Franchise sector continues to expand

The franchise sector, currently valued at 300 billion baht, is growing contrary to the economic downturn, with expectations of a 9% expansion this year driven by the service sector, including spas, beauty clinics, and the influx of new Chinese franchises with innovative products and business models investing in Thailand. 

The provincial market is also expected to see significant growth, particularly among the younger generation, who increasingly prefer to start their own businesses.

Franchise businesses have shown a clear recovery after the Covid-19 pandemic. According to data from the Department of Business Development, Thailand's franchise sector had a total value exceeding 300 billion baht in 2023 (excluding large convenience stores). 

This year, the sector is expected to grow by about 9%, largely thanks to the entry of new franchises, particularly from China.

Supak Muennikorn, founder of the Food Franchise Institute and chief executive of Easy's International Franchise Co, which manages the Siam Steak burger chain and premium sausage brand Easy's, said franchise businesses remain a popular choice for entrepreneurs. 

While the overall food business has slowed down, service-related businesses such as spas, traditional Thai medicine clinics, dental clinics, beauty clinics, and language schools have continued to expand.

Chinese Franchises Entering the Thai Market

The current franchise opportunities in Thailand are being shaped by international franchises, particularly those from China. The Chinese market is large and rapidly growing, with Chinese businesses determined to expand abroad, especially in Thailand.

Chinese franchises stand out for their new products, innovative business models, fresh experiences, and affordable prices, making them attractive to customers and offering high growth potential. 

Examples include MIXUE, an ice-cream and tea-shop franchise with prices starting from 15-50 baht, which has gained significant popularity and aims to expand to 2,000 branches in three years, and Haidilao Hot Pot, a franchise specialising in mala hot pot, which has successfully penetrated the Thai market. 

Although franchises from the US, Europe, Japan, Taiwan, and South Korea have also entered Thailand, the number of brands and market opportunities may be limited.

The franchise business in Thailand continues to show growth, particularly in businesses with high transaction values, as evidenced by the increasing number of branches, especially in coffee shops and restaurants.

The main reason Thai franchises continue to grow, even in the face of economic slowdowns, is their flexibility, adaptability, ability to reach diverse customer groups, and support from experienced franchisors.

Provincial Franchises on the Rise

Thai franchises are increasingly expanding from shopping malls to community malls and residential areas, because of limited space and high rental costs. Expanding into community malls and residential areas helps franchises reach new customer groups, especially those living in suburban areas.

Other factors supporting the growth of Thai franchises include the trend of young people seeking side jobs to increase their income, which has led to a preference for franchise businesses with simple, user-friendly business models that can be self-managed, attracting those looking to become business owners.

At the same time, investors in provincial areas, such as second-generation business heirs, often seek to expand their businesses by investing in community malls and multiple franchise brands. This is primarily due to the increasing purchasing power in provincial areas and consumers' demand for quality products and services.

The provincial market is seen as a gold mine for investors thanks to the continuous growth in purchasing power and the demand for quality products and services. Additionally, franchisees in provincial areas are increasingly seeking opportunities to expand their businesses and contribute to local economic development.

Watch-Out Factors

Supak highlighted several concerns for the domestic franchise business, including:

Some franchisors may lack sufficient experience in managing franchise businesses, affecting their ability to provide effective support and advice to franchisees.

Franchise businesses face intense competition from other franchise brands and similar businesses, making it challenging for franchisees to attract and retain customers.

Franchisees need to build a strong brand identity and image to attract customers, which may require significant investment and effort.

Rapidly changing digital technology may require franchisees to adapt and invest in new online platforms, posing a financial burden for smaller franchisees.

The adoption of artificial intelligence (AI) in business is still in its early stages in Thailand, and some franchisees may lack the knowledge or resources needed to implement these technologies.

Some franchisors may lack the resources to provide adequate support to franchisees, which could impact the franchisee's success.

Nevertheless, the franchise business can be divided into two major categories: food and beverage franchises and non-food or service-related franchises. 

The franchise market can also be segmented by investment level into three tiers:

Investments ranging from thousands to tens of thousands of baht typically involve small businesses focused more on product sales than services, such as small retail stores, online shops, or market stalls. The main characteristic of this type of franchise is low investment, but support from the franchisor may be limited.

Investments of hundreds of thousands of baht involve medium-sized businesses, such as kiosks or small stores with more modern business models, incorporating technology into management and focusing on brand recognition.

Investments of millions of baht are for large businesses with international management systems and continuous investment in marketing and branch expansion, such as large corporations with strong structures, comprehensive management systems, and typically expanding branches abroad, like Minor Food, or medium-sized organisations with high growth potential focusing on domestic expansion before moving abroad.

Meanwhile, a survey by Thaifranchisecenter revealed the top 10 most popular franchises for investment in 2023:

Five Star Chicken, with more than 5,000 branches
Chaixi Bamee Kiew, with 4,829 branches
Kumon, with 466 branches
Shogun Steak, with 201 branches
Thanyarot Beef Soup, with 150 branches
Giant Fish Ball, with 2,501 branches
Nopparat 20, with 332 branches
Chester, with 200 branches
Sumo Fish Ball, with 1,004 branches
Ido4Idea, with six branches specialising in printing images on materials, screen printing, and phone-case printing.