Franchising in Asia

The new, three-towered Marina Bay Sands Resort looms over downtown Singapore like a giant Chinese character. It is a vast, eye-popping Las Vegas-style property with 2,500 rooms, daring architecture, a casino (controversial for Singapore), an enormous convention center, and a shopping mall for which the term “upscale” would be too timid. The hotel is topped by an outdoor Sky Park sporting an infinity pool that seems to threaten a 200-meter plunge to swimmers who venture too near the edge.

As a symbol of Southeast Asia's brimming economic confidence, the Marina Bay Sands was the perfect venue for the Franchising Licensing Asia 2010 (“FLAsia 2010″) exposition, held on Oct. 21-23, and a concurrent International Symposium on Franchising organized by the International Franchise Association. FLAsia 2010 and the International Symposium both showcased the vibrancy of Asian franchising. Despite a modest number of exhibitors compared with franchise expos in the United States, one could not escape the impression that much of franchising's future lies in Asia.

The 'Curse of Assumption'

That future depends in part on overcoming what Rod Young, executive director of Australian consultancy DC Strategy, calls the “curse of assumption” in international franchising. He and other speakers at the International Symposium stressed the danger to brand owners of making assumptions about how new markets will perceive their products and services. According to Young, the curse of assumption has undermined more franchising opportunities than any other single factor.

Young shared a panel with Ned Lyerly, executive vice president of global franchise development for CKE Restaurants, Inc. Lyerly used his company's brands, Carl's Jr. and Hardee's, as cases studies on analyzing new markets and adapting U.S. franchise concepts to them. Keynote speaker Winston Tang, regional executive of V-KOOL International, a franchisor of heat-absorbing window film products, offered another case study from the perspective of a Singapore-based concept that has expanded to 600 units in 30 countries.

Universal Truths

The stories of these and other franchisors at the symposium confirmed that certain truths of franchising are universal. No matter the country of origin, the principal business challenges are: 1) finding good franchise candidates; 2) managing franchisees' compliance with brand standards, especially from a distance; and 3) finding ways to maintain franchisor leadership of the brand by continuously adding value for franchisees.

To an American lawyer sitting in the audience, two observations stood out. First, none of the franchisor business executives who spoke complained about the burden of franchise laws, despite facing a presumably sympathetic audience that was almost devoid of lawyers. They spoke of franchising in China, Indonesia, and Vietnam with the same relish as franchising in Singapore, Thailand, and India ' though the former three countries regulate franchise sales, while the latter three do not. This is not to presume that the speakers did not consider franchise laws a burden, only that the business factors seemed to dwarf the legal.

Second, a subtle but significant theme emerged from the remarks about managing a franchise network. Michael Cha, director of business development for Korea-based franchisor Genesis BBQ, listed four basic elements for strong franchise relationships: respect, communication, acceptance (of cultural differences), and trust. Western franchisors, of course, might list the same elements as keys to business success. But in Singapore, these elements seemed to be invested with cultural meaning, not just business advantage. The result was a different emphasis (or different instinct or philosophy ' it was hard to pin down the right term) in managing franchise system disputes. As Imeelia Ismail, COO of Cherie Hearts Group International, a Singapore-based system of 125 child-care centers, put it: “We understand that [franchisees] make mistakes; we don't punish them, we support them.” The Western instinct, by contrast, is often to reach for the default letter.

Away from the conference, a visit to the Singapore International Arbitration Centre (“SIAC”) offered a different slant on potential franchise disputes. The SIAC is housed in Maxwell Chambers, the beautifully renovated former Customs House building, which also contains offices of the American Arbitration Association's International Centre for Dispute Resolution and the International Chamber of Commerce's International Court of Arbitration. Maxwell Chambers provides state-of-the-art hearing room facilities and support to all of these organizations, including an arbitrators' lounge that would be the envy of any Red Carpet Club denizen. The hearing rooms offer a variety of configurations in a sleek modern architecture, but one of them bucks the style of the others and features ornate furniture that formerly served the Supreme Court of Singapore.

With no disrespect to the other organizations mentioned above, the SIAC has developed a solid reputation as a dispute resolution administrator of choice in Southeast Asia. The SIAC, in a refreshing nod to transparency, even provides an “Estimate Your Fees” calculator on its Web site. Its caseload ' about 160 cases so far this year ' is dominated by commercial and maritime disputes, which is no surprise for a city-state that serves as one of the world's major container ports and finance centers. Intellectual property disputes, which would include franchise disputes, is a much smaller category. However, for a franchisor that is seeking a neutral site to designate in its contracts for disputes with, say, a Chinese franchisee, the SIAC (and the alternative providers at Maxwell Chambers) is worthy of consideration. Coincidentally, Maxwell Chambers also happens to house the offices of the Franchising and Licensing Association (Singapore), the sponsor of the FLAsia 2010 exposition.

Conclusion

For a Western franchisor considering a regional office to oversee its operations in Southeast Asia, Singapore would be a logical base. As a former British territory, English is one of its four official languages and generally serves as the language of business, and Singapore's laws are based on the British model. The government is stable and friendly to business. The handsome airport is a non-stop flight away from most major cities in the region. Lastly, it is a multi-cultural society and a crossroads for visitors. Anyone laboring under the curse of assumption would likely find that Singapore helps to shatter those assumptions and ease the entry of a franchise brand into other parts of the region.

David W. Koch is co-founder of Plave Koch PLC in Reston, VA. He can be contacted at 703-774-1202 or [email protected].

The new, three-towered Marina Bay Sands Resort looms over downtown Singapore like a giant Chinese character. It is a vast, eye-popping Las Vegas-style property with 2,500 rooms, daring architecture, a casino (controversial for Singapore), an enormous convention center, and a shopping mall for which the term “upscale” would be too timid. The hotel is topped by an outdoor Sky Park sporting an infinity pool that seems to threaten a 200-meter plunge to swimmers who venture too near the edge.

As a symbol of Southeast Asia's brimming economic confidence, the Marina Bay Sands was the perfect venue for the Franchising Licensing Asia 2010 (“FLAsia 2010″) exposition, held on Oct. 21-23, and a concurrent International Symposium on Franchising organized by the International Franchise Association. FLAsia 2010 and the International Symposium both showcased the vibrancy of Asian franchising. Despite a modest number of exhibitors compared with franchise expos in the United States, one could not escape the impression that much of franchising's future lies in Asia.

The 'Curse of Assumption'

That future depends in part on overcoming what Rod Young, executive director of Australian consultancy DC Strategy, calls the “curse of assumption” in international franchising. He and other speakers at the International Symposium stressed the danger to brand owners of making assumptions about how new markets will perceive their products and services. According to Young, the curse of assumption has undermined more franchising opportunities than any other single factor.

Young shared a panel with Ned Lyerly, executive vice president of global franchise development for CKE Restaurants, Inc. Lyerly used his company's brands, Carl's Jr. and Hardee's, as cases studies on analyzing new markets and adapting U.S. franchise concepts to them. Keynote speaker Winston Tang, regional executive of V-KOOL International, a franchisor of heat-absorbing window film products, offered another case study from the perspective of a Singapore-based concept that has expanded to 600 units in 30 countries.

Universal Truths

The stories of these and other franchisors at the symposium confirmed that certain truths of franchising are universal. No matter the country of origin, the principal business challenges are: 1) finding good franchise candidates; 2) managing franchisees' compliance with brand standards, especially from a distance; and 3) finding ways to maintain franchisor leadership of the brand by continuously adding value for franchisees.

To an American lawyer sitting in the audience, two observations stood out. First, none of the franchisor business executives who spoke complained about the burden of franchise laws, despite facing a presumably sympathetic audience that was almost devoid of lawyers. They spoke of franchising in China, Indonesia, and Vietnam with the same relish as franchising in Singapore, Thailand, and India ' though the former three countries regulate franchise sales, while the latter three do not. This is not to presume that the speakers did not consider franchise laws a burden, only that the business factors seemed to dwarf the legal.

Second, a subtle but significant theme emerged from the remarks about managing a franchise network. Michael Cha, director of business development for Korea-based franchisor Genesis BBQ, listed four basic elements for strong franchise relationships: respect, communication, acceptance (of cultural differences), and trust. Western franchisors, of course, might list the same elements as keys to business success. But in Singapore, these elements seemed to be invested with cultural meaning, not just business advantage. The result was a different emphasis (or different instinct or philosophy ' it was hard to pin down the right term) in managing franchise system disputes. As Imeelia Ismail, COO of Cherie Hearts Group International, a Singapore-based system of 125 child-care centers, put it: “We understand that [franchisees] make mistakes; we don't punish them, we support them.” The Western instinct, by contrast, is often to reach for the default letter.

Away from the conference, a visit to the Singapore International Arbitration Centre (“SIAC”) offered a different slant on potential franchise disputes. The SIAC is housed in Maxwell Chambers, the beautifully renovated former Customs House building, which also contains offices of the American Arbitration Association's International Centre for Dispute Resolution and the International Chamber of Commerce's International Court of Arbitration. Maxwell Chambers provides state-of-the-art hearing room facilities and support to all of these organizations, including an arbitrators' lounge that would be the envy of any Red Carpet Club denizen. The hearing rooms offer a variety of configurations in a sleek modern architecture, but one of them bucks the style of the others and features ornate furniture that formerly served the Supreme Court of Singapore.

With no disrespect to the other organizations mentioned above, the SIAC has developed a solid reputation as a dispute resolution administrator of choice in Southeast Asia. The SIAC, in a refreshing nod to transparency, even provides an “Estimate Your Fees” calculator on its Web site. Its caseload ' about 160 cases so far this year ' is dominated by commercial and maritime disputes, which is no surprise for a city-state that serves as one of the world's major container ports and finance centers. Intellectual property disputes, which would include franchise disputes, is a much smaller category. However, for a franchisor that is seeking a neutral site to designate in its contracts for disputes with, say, a Chinese franchisee, the SIAC (and the alternative providers at Maxwell Chambers) is worthy of consideration. Coincidentally, Maxwell Chambers also happens to house the offices of the Franchising and Licensing Association (Singapore), the sponsor of the FLAsia 2010 exposition.

Conclusion

For a Western franchisor considering a regional office to oversee its operations in Southeast Asia, Singapore would be a logical base. As a former British territory, English is one of its four official languages and generally serves as the language of business, and Singapore's laws are based on the British model. The government is stable and friendly to business. The handsome airport is a non-stop flight away from most major cities in the region. Lastly, it is a multi-cultural society and a crossroads for visitors. Anyone laboring under the curse of assumption would likely find that Singapore helps to shatter those assumptions and ease the entry of a franchise brand into other parts of the region.

David W. Koch is co-founder of Plave Koch PLC in Reston, VA. He can be contacted at 703-774-1202 or [email protected].