BEYOND LOCAL SHORES

Taking Malaysian Franchise  International

International expansion can be extremely appealing for most franchisors who have reached a saturation point in their own markets. Aside from being a natural and viable strategy, expanding a franchise beyond the boundaries of a country in which the franchisor is based offers many other opportunities. Ranking top is the prospect of increasing sales and profits by taking advantage of new target audience.

Malaysia, with a small population of 28 million people compels successful home-grown franchisors to seek out foreign locations once local grounds are solidly covered. Imagine tapping a market potential of almost 4 billion consumers (60% of the world population) living in countries in the Asian continent alone – all within a radius of a three-hour flight.

According to the Ministry of Domestic Trade, Cooperatives and Consumerism, there are 449 registered franchisors, of which 26 local franchise businesses have spread their wings to 49 countries. Among them are Marrybrown, D’Tandoor, Secret Recipe, Smart Reader Worldwide, Sinma, Q-dees, Elianto, Snips, to name some.

Even though a fairly young country in franchising, a few Malaysian franchisors have already established themselves successfully in the international franchise arena.  Franchise Asia hand-picked five of them – Secret Recipe, Sinma, Elianto Snips and Q-dees to share with our readers their venture abroad.

Making A Name
Secret Recipe Cakes and Café is no stranger to Malaysians, particularly those with good appetite. Malaysia’s largest cakes and café chain, renowned for its award-winning cheesecakes and fusion culinary delights, is a household name following its debut in 1997. By virtue of its fine quality cakes, fusion food and distinctive service, Secret Recipe is a highly recognised brand name in Malaysia, Singapore, Indonesia, Thailand, China, the Philippines, Pakistan and Brunei, In a short span of 13 years, Secret Recipe has expanded to a network of more than 250 cafes throughout the region. Its entrance into Australia in February 2010 with an outlet launch in Chapel Street, Prahran, Melbourne, one of Melbourne’s premier shopping and entertainment strips, was an interesting one as it is among Malaysia’s first franchise businesses to do it in a big way there. It plans to open another 50 outlets throughout Australia within the next five years.

Sinma for more than two decades has established itself as the leading costume jewellery franchisor in Malaysia with around 60 outlets in its network. Its slogan explains its business succinctly – ‘Making every girl pretty.’ Sinma established its global presence since 2006 with expansion to Saudi Arabia, followed by Dubai and Abu Dhabi, UAE three years later. Sinma’s next overseas expansion plan is into Damascus in Syria.

Snips has been a pioneer in Malaysian hairdressing industry when it comes to introducing hair trends. Snips is the very first to introduce Re-Bonding hair technology and Ceramic Wave™ perm techniques in Malaysia. It has more than 10 outlets strategically located throughout Klang Valley – all committed to offer its clients the latest technical expertise in hair fashion, highest quality of hair creations and personal customer services. Today, Snips Salon has around 15 outlets spread across Malaysia, Australia and Saudi Arabia operating under the label of Snips, Signature and Spins. The group has expanded its services to beauty, nail arts and makeup. Snips opened its first salon in Saudi Arabia in 2008, and within two years added two more. The fourth salon to be launched soon is reputed to be the largest Hair & Beauty Salon in Riyadh, Saudi Arabia.

Like its name, Elianto (sunflower in Italian), has inspired many by combining the striking beauty and utility symbolised by the sunflower in its brand synonymous with gentle skincare products. The company was incepted as Bonita previously in 1990 specialising in costume jewelry. Elianto has over 50 outlets nationwide and 13 international franchise outlets in countries like The Philippines, Dubai and Saudi Arabia. Future overseas market it plans to expand include Asian countries like Thailand, Cambodia, China, India, Maldives and the Middle East including Kuwait and Jordan.

Q-dees was started in the early 1990s by a group of educationists with vast experience in research and development in the field of pre-school education. Within the first year, 12 Q-dees centres were opened throughout Malaysia, and to date, Q-dees has opened more than 100 centres across Malaysia, Singapore and Indonesia, impacting more than 100,000 children.

Finding A Partner
An international partner can make or break a global endeavour, and finding the right one is not always obvious. So how these franchisors found one in the first place? According to Dato’ Steven Sim, CEO of Secret Recipe, most of their enquiries were gathered from its corporate website and recommendations. Direct enquiries coming through customers’ personal experiences after visiting Secret Recipe outlets are also common. As for Sinma, enquiries are generated usually from media, where its business is largely advertised. International trade fairs and trade missions are some other means to find partners. Snips, points to Malaysian Franchise Association (MFA) and MATRADE for being instrumental in arranging and assisting business deals through various international trade missions. Elianto on the other hand gets acquainted with foreign partners through network of associates, government sanctioned events and walk-ins. Elianto credits INTRADE (MATRADE) for helping in generating genuine enquiries through proper profiling.

Facing Challenges
International franchising is inherently more risky than domestic franchising. Reasons are plenty for this. Firstly, going international requires the franchisor to operate outside of their normal comfort zones. They are forced to move around in unfamiliar markets, customs, climate, language, regulations, etc. Besides the new territory, a franchisor new to globalise must be alert to the cultural issues and differences, and at certain point, has to make the necessary adaptation on their part to fit in with the demands of the new market. Sinma, for example works out the right merchandise mix that caters to the local market, including product localisation after conducting a thorough market survey of the host country. After the opening of business, it also fine tunes the merchandise mix from time to time, based on feedback from the franchisee as well as consumers. Secret Recipe is non-compromising when it comes to the winning qualities of its cakes and baked desserts – best sellers in all nine countries it operates. To ensure it attracts foreign customers in droves, Secret Recipes conducts non-stop R&D and is adaptable in introducing different menu options to suit local taste buds. To ensure this, every country it operates has a central kitchen to ensure quality and consistency. For Q-dees, it is through repackaging the appropriate learning programmes to best fit local markets (students) through quality R&D, without losing its unique teaching-learning appeal.

Learn the Basics And Seek Help
There is a steep learning curve when entering any foreign market, no matter what its state of economic development, or the size and status of the company that is expanding there. Even though great opportunities lie in front of franchisors who expand their market internationally but it would not be easy to prosper without proper and timely support from the government in the form of educational tools, grants, etc to encourage business export. This was echoed by all the aforementioned franchisors. Dato’ Sim shared a valuable pointer that companies expanding overseas can apply for Brand Promotion Grant from MATRADE while F&B companies are eligible to apply for a special loan through Exim Bank Malaysia under MalaysiaKitchen Financing-i.

For Elianto, being an active member of MATRADE and MFA as well as retail associations like Malaysian Retailer-Chains Association (MRCA) and branding associations, helps their brand to keep abreast with the market conditions and to enhance business networking. Ongoing events held by the government agencies and associations also provide insight on the legal issues, intellectual properties protection, up-and-coming regional shopping malls as well as opportunities to promote the brand via exhibitions. Snips also recognised the enormous contribution of MATRADE via financial reimbursement, in assisting SMEs in laying the footing to bring home-grown Malaysian brands internationally. (See accompanying article on how MATRADE assists in developing and promoting export of Malaysian products and services).

Expanding overseas may not be for home-grown franchisors who are unable to dedicate the time, staff, funds, and other resources to prepare their product or service for the international marketplace. But for those who are up for the challenges (and the opportunities), international expansion is a lucrative strategy worth pursuing. The road is not always easy going but with reliable overseas partner, relevant know-how, government assistance and resolve, a lot more home-grown franchisors can make a name for themselves abroad. The aforementioned franchisors we interviewed were relatively unknown when they first started.