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A taste for franchises in Brunei Darussalam

Publication Date : 02-06-2014

 

Brunei Darussalam has proven to be fertile ground for international food chains entering the domestic market, with an increasing number using franchising as a means to extend their roots and reach out to an enthusiastic clientele.

As a result, their success is prompting calls for local businesses to use the same franchising vehicle to drive expansion overseas.

Over the past year, there has been a surge of overseas food outlets launching in Brunei, aiming to carve out a niche in an increasingly affluent market.

Companies such as Burger King, Starbucks, the organic food retailer Natural Health Farm and Aunt Annie’s Pretzels have all moved into the country, while others, such as the US-based coffeehouse It’s A Grind, are set to open their doors later this year, utilising franchises operated by local owners.

Among the reasons officials have given for the uptick in franchised food chains coming to the domestic market is Brunei’s demographics, with more than half the population under the age of 24 and increasingly affluent.

Travel on the part of Bruneians is also a factor. As locals have explored the region and beyond, they have been exposed to a wide range of products and international food franchises.

According to Mike Shattuck, president of Focus International Brands, which represents a number of leading franchises including Aunt Annie’s Pretzels, this exposure helps drive sales.

“The response in Brunei Darussalam has been unbelievable and overwhelming. Customers start lining up at least 30 minutes before the store opens,” Shattuck said earlier this year. “Most are familiar with the Auntie Anne’s brand and have tried it in Malaysia, Singapore, the Philippines and Thailand.”

Develop local, franchise global

While leading global brands are being introduced to Brunei Darussalam through the franchise model, it has been suggested the traffic has the potential to become two-way.

In early May, Haslina Taib, the CEO of information technology consulting and outsourcing services provider Brunei Accenture Group Networks, called for the establishment of a regulatory agency or advisory body to assist local businesses to develop through franchising.

While saying that building a business through a franchising arrangement had many advantages, thanks to the standards and practices that were part of the framework provided from the parent firm, developing a brand that could be franchised overseas was another matter, she said.

“It would be good to have an agency that tells businesses how to go to Vietnam, or how to go to Bali, and have packages set up for them,” Haslina told The Brunei Times in early May.

“I think it would be good to encourage our successful restaurants to franchise, but there isn’t any government agency now that can help a business to set up a franchise,” she said.

Two local restaurants – Excapade Sushi and Fratini’s Italian Restaurant – have several branches in the country, and Fratini’s has already expanded to Malaysia and the Philippines while Escapade is currently considering investing in neighbouring countries.

Halal potential

One of the developing strengths of the Sultanate’s economy is the halal products industry, one that could be slowly built into an indigenous franchise industry. Brunei is already working to position itself as a leading halal certification centre, establishing facilities to test and provide quality control for food and medical and cosmetics products to ensure they meet the stringent requirements of syariah-compliant production. It has also stepped up investments in research and development into halal products and techniques.

If local halal producers can take advantage of the support being provided by state agencies, they could be in a position to create their own halal ranges and market profile. In time they could build export markets for not only these products but also use them as a vehicle to develop Brunei-specific franchise lines. There could be opportunities for private firms to develop a range of specialised food products aimed at the halal health food market, along with mainstream sales.

With the state-owned Brunei Darussalam Wafirah Holdings building brand awareness of halal products developed in the Sultanate, targeting markets like the UK with its expanding range of certified ready meals and grocery items, some of the groundwork has already been laid for the private sector to develop their own brand and then try and parlay that into a franchise.

Other local companies such as cosmetics firm Faceshop and Simpor Pharmaceuticals are either planning to or currently in the process of exporting their products abroad.

While it may be difficult for a small business to build its profile to the point where it can look to franchising its operations, most of the international brands that are making their way into the market through franchise arrangements began life as small businesses and grew through identifying demand and meeting it.

Through cooperation between the private and public sectors, local successes could one day be franchised and exported.

 

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