After spending almost 14 years on the franchisor’s side, Sofia Leong Abdullah took the CEO’s hot-seat at MFA in July this year. For someone who had acquired first hand experience of the Malaysian franchising scene from being an EXCO member of MFA and from representing renowned international franchisors, she could well be the best person to give MFA the push to become an aggressive franchise association in South East Asia. Franchise Asia caught up with her at FIM2010 to find out her plans for MFA.
Many Malaysian franchisors are cautious of expanding globally. However homegrown brands like Secret Recipe, Marrybrown, Reliance, Smart Readers, etc have done it successfully. What do you think are the key factors in holding others back and how is MFA assisting them to tap potential markets overseas?
The franchising business is not without its sets of risk although the failure rate of someone involved in franchising compared to any other business is much lower. It is common to see ambitious individuals without any business experience taking up franchising as they have a franchisor to guide them and a system already in place for them to duplicate and apply to their own businesses. Even with all the ease, there is always fear even among experienced franchisors to find their brands not easily duplicable overseas without a close monitoring of the overall operation. For this, you need a team to offer support, training and enforcement if there is deviation from the original system, etc which all incur costs. Many seasoned franchisors are re-looking into the financial concerns involved in establishing their brand overseas as it is a long-term commitment. Apart from this, many do not have the manpower to support overseas franchisees either.
These are some of the reasons. However, together with the Ministry of Domestic Trade, Co-operatives and Consumerism (MDTCC), and PNS, we carry out many trade missions where we bring local franchisees overseas to explore the markets, to experience the culture; and to study if a local concept will be accepted there. Take for instance Ani Sup Utara. Will it be accepted in China? You never know. There is a long list of exercises involved to make overseas expansion really successful. That is the reason many franchisors are taking their time to conduct market research and equipping themselves before venturing abroad. Also, the franchising sector in Malaysia has only gotten aggressive in the past six years or so. It will take time. As for MFA, we work closely with MDTCC and PNS in arranging trade missions, disseminate franchise news to our members and also assist potential franchisors who want to convert their business into franchising by providing education, training, and recommend them to the right funding arm of the government, help them in one-to-one consultation, link them up with the media if they want to publicise their business, etc.
In countries like
USA and Australia, more than 50 percent of all retail and service revenue come from franchised businesses, where one out of 12 businesses is a franchised business. In Malaysia, the percentage is much lower. What are the efforts taken by MFA to increase the numbers?
We have to understand the reason for the high percentage. USA has been a pioneer in franchising for almost 100 years now. Obviously they have better numbers compared to us. If you can recall, the first foreign franchise businesses to start in Malaysia were names like Bata and Singer way back in the 1930’s which are basically product franchising. Even though these were franchise businesses but there were no proper systems in place then. We only started becoming aggressive after brands like McDonald’s and KFC hit our shores, about 20 years ago, in the early 80s. Obviously our franchising industry does not contribute much to the country’s economy at the moment but with the drive that MDTCC has in place right now and MFA looking into the welfare of its members, I am sure the numbers would grow significantly. It is important that we strengthen the franchisors first, and they will eventually gain the confidence in their business to contribute considerably to the economy.
What are the contributions of MFA in the development and implementation of the upcoming Franchise Blueprint?
We have to admit that we don’t play a very big role in putting the blueprint together. We had in the past highlighted our views to the Ministry that this is one exercise we would like to help carry out because who could understand the franchisors and franchisees better than MFA which was established to serve its members.
Malaysia targets to become the franchise hub of Southeast Asia but its Franchise Act makes it more stringent and regulated for foreign players to invest here. How MFA overcomes this and makes it attractive to increase foreign participation?
Firstly the Act is meant to protect the industry. For instance in many countries where franchising is a matured industry, it is common to hear court cases, and suits related to the franchise business. We don’t want the same happening here. That is why the government set off such an Act back in 1998. However, the government should also be commended for taking the initiative to review the act now that the Malaysian franchising sector has become more active. Plans are underway to review the Act to see if it is really being helpful for the industry in line to achieve the objectives laid out in the Franchise Blueprint and to ensure the franchise players get the best out of the Act.
But at the same time, I feel it is also our duty to make sure that the players are educated about the Act because once they understand the Act, they will know it is there to protect their IP, to protect their business against unscrupulous parties, and also protect franchisees from becoming victims of wrong agreements. So basically if everything is in order in their franchise businesses, the players need not worry about the Act because it was implemented, essentially to provide a broad guideline to safeguard their interests and to ensure they profit most from their franchising businesses.
Singapore has launched the internationally recognised Certified Franchise Executive (CFE) programme to offer the highest standards of professional education to franchise members. What are some the plans MFA has to develop franchise talents in Malaysia?
We don’t have an exact CFE programme in place but as far as the MFA research and education sub-committee is concerned we have submitted a proposal to the Asia-Pacific Economic Cooperation under the Small and Medium Enterprises Working Group (SMEWG) to collaborate among the Asian countries to start an education module with regards to franchising. Essentially the proposal explains the necessity for less developed countries like Cambodia, Laos, Vietnam and also other countries like Thailand, Indonesia and even Singapore to educate the public on franchising. The proposal will initiate the sharing of franchise training programme for ASEAN countries. We have already received consent from the Asia-Pacific Franchise Confederation in which MFA is the chairman and permanent secretariat. We plan to have it implemented this year but there is some funding issues which need to be attended to first. To address the franchise talents in Malaysia, our sub-committee has plans to introduce industrial certificates for franchise management, franchise financing management and other types of certificates which we believe are more practical for us at this moment, rather than a formal educational programme.
As for CFE course, we don’t have plans for such a programme yet but we have initiated other programmes like training more people to become mediators under experts from Australia so that they can mediate for our members instead of members having to spend high amount of fees paid to lawyers in their business.
Now that you have been appointed as the CEO, how do you envision spearheading MFA?
I just got on board in July this year. So there’s a lot to learn and understand. I’ve been involved with the franchising industry for the past 14 years where I was closely engaged with the F&B and hospitality industries for quite sometime. While serving other companies, I’ve also been on board as EXCO member with MFA. That gave me the advantage of understanding the franchise issues from both sides – the franchisor as well as the Association. When I took up this post, one of my main goals was to execute programmes and exercises conducted by MFA to help franchisors build their brand. I want to help more local companies by equipping them with soft skills and strengthen their brands before they venture overseas. Another of my main aims is to make MFA enhance its services to serve our members better in the next couple of years. We also want to be seen as more aggressive in the region in line with our government’s drive to make Malaysia a franchise hub in South East Asia.