The Franchise Frenzy

PHNOM PENH IS SLOWLY BUT SURELY BECOMING THE FRANCHISE CAPITAL. NEXT STOP SEATTLE COFFEE?
PHNOM PENH IS SLOWLY BUT SURELY BECOMING THE FRANCHISE CAPITAL. NEXT STOP SEATTLE COFFEE?

PHNOM PENH IS SLOWLY BUT SURELY BECOMING THE FRANCHISE CAPITAL. NEXT STOP SEATTLE COFFEE?

Franchises from Singapore are eyeing up Cambodia as the prime location to expand their business abroad. BY MARISSA CARRUTHERS

A silhouette of shiny skyscrapers dominates the skyline, signalling Singapore’s booming business district. Gleaming shopping centres carrying big name brands, global designs and internationally-renowned eateries line the prestigious Marina Bay, and pristine tower blocks that are scattered around the outskirts of the city house the majority of the population.

Today, Singapore stands as one of the region’s most powerful economic hubs, with the highest GDP per capita in ASEAN of $55.20 compared with $1 for Cambodia. Its transformation has taken place at a staggering rate, with the country developing from a slum state to an economic stronghold within a few decades.

One factor that played a significant role in Singapore’s development was the introduction of global brands into the market, increasing quality and delivery across the board. The same pattern can be seen to be emerging in Cambodia, where the appetite for international brands is increasing with the emergence of a youthful middle class. This demand has led to a series of franchises making their debut in the Kingdom to cater to this growing sector of the population, and heralding a new era.

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David Murphy, of Independent Property Service, welcomes the influx of franchises, especially in the food retail sector. “International franchises bring with them food safety standards, procurement systems, point of sales systems and probably the most important improvement – structured training – ensuring local staff not only use the new systems effectively but represent the brand’s ethos. This up-skilling reverberates through the whole retail sector,” he says.

The first food franchise to operate in central Phnom Penh was Thailand-based The Pizza Company, which was launched in 2005 by EFG (Express Foods Group). The company went on to introduce Swensen’s, BBQ Chicken, Dairy Queen and Costa Coffee. Other internationally renowned franchises that have enjoyed success in Cambodia include Spanish fashion house Mango, shoe specialist Pedro and, with the opening of Japanese Aeon Mall in 2014, a whole host of other global names.

As construction of a swathe of other mega-malls is currently underway across the country, the Cambodian economy continues to grow and with apparent political stability, the window of opportunity to attract more top brands is opening – and it is a window that businesses are clamouring to clamber through.

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In September, a Singaporean mission is heading to the country to explore the opportunities available. Forming part of a strategic process, representatives from about 30 businesses will head to the Kingdom for the three-day event, which is subsidised by the Singaporean government. They range from yoghurt producers and aromatherapy companies, to spas, educational organisations and children’s learning programmes.

Ahead of the event, the businesses released standards on experience, income and other capabilities required of prospective franchisees. They were then paired with interested Cambodian partners that met these criteria. The prospective partners will meet for a series of events to discuss potential ventures from September 9 to 11.

“We are coming to find the right business partners to carry these brands,” says Joanna Lieu, who is helping to organise the mission for the Singaporean government. “Cambodia is expanding very, very fast. Previously people were sceptical because of factors like corruption and instability. However, this is changing and we have had a very good response from businesses wanting to expand overseas.”

Add low labour and rental costs, ease of access into the country, as well as setting up shop and Cambodians’ passion for brands, and the country is an attractive location to many. “Cambodians are hungry for brands, and that’s the right attitude for these businesses, which is very important,” says Lieu.

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The mission also comes at a time when a string of malls are being constructed across Phnom Penh. Following hot on the tail of the 68,000sqm Aeon Mall, which is currently Cambodia’s largest shopping centre, Vattanac Capital opened in July, boasting a mini-mall on the ground floor. This is now home to a series of luxury franchises and names, including Hugo Boss and TWG Tea.

Malaysian retail chain, Parkson, is also set to make its Cambodian debut next year in the form of Parkson Phnom Penh City Centre Mall. It will comprise a Parkson department store and a shopping mall. The nine-storey development, which will also measure a total of 68,000sqm, will house a multiplex cinema, IT mall and supermarket. Property experts predict more malls will follow suit, opening more doors for potential franchises.

“Parkson was the first mall to open in Vietnam, and it has been doing very well,” says Lieu. “Since then, malls have sprung up across Vietnam. I see the same happening in Cambodia where you now have this middle sector that is trying to push itself up.” She adds that some of the brands heading to Cambodia prefer shopping centre settings, while others desire independent stores.

A recent report from CBRE predicted retail space would triple in the next few years. Prior to the opening of Aeon Mall, research conducted by the property specialists showed that the net internal area of high-quality shopping centres equates to 0.04sqm per capita, compared with 0.07 in Ho Chi Minh and 0.59 in Bangkok.

Lieu is highly confident that up to 50 percent of the Singapore businesses coming to Phnom Penh will find an acceptable partner, and with others set to follow suit, Cambodia’s retail landscape looks likely to change very soon.

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