Tougher competition seen among franchisees

THE franchise business is expected to see more competition this year as eased mobility restrictions are prompting those who incurred losses in recent years to try to recover, an industry official said.

Joey R. Garcia, president and chief executive officer of Eight-8-Ate Holdings, Inc., said franchisors can expect franchisees to be more aggressive this year.

“But I think they will struggle this year because more competitors are out. More of those losers last year want to gain back what they have lost over the past three years during the pandemic and they’re more aggressive than before,” he said on the sidelines of Franchise Asia Philippines 2023 International Conference last week.

Eight-8-Ate is Udenna Corp.’s venture into the food and restaurant sector. Established in 2019, it operates restaurant groups Conti’s and Wendy’s.

“If you’re in the restaurant business or dining segments, everyone is back. Everyone is also back in the market, not only you. Everyone who has closed most of their stores is also back now and trying to get what they have lost,” said Mr. Garcia, who chairs this year’s conference.

He said franchisees are now more conscious of who can provide a better experience and better value for money.

“The challenge there is value for money as it also comes with inflationary pressures as well as the cost of doing business, which is now more expensive than a couple of years ago, [which is] even more expensive than during the pandemic,” he said.

The playing field has also changed after the pandemic, bringing greater competition in the franchising industry, he added.

“During the pandemic, most of your transactions do not require a lot of capital expenditures and most of the brick-and-mortar stores saved a lot in terms of real estate savings like in rentals. You don’t get [those perks] anymore. So the game is a bit even now,” Mr. Garcia said.

“So now it will be tougher since the playing field is even now. There is no such thing as ‘I will get an advantage because I have more strength in digital or in e-commerce.’ You can’t say that anymore because basically, everyone has an even playing field now,” he added.

Last year, franchisors still experienced some burden from the pandemic but those who continued their operations benefited by getting better locations. Mr. Garcia said that “Last year it was still partly pandemic. You could say that we still felt a little bit of that during the first quarter, but towards the second half of the year, that was when things were lifted,” Mr. Garcia said.

“Some of those who have folded during the pandemic, somehow didn’t have enough patience to stay and some who managed to basically navigate and pivot are still alive and I think those really benefited,” he said.

“It takes a lot of courage to invest and to stay in the game in the last three years due to the pandemic,” he said.

Businesses that persisted managed better real estate and went beyond the traditional brick-and-mortar stores and “managed to get into the e-commerce side of doing business,” he added.

“Those who benefited are the ones who really had patience and courage to stay in the game,” he said. — Justine Irish D. Tabile