Is Franchising a Worthwhile Investment in Singapore?

This was originally posted on Planner Bee.

As a country known for its vibrant economy, stable business environment, and strong support for entrepreneurship, there is no shortage of investment opportunities here. Franchising is one investment option that has become a popular choice for both local and international entrepreneurs.

In this article, we will delve into franchising in Singapore to determine if it is a worthwhile investment option.

What is a franchise?

It is a business model where a franchisor grants the rights to use their established brand, products, and business processes to a franchisee. The franchisee, in turn, pays a fee and ongoing royalties for the privilege of operating under the franchisor’s brand and utilising their business system.

Singapore’s business-friendly environment, well-developed infrastructure, and strong consumer purchasing power has made for an attractive landscape for franchisors looking to expand their brand. Similarly, local entrepreneurs often find franchising an appealing investment opportunity as it offers a ready-made business model with established market recognition.

How does a franchise work?

The franchisee operates under the franchisor’s brand, adhering to pre-determined guidelines and maintaining brand standards while benefiting from an established customer base and the franchisor’s expertise.

This mutually beneficial partnership allows the franchisor to expand its presence in a market, while enabling a franchisee to run a business with reduced risks and what is often proven success.

Advantages of franchising in Singapore

Established brand recognition

One of the most significant advantages of franchising is that you have access to an already-established brand with a customer base. This allows you to capitalise on the brand’s reputation and customer trust, which is particularly beneficial in industries such as food and beverage, as well as retail.

Proven business model

Franchisors have honed their business models through trial and error, ensuring that the franchisees can work within a well-defined and proven system. This increases the likelihood of success and lowers the risks often associated with starting a new venture.

Ongoing support

Franchisors typically provide ongoing training, marketing assistance, and operational support to franchisees. This support can prove invaluable, especially for first-time business owners or those unfamiliar with Singapore’s business landscape.

Reduced risk

Franchising offers a lower risk approach compared to starting an independent business. The franchisee benefits from the franchisor’s prior experience in navigating legal, regulatory, and operational challenges.

Access to resources

Franchisors often negotiate better deals with suppliers due to their bulk buying power. This can lead to cost savings for you, enhancing the overall profitability of the venture.

Challenges of franchising in Singapore

High initial investment

Franchise opportunities in Singapore can require a significant upfront investment, which might deter some potential investors. These costs include franchise fees, initial inventory, and setting up the business location.

Royalty payments

Franchisees are required to pay ongoing royalties, which can impact profit margins. It’s essential to carefully consider these costs and ensure they align with your overall business plan.

Market saturation

Certain industries in Singapore may already be saturated with established franchises, making it more challenging for new entrants to gain a foothold. Thorough market research and a unique value proposition are crucial to overcome this challenge.

Legal and regulatory compliance

Singapore has strict regulations and legal requirements for businesses, including franchising. Navigating these complexities can be time-consuming and may require specialised legal assistance.

Franchising options in Singapore

1. Subway

As one of the world’s largest quick-service restaurant franchises, Subway has a strong brand recognition and a diverse menu that appeals to a broad customer base.

Estimated Franchise Capital Requirements:

Food court/kiosk at a non-traditional location about 30-40m² in size: S$127,900

2. 7-Eleven

This convenience store brand is well-established internationally and offers franchisees access to a proven business model and a wide range of popular products. By strategically selecting suitable locations and offering 24/7 convenience, franchisees can capitalise on Singapore’s fast-paced lifestyle and consumer demand, making a 7-Eleven franchise potentially profitable and rewarding investment opportunity.

Estimated Franchise Capital Requirements:

• Capital (Security deposit refundable at end of tenure): S$40,000
• Franchise fee for five-year term (non-refundable): From S$30,000

• Training deposit (refundable upon completion of training/or when you take over store): S$5,000

3. Prima Deli

A local brand with a strong presence, Prima Deli offers a range of western, French, Asian, and Singaporean buns, cakes, bread, and pastries.

Estimated Franchise Capital Requirements:

• Full-baking bakery (600-800 sq ft): S$250,000

• Non-baking bakery kiosk (200 – 500 sq ft): S$120,000

4. Astons

A popular casual dining restaurant chain, Astons offers franchisees access to its successful and diverse menu, which includes a wide array of delectable dishes such as sizzling steaks, grilled chicken, and flavorful seafood.

Estimated Franchise Capital Requirements:

• Franchise fee: S$50,000 per restaurant, with an Area Franchise Agreement (AFA) that involves at least five restaurants

• Initial investment (including initial training, support, development assistance and Standard Operating Manuals): S$1,500,000 to S$2,000,000

5. Old Chang Kee

Old Chang Kee is a well-known Singaporean food brand that specialises in a wide variety of savoury snacks and finger foods. Founded in 1956, Old Chang Kee has become an iconic brand in Singapore and is famous for its curry puffs, a popular street food snack in the region.

Estimated Franchise Capital Requirements:

While Old Chang Kee did not publicly disclose the exact franchise fees or costs associated with opening a franchise, you can reach out to them directly here to understand more regarding franchise fees, royalty fees, and other financial requirements.

To franchise or not to franchise?

Franchising in Singapore can be a worthwhile investment for an entrepreneur. The benefits of established brand recognition, a proven business model, ongoing support, and reduced risk make it an attractive option. However, one must do thorough research, assess one’s financial capabilities, and consider market demand to ensure the chosen franchise opportunity aligns with one’s long-term goals.

Like any business venture, success in franchising requires dedication, hard work, and adaptability. Those willing to invest the time, effort, and resources into understanding the market dynamics and adhering to best practices are more likely to flourish in Singapore’s franchising landscape.

With the right approach, franchising in Singapore can offer a rewarding and profitable business venture.

Read also: When Should You Start Your Own Business?