the local economy. Over the past few years, the sector has grown by 20%-25% in terms of annual turnover, registering a significant jump from $3 billion to $7 billion. Aside from this, the local franchising sector has also seen its number of workers balloon to almost 5 million in 2012, while also doubling the number of franchises from 600 to about 1,200.

In 2014, local franchise brands—particularly those engaged in the food business—continued to spearhead this phenomenal growth as they accounted for two-thirds of the revenue generated by the sector. The fact is that the food industry remains as one of the most stable economic sectors in the country today and, as such, is a highly attractive investment option. Experts strongly believe that the food industry plays a major role in the Philippines has a consumption-driven economy. This role, in turn, can be attributed to the Filipinos’ spending habits that put food at the top of the list.

Investors lured by Filipino dining culture

A recent report by the International Enterprise Singapore (IES) revealed that Filipino restaurant diners spend as much as $25 (or about Php1,200) per meal—a clear indication why local food businesses continue to thrive in the country. “Filipinos have a hearty appetite. It is typical for them
to eat at least five times a day,” the IES report cited.

Filipino diners are also more inclined to choose restaurants that serve authentic-tasting food and, much like the rest of the world, dishes that are healthy and made from organic ingredients. These developments can be attributed to the growing number of Filipinos who are becoming more adventurous in their lifestyle and yet are still conscious of what they consume.

This consciousness is, in turn, causing more Filipinos to choose locally sourced food and ingredients in order to support the country’s agricultural and food manufacturing industries. This consumer behavior has then moved investors to look into local industries and companies as these are the ones gaining considerable support from consumers.

Although there is no guarantee that any investment is risk-free, the food industry presents the least number of risks due to the nature of what it provides—basic sustenance. With the kind of dining culture Filipinos are known for, there will never be a lack of people who need and will buy food—something that makes investing in food business, whether through buying stocks or opting to franchise, a highly encouraging endeavor to pursue.

“Franchising also puts high value on strong branding and excellent services and products, which gives franchise brands the better chance of becoming global brands. In fact, many of the internationally renowned brands today are franchises,” says Philippines Franchising Association (PFA) chair emeritus, Samie Lim in a recent interview.

With more investment opportunities and a global market to play at following the ASEAN Integration, it truly makes for an exciting time to be part of the country’s thriving food industry.

The “chain” advantage

While investing in the food sector is attractive, it is a highly competitive industry, especially in retail. Therefore, selection of a strong player, with strong brands and proven operations is key.

One of the local food companies eyeing to go all-out in the coming years is Max’s Group, Inc. (MGI), a publicly listed restaurant operator considered as one of the most successful casual dining chains in the country.

MGI bolstered its status as one of the biggest and strongest players in the local food sector when it posted a significant jump in net income during the first half of this year. This came on the heels of then Max’s Group of Companies’ acquisition of Pancake House, Inc. in 2014 to become the
leading chained full-service restaurant group in the country.

As the country’s largest dining chain, MGI’s planned international expansion for the last quarter of this year and the whole of next year makes it a prime option for investors. Seeing as MGI has over 14 different brands that cater to various tastes—operating iconic food brands like Max’s Restaurant, Max’s Corner Bakery, Pancake House, Yellow Cab, Teriyaki Boy, Dencio’s, Kabisera, Sizzlin’ Steak, Le Coeur de France, Maple, and international foods brands Krispy Kreme and Jamba Juice—the company has the advantage of having a diverse pool of consumers that support each and every brand. At present, MGI is looking to expand five of its 14 brands to the Middle East, Asia, the United States, and Canada, among others, in the next few years—a move that gives investors a chance to expand their respective portfolios in the global arena.

“It is true that the franchisor-franchisee relationship requires a special kind of commitment between the two parties, and one way to ensure commitment is choosing the right franchisee,” says MGI President, Robert F. Trota in a recent interview. “We have to bear in mind that franchising is often likened to marriage, which stresses the need for shared values and a common vision between the husband and wife to make the marriage work. This means that a franchisor needs to have a franchisee that shares the values and vision of the franchisor’s brand.”

With more than 70 years of experience in the food industry, a strong franchise portfolio consisting of over 500 outlets nationwide and 35 stores overseas, MGI has certainly strengthened its case as a strong contender in the Philippine investment market.