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Franchises Gain Appeal in Myanmar

Franchise restaurant chains are racing to develop business in this Southeast Asian nation as its national wealth increases and some nations begin dropping economic sanctions.

By Albert Kong, CFE

 

Having been to Myanmar three times over the last three years, and having met with a few franchisors and master franchisees in buzzing Yangon, the commercial hub, I am more certain now that this city is ripe for a great franchise harvest.

At the time of this writing in early February, I had just confirmed my air-tickets to Yangon to speak at the Myanmar Franchise exhibition and conference. Similar to the trends seen in other countries, the early foreign franchise entrants hail mainly from the food and beverage sector, as seen by the franchises from major companies from Asian countries such as Thailand, South Korea and Japan. They seem to be racing to open restaurants in this nation that is blessed with increasing wealth.

One example is Thailand’s conglomerate Minor Food Group that opened Swensen’s in 2013. The company has a 40-year license to develop and franchise Swensen’s ice cream stores in 34 countries across the Middle East and parts of Asia. Although a scoop of ice cream costs as much as 1,600 kyat (US $1.66), the small shop of around 10 seats is constantly full, even during the daytime on weekdays. It is an extravagance in a country where the average annual income of an office worker is around US $3,878. But again, as observed in many other nations, consumers nowadays aspire for better things. (A Minor’s franchisee has also opened The Pizza Company in Yangon.)

Following closely behind is South Korean fast food restaurant Lotteria which opened an outlet at Junction Square in April 2013. Lotteria is a subsidiary of conglomerate Lotte Group and operates in South Korea, Japan, Vietnam, China and Indonesia. Its master franchisee, the newly formed MYKO, short for Myanmar-Korea, plans to open 25 or more restaurants by 2016, expanding from Yangon to the capital Naypyidaw. To cultivate a strong following and not to alienate less-adventurous locals who are accustomed to its standard fare of chicken and burgers, Lotteria also offers dishes tailored to Myanmar consumers, such as chicken rice.

Another South Korean chain, BBQ Chicken, has also opened its first Myanmar outlet in Yangon. The master franchisee is Myanmar Culinary Holdings Co. Ltd. whose executive director, Zaw Lin Oo, runs many businesses. As BBQ Chicken’s prices are higher than other chicken offerings, its strategy is to target the city’s young-middle- and upper-middle-class population with a casual dining format.

Hailing from Japan is Freshness Burger, which has opened its first outlet near the famous sacred landmark Shwedagon Pagoda. 3E is the joint operator of the chain in Myanmar. Note that beef is not as commonly eaten as in other nations; the nation’s favorite meat is chicken. It is important to localize the menu somewhat – just as McDonald’s does in India – so as to not alienate a big portion of the local consumers.

Yet another fast-food entrant is Malaysian chain Marrybrown, known for its halal fried chicken, burgers and finger food. It opened its first restaurant in Myanmar in June 2013. According to Joshua Liew,  business development manager for Marrybrown, the Yangon store will kick off an expansion in Myanmar to 16 outlets in five years. Another Malaysian brand, Manhattan Fish Market has also opened in Yangon.

Not to be outdone, of course, is Singapore’s most-established local coffee chain Ya Kun. It has also opened in Yangon and according to Adrin Loi,  chairman of Ya Kun (name), it plans to expand to as many outlets as the market can support. Another Singapore brand is Chewy Junior that has opened a few outlets.

U.S. barriers to Myanmar business lowered

In tandem with the European Union’s decision to permanently end sanctions against Myanmar, the United States has also eliminated almost all the barriers to do business there. Case in point: KFC plans to open its doors in Myanmar this year. (Yum! Brands’ franchisee is Singapore-listed, Myanmar-focused Yoma Strategic Holdings.) Another example: Starbucks’ CEO Howard Schultz said during a visit to Thailand last year to celebrate the 15th anniversary of its opening in the country that it has set its sights on tapping the nation’s coffee lovers.

Myanmar is an extremely attractive market with more than 50 million consumers, terrific locations for trade and ample natural resources. Although the per-capita gross domestic product currently stands at around US$900, the middle class is steadily emerging in major cities.

However, the infrastructure for keeping foods frozen or refrigerated has yet to be fully developed. The road networks necessary for food transport and the food processing industry are also in their early stages of development. In addition, high property rents are also major issues.

Another concern is the protection of intellectual property. “In the past, people weren’t familiar with international trade. Our eyes were closed. They still don’t know IP should be a right,” said Thein Aung, a senior associate with the Myanmar Trademark and Patent Law Firm, whose clients include KFC, Panasonic, Adidas and other well-known corporations.

Albert Kong, CFE, is a member of the board of directors of the Singapore Franchising and Licensing Association. Find him at fransocial.franchise.org.

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