America's Top Ten Franchises

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

Year 1 Year 2 Year 3 Year 4 Year

Independent enterprise

Franchise company

Year 6 Year 7 Year 8 Year 9 Year

(Source: US Chamber of Commerce)

In 2007, there were 847,246 franchise stores with revenue of 816 million USD, creating 9.8 million jobs. By the end of 2007, there were approximately 370,000 franchise systems in the US. The actual annual growth rate was approximately 4.5% during the period 2002-2007. Each year, 15,000 to 16,000 new franchise systems were established. Currently in the US, there are more than 3,000 brands implementing franchising and about 500 other brands in the process of preparing to franchise; these 3,500 brands belong to 2,800 companies [27, p.2].

However, due to the impact of the economic recession that began in December 2007, the growth of franchising activities in the US has slowed down and decreased slightly.

Table 1.3: Franchise Business Economic Outlook, 2006-2009

2006	2007	2008	2009 3	Annual percent change
2006	2007	2008	2009 3	2007/2008	2008/2009
Establishments	808.275	847,246	864,784	854,511	2.1%	-1.2%
Employment (Thousands)	9,473	9,805	9,785	9,578	-0.2%	-2.1%
Output (Billion of dollars)	$742.5	$816.0	$839.2	$835.0	2.8%	-0.5%

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(Source: National Economic Statistics - Franchise economic business overlooked)

The number of new franchise stores established in 2008 compared to 2007 increased by only 2.1%. According to PricewaterhouseCoopers, due to the impact of the recession, this number will decrease by 1.2% in 2009, down to only 854,511 stores. The number of jobs created also decreased significantly (from 9,805 in 2007 to 9,785 in 2008 and estimated to be only 9,578 in 2009) along with a decrease in revenue. Because franchise businesses have no way to fight against the economic downturn that is happening in the US and around the world. According to a recent study by FRANdata, the amount of capital borrowed by franchise businesses in the US will decrease by 27% in 2009 (compared to 2008), thus reducing the ability of businesses that are franchising as well as businesses that intend to franchise to expand. 4

3 Figures predicted by PricewaterhouseCoopers (PwC)

4 FRANdata, 2009 Franchise Capital Requirement Estimate (November 2008). FRANdata, founded in 1989, is an organization that provides information and statistics on franchising.

In the US, the franchise system with the highest proportion in recent years is fast food restaurants, followed by maintenance services, retail... Of the top 10 franchise systems in the US, 7 operate in the fast food sector.

Table 1.4: Top Ten Franchise Systems in the US

Trademark

Business sector	Number of franchise stores (2007)	Country of presence	Expense investment ($10,000)	Revenue 2006 (million USD)
7-Eleven	Retail Store	30,642	17		15,000
Subway	Fast food	27,929	86	7.6 - 22.7	9,000
Dunkin' Donta	Fast food	7,276	30		4,800
Pizza Hut	Fast food	9,881	84	110 - 170	5,200
McDonald's	Fast food	23,099	121	50.6 - 160	21,600
Sonic Drive In Restaurants	Fast food	2,656	2	82 - 230	692
KFC	Fast food	11,071	80	110 - 170	523
InterContinental Hotels Group	Hotel	3,289	100		1,500
Domino's Pizza LLC	Fast food	7,902	54	11.8 - 46	1,437
RE/MAX Intl. Inc	Real estate	6,973	65	3.55 - 9.7

(Source: Franchise - choose or not, p.111)

Although the fast food and retail industries have seen steady growth in the number of franchise stores, they seem to be losing market share due to the strong growth of the service industries over the years.

This change shows the shift in industry structure from manufacturing to services. This is the general trend of franchise system development.

American franchisors often evaluate the potential and working capacity as well as many other conditions of franchise candidates very seriously. In addition to this evaluation, market analysis and evaluation are also carried out meticulously and scientifically. Sometimes this work is often carried out many years before the system appears. A typical example is KFC. Entering Vietnam very early, since 1998, but it was not until 2007 that franchising was implemented.

With the world's largest GDP economy, the American franchise system is constantly growing and gradually conquering the world with its strength and professionalism.

1.4.2. Singapore

Franchising activities began to be introduced and developed in Singapore in the 70s of the 20th century. By the 1980s, many domestic Singaporean companies had negotiated and won franchise rights for international brands such as KFC, McDonald's, Pizza Hut and 7-Eleven. Since then, franchising has become one of the main forms for Singaporean businesses wanting to establish a business, dominate and expand the market. According to statistics from the Singapore Franchising and Licensing Association (FLA), total revenue from franchising activities in Singapore in 2005 was 3.6 billion USD, accounting for 18% of total domestic retail revenue, of which 70% of sales were from foreign franchise systems (especially the US) [28, p.3]. However, domestic franchise systems are also developing rapidly and growing stronger. There are successful and famous domestic brands thanks to franchising such as Charles & Keith, Bread Talk, Cavana... Typical examples are:

Bread Talk brand, a very famous chain of bakery stores in Singapore. Although only established for about 6 years, Bread Talk has been very successful in franchising in many countries in the region such as China, Hong Kong, Indonesia, Philippines, Taiwan and even some countries in the Middle East such as Kuwait, Saudi Arabia...

According to the World Franchise Council (WFC), by 2007, there were 420 franchise systems in Singapore with more than 3,000 stores [28, p.5]. The reason why the number of franchise systems in Singapore is not as high as many other countries in the region such as Indonesia, Malaysia, Thailand... is because this island nation has a very small area, the main island has an area of 682 km2 and a population of only nearly 5 million people (2007) [28, p.3]. Another reason is that each company only owns one franchise system even though the number of companies applying franchising in Singapore is increasing.

Table 1.3: Franchise system structure in Singapore, 2007

Support Services 6%

Other industries 10%

Health care services 3%

Food and drink

36%

Education and training

19%

Retail 26%

(Source: Singapore Franchise Industry Survey 2007)

Among the franchise businesses, up to 80% of businesses are members of FLA. Currently, FLA has 150 members including domestic and foreign franchisors.

abroad [22, p.139]. FLA actively seeks and develops the foundation of entrepreneurial spirit and internationality in the Singapore franchise industry. In addition, FLA encourages businesses to use franchising to do business, organizes career education programs, business playgrounds to exchange ideas and seek cooperation opportunities, and supports members to access international marketing programs through relationships with government agencies and franchising associations and organizations.

The Singaporean government is also very interested in the franchising industry. The government has adopted many measures and policies to promote franchising activities, such as establishing professional consulting associations such as FLA and International Enterprise Singapore (IES) to support domestic enterprises in building business capacity through franchising and attracting international franchising companies to do business in Singapore under the franchising form. At the same time, the Singaporean government also creates a business environment with an open legal mechanism to support and promote the development of existing and potential franchising enterprises. At the same time, they also create conditions for potential franchising enterprises to seek and expand business cooperation relationships.

For example, the Singapore SPRING Local Enterprise Technical Assistance Project (LETAS) was launched in 2001 to encourage businesses to start and upgrade their business operations through franchising with a total budget of about S$250,000, or to organize franchising-related events such as regular seminars and exhibitions... Typically, the "Global Franchising" seminar has attracted many businessmen from countries around the world to Singapore to invest in the form of

franchising. In addition, there are also programs to support businesses operating under the franchising model such as the “Franchise Development Assistant Scheme - FRANDAS” which started in 1990. With this scheme, domestic companies with good operating results and a basis for developing a franchise system will receive support to develop their system and advertise the franchise system to the international market. FRANDAS also supports foreign franchisors if they want to find domestic partners.

In the future, the International Enterprises Singapore (IES) will work closely with the Singapore Franchise Association (FLA) to promote and position Singapore as a “franchise base” for the entire Southeast Asian region.

1.4.3. Thailand

Currently, the franchise industry is very popular and successful in the Thai market. Many investors have been looking for opportunities in this field because of the attractiveness of the market and the open and safe procedures from the Government. According to statistics from the American Chamber of Commerce, in 2006, Thailand had 435 franchise systems with more than 30,000 stores in operation, including 350 franchise systems of Thai enterprises and 85 franchise systems of foreign enterprises. Revenue from domestic franchise enterprises reached over 1 billion USD, accounting for 45% of the total revenue of the franchise industry [22, p.144]. These are very impressive numbers because in the context of foreign franchise brands "invading" massively into the domestic market of Asian countries, Thailand has had a positive development of its domestic franchise system. If in 2000, the market share between Thai franchisors and foreign franchisors was 30:70, by 2006 that ratio was 45:55.

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