26 October 2021 - Aleevar’s Managing Director Mr. Yap Far Loon speaker was invited as panel discussion on Webinar Franchise: Post-Pandemic: Selection of Strategic Location organised by Malaysia Franchise Association (MFA). The panel discussion was led and moderated by Professor Dr. Azmawani Binti Abd. Rahman from Director, Vice Chancellor Office of University Putra Malaysia and joined by guest speakers Mr. Kairul Azman, International Director of Marrybrown Sdn.Bhd and Mr. Ramilan Abd Rahman, General Manager of Permodalan Kelantan Berhad that manage micro credit franchise brand Ar-Rahn.
From left to right, Professor Dr. Azmawani Binti Abd. Rahman, University Putra Malaysia; Mr. Kairul Azman, Marrybrown; Mr Wan Muhammad Zainal, Malaysia Franchise Association (MFA); Mr. Ramilan Abd Rahman, Permodalan Kelantan Berhad; Mr. Yap Far Loon, Aleevar Consulting at Kementerian Perdagangan Dalam Negeri Dan Hal Ehwal Pengguna (KPDNHEP) Putrajaya.
Marrybrown is Malaysian-based F&B halal-certified fast food restaurant chain established in 1981 with over 198 restaurants locally and more than 388 international outlets.
Permodalan Kelantan Berhad is appointed to manage micro credit franchise business brand Ar-Rahn and continues to expand with 5 franchise companies managing 52 branches.
Where are the strategic locations to open retail and food & beverage outlets in Malaysia?
There are 4 main factors in the selection of strategic locations which are;
By population density per kilometre (km) - The residents in old town area such as Subang Jaya or Petaling Jaya usually have 5,000 population per square km. A new town such as Gombak or Semenyih is about more or less 1,300 population per square km. Besides population density, there is a need to know the demography and psychography of the area namely to find out the gender, age and understand their behaviour or attitude.
For the F&B sector, it is encourage that any prospective franchisees to introduce the location they may feel confident to open an outlet over there, which might be closer to the housing area or a location where they already know the terms of impact and all the details of the analysis. For every location selected cannot be operated in a short period of time as F&B minimum term to operate is eight years. Hence, it is vital to make sure that the location must be secured and profitable from the entire area.
In the microcredit sector, operator who provides small loans to low-income individuals or those who are unemployed. This is a niche population that would normally do not have access to any type of financial service especially those who has difficulty to obtain finances from financial institutions because of some reasons. One of the factors to open the Islamic pawnbroking outlet (currently only accept gold which is known as "Marhun", the collateral asset) is to know the type of the population at the suggested area such as if the population likes to wear gold. If the area has a lot of people that wear gold, they will be a good candidate location to open the outlet within that area. Additionally, to consider the location that has a lot of commercial activity because most of the customer will pawn their gold to be turned into a capital to start their business.
By competitions - Being located near your competition can be a boon to business, provided the brand is confident enough to outsell competitors in the case of microcredit operator who prefer the location that have a lot of competitors. In additional, footfall or foot traffic is important but landing the 'perfect' customer is more crucial where by being in close to the competitors, it can benefit from their competitor marketing efforts. In other words, the competitors already chose the locations based on the ideal demographics of a particular area. In many cases, these competitors also devoted large portions of their advertising budget toward driving traffic to their locations. Hence, there’s are less need to spend on marketing since the competitors had already done so.
Visibility -The location must have plenty of retail activities such as F&B, financial services, groceries, convenience store, healthcare and wellness store and even fashion. This retail/ traffic activity can be the positive factor because store will be instantly visible since the location area is full of retailers that draw people to the area. In the case of retail pharmacy in shop lot area, in practice they chose densely populated area or in a mature neighbourhood because the need of recognition of healthcare, the convenience and customers access to car parks.
Accessibility - By building type such as high street (i.e. shop lot) or shopping mall. These building type have their own advantages and disadvantages. Both high street located at population dense area attracts a huge retail activity as well as shopping malls having a high patron footfall. However, there are disadvantage of these buildings where shopping malls have higher overall rental rate including mall expense, mall service fee and gross turnover (GTO) fees.
Other internal organisation factor - Considering proximity and access to suppliers and the accessibility for the labour. For example, F&B need a to do a lot of customer service, so they need a lot of labour. Hence, sometimes they will open near to university so that the students can do their part time at our store.
What changes should the franchisor make in the selection of locations?
Focus on marketing mix 4Ps (Product, Pricing, Promotion, Placement). Now that people are afraid to go out, emphasis should be placed in providing service or product that is safe. For instance, if someone does not want to dine in, go to retail pharmacy or to the bank, the company needs to figure out what they can provide in the simplest ways. The channels could be either the person can just walk into the store or the business itself need to approach the customer. The franchisor also needs to consider:
O2O (offline to online) combination of :
Physical presence (i.e., high street or shopping mall)
Online presence (i.e., Facebook, Instagram, marketplace, website)
Traffic of your capacity and your customer:
Customer Walk in
Customer Pick up
Business delivery (i.e. Delivery)
Start with Omnichannel marketing namely both online presence and order taking in the case study of Marrybrown;
Food tech marketing & delivery (i.e., Foodpanda, Grab, DeliveryEat)
Marketplace (i.e., Easi, More Fun, Shopee, Lelong, Ebay, Lazada)
Incentives from the government such as Lazada ‘Pakej Kedai Pintar 2.0’ stimulus package and Program e-Usahawan.
For franchisees of micro franchise programs, which is the right location for them?
During this post-pandemic, you need to combine the selection of right location and the marketing strategy. To choose the right location, you need to consider and understand:
Your sector (i.e., grocery, F&B, education, etc.)
Old neighbourhood (higher footfall by maybe higher rental and more competition) such as Petaling Jaya, Subang Jaya, Bangsar, Cheras.
New neighbourhood (lower rental and less competition but need time to footfall) such as Kuala Langat, Sepang, Klang and Kuala Selangor.
Internationally, which countries should Malaysia's franchisors focus on?
Based on Rakuten Insight, there are difference level of confidence consumer would be shopping in physical stores after restrictions are lifted in their country where Taiwan and Japan were likely to shop frequently at physical store at 90% and 88% respectively. Malaysia remains conservatively at 57%.
During this pandemic, business slows down, franchise business needs to focus the resources on internal first which is in our own country, Malaysia. Franchisors may consider neighbouring countries in ASEAN region because Malaysia shares the similar behaviour, attitude and language.
As a franchisor what is the difference in the selection of locations in Malaysia and abroad?
In Malaysia, F&B always target to open their branch in shopping mall while for the shop lot we always chose the corner lot because of the space. For F&B in each country has a different marketing model. We need to know the power of the brand itself. In home country Malaysia, we already know the brand positioning, market share and size. However, for market abroad, we need to know where the demand is.
We also need to know the factors to select the location. The concept of selection is pretty much the same where we need to negotiate the rental price of the suggested location. For example, there is a the standard rental rate that it should not be more than 10% for the next coming term. If overseas, we need to comply with the conditions over there namely rental deposit needs to be secure for one year. There is a slight difference in terms of choosing the location as we know the value of the property is quite high in overseas and we need to know how it can impact on our business. Hence, we need to learn and find out how we can get back the capital for the franchisee.
What is the difference before and after the of pandemic in terms of franchisor experience itself?
We understand now, it is certain that during this time more locations are available which means that the location is over supply, as there may be factors that most real estate agents face constraints to fill vacancies thus they themselves approaching tenants to offer a very good rental rates and so on.
Is it better to rent or buy a premise?
Usually when you start a business, you need to rent first. Because there is capital intensive if you bought the premise. Besides, you still need to figure out the requirements for business set ups since you just learned business and still learning the internal process. You need know how much space you want and once you go along with it by knowing the space, the structure and the people around you. Then, maybe it makes sense you to buy the premise.
For F&B, it will depend on the capabilities of the franchisee itself. There are franchisees that start by renting first, but there are also franchisees who looking forwards in terms of their business prospects. They knew that it might be the right time for them to buy the premise at the time it probably had a low-priced property.
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