The Future of Franchising in Malaysia: Emerging Trends and Opportunities for Entrepreneurs.

Franchising is a popular business model that allows entrepreneurs to start their own business with the support and guidance of an established brand. Franchise businesses can be found in many industries, from fast food to fitness to hotels. The franchise industry has experienced significant growth in recent years, with more and more entrepreneurs recognizing the benefits of franchising.

As the industry continues to evolve, new trends and opportunities are emerging that offer exciting possibilities for franchisees. In this article, let us explore the future of franchising and discuss the emerging trends and opportunities that entrepreneurs should be aware of. By understanding these trends, entrepreneurs can make informed decisions about their franchise investments and position themselves for success in a rapidly changing marketplace.

The Current State of Franchising in Malaysia

The franchise industry in Malaysia has been growing steadily over the years, with the sector contributing significantly to the country’s economy. According to the Malaysia Franchise Association (MFA), the franchise industry in Malaysia grew by 8% in 2020, despite the challenges posed by the COVID-19 pandemic. The sector is expected to continue its growth trajectory in the future, driven by several factors, including a growing middle class, an increasing demand for convenience, and the availability of funding.

Technology Integration

Technology is transforming the franchise industry, with franchisors integrating new technologies such as artificial intelligence (AI), virtual reality (VR), and the Internet of Things (IoT) to provide better customer experiences and increase operational efficiency. Franchisors are also exploring new digital marketing strategies such as social media marketing, mobile apps, and e-commerce to reach a wider audience and increase brand awareness.

One example of technology integration in franchising is the use of AI-powered chatbots in customer service. Chatbots can provide immediate responses to customer inquiries, freeing up staff time and reducing wait times. For example, Domino’s Pizza has invested heavily in its online ordering platform, making it easier and more convenient for customers to order and track their pizza delivery.

The fast-food chain McDonald’s in Malaysia has also been adopting digital technologies to improve its operations. In 2020, the company launched a mobile app that allows customers to order and pay for their meals online. The app includes a loyalty program that rewards customers with points that can be redeemed for free meals.

The new Order & Collect option, Deals and Rewards features available on the McDonald’s Malaysia app.
Source: McDonald’s MY

Franchisors that integrate new technologies into their operations can gain a competitive advantage over those that do not. By investing in technology, franchisors can improve operational efficiency, enhance customer experiences, and increase profitability.

Focus on Sustainability

Sustainability is becoming an increasingly important consideration for consumers, and franchisors are taking notice. Franchisors are incorporating sustainable practices such as using renewable energy sources, reducing waste, and implementing eco-friendly packaging to attract environmentally-conscious consumers. Going green not only helps the environment but can also improve a franchise’s bottom line.

For example, Starbucks has committed to using 100% renewable energy in its company-operated stores globally by 2025. The company has also implemented a series of sustainability initiatives, such as using reusable cups, reducing food waste, and investing in ethical coffee sourcing.

A closer look at Starbucks’ sustainability journey so far.
Source: theCOMMONS

Franchisors that prioritise sustainability can appeal to a growing segment of environmentally-conscious consumers, differentiate themselves from competitors, and reduce operating costs over the long term.

Personalization and Customization

Personalization and customization are becoming increasingly important for consumers, and franchisors are responding by offering tailored products and services. Personalization can take many forms, such as customised menus, personalised workout plans, and tailor-made beauty treatments. Franchisors that can offer personalised experiences will have a competitive advantage over those that cannot.

For example, the fast-food chain Subway has introduced a “build your own” menu option that allows customers to customise their sandwiches. This personalised approach has helped the brand appeal to consumers looking for healthier and more customised food options. Health food chain Salad Atelier has been growing in popularity in Malaysia, offering a wide range of salads, sandwiches, and wraps made with fresh, healthy ingredients. The company has also been expanding its menu to include vegan and gluten-free options, catering to the growing demand for healthier food options.

Subway sandwich artists can create any combination of bread, protein, vegetables and sauces that customers prefer.
Source:Subway MY

Similarly, fitness centre chain Celebrity Fitness has been operating in Malaysia for many years, offering a wide range of fitness classes and facilities. The franchise has been successful in Malaysia, with consumers valuing the convenience and variety of fitness options that Celebrity Fitness provides. Franchisors that can offer personalised experiences can create stronger connections with customers, increase loyalty, and boost revenue.

Expansion into Emerging Markets

As developed markets become saturated, franchisors are looking to expand into emerging markets such as Southeast Asia, Latin America, and Africa. These markets offer significant growth opportunities due to their growing middle class and increasing consumer purchasing power. Franchisors are also adapting their products and services to cater to local tastes and preferences.

As an illustration, McDonald’s has customised its menu items in different countries to cater to local tastes. In Malaysia, the company offers the Ayam Goreng McD, which is spicy fried chicken specially made for Malaysian taste buds, whereas in Singapore, the company offers a Hainanese style chicken burger. This is because Hainanese chicken rice is so well-loved in its home country of Singapore that it is hailed as their unofficial national dish. Each burger has a breaded chicken patty that is crispy on the outside and juicy on the inside, and a trio of sauces similar to the original: a dark sweet sauce, garlic-chilli sauce, and ginger sauce.

McDonald’s launched the Crispy Hainanese Chicken Burger, in partnership with Singaporean actor Ben Yeo.
Source: spot

Franchisors that expand into emerging markets can tap into untapped potential and increase their global footprint. However, franchisors must also be aware of the cultural differences and regulatory environments of these markets and adapt their operations accordingly.

Diversity and Inclusion

Diversity and inclusion are becoming increasingly important considerations for consumers, and franchisors are responding by promoting diversity and inclusion within their businesses. Franchisors are investing in diversity training, implementing inclusive hiring practices, and supporting diverse franchisees to create a more inclusive business environment.

For instance, the fast-food chain McDonald’s has implemented a diversity and inclusion initiative that includes training for employees and franchisees, support for diverse suppliers, and partnerships with minority-owned businesses.Franchisors that prioritise diversity and inclusion can create a more inclusive business environment, appeal to a wider range of consumers, and improve their brand reputation.

Alternative Franchise Models

Traditional franchise models such as fast-food chains and retail stores are still popular, but alternative franchise models are also emerging. These include non-traditional franchise models such as mobile franchises, home-based franchises, and pop-up franchises. These models offer lower startup costs and greater flexibility for entrepreneurs.

As an example, mobile franchise Cinnaholic operates out of food trucks and kiosks, allowing the franchisee to reach different locations and markets. Similarly, home-based franchise MaidPro offers cleaning services that can be performed remotely, providing greater flexibility for franchisees.

To summarise

The future of franchising is exciting and full of opportunities for entrepreneurs who are willing to embrace change and innovation. By staying up-to-date with emerging trends and exploring new business models, franchisors can succeed in a rapidly changing marketplace. Aspiring franchisees should carefully evaluate franchise opportunities based on these emerging trends and find the ones that align with their business goals and objectives.

Ultimately, franchising offers entrepreneurs a unique combination of the benefits of entrepreneurship and the support of an established brand. By leveraging on promising opportunities, franchisors can continue to grow and evolve, providing entrepreneurs with even more opportunities to achieve their dreams of business ownership. Get in touch with Intellect as we can help you to take the first step towards owning your first franchise.