The future of franchising in Cambodia
What is the future of franchising in Cambodia? Cambodia Lifestyle went o explore….
Investment in the restaurant industry and franchising in Cambodia has been severely affected by the restrictions and economic impact of Covid-19. Khmer Nights spoke with Mr Sarith Hem, Master Franchisee of Marucha in Cambodia. as well as the founder and inaugural president of the Cambodian Business and Franchise Association about the future prospects for the industry within the Kingdom.
What can you tell us more about your organization. How many members does it currently have?
I founded the association 6 months before the Covid-19 pandemic to aid
the promotion of small and medium enterprises and entrepreneurship through franchising and matching franchisors to franchisees.
Due to the pandemic it has been hard to build confidence within the industry
We are currently in a period of reorganization of the association un order to be ready for the reopening up of the economy.
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Cambodia has only 130 active franchises, which is much lower than other countries in the region. What are the factors that contribute to this dichotomy?
Actually Cambodia has over 200 brands if we count local brands operating in low cost structure franchising (but not fully franchise structure), according to the data we collected prior to the pandemic.
I’m sure that after things get back to normal franchising in Cambodia will again begin to develop, with more international brands coming in, as well as local low-cost franchises being created.
Is your organisation active in lobbying the government to incentivize more franchises to opening in Cambodia? Are there any incentive schemes in place?
Although a number of franchise businesses are operating in Cambodia, there is currently no legal framework governing franchising in the country, and the laws that do apply (e.g., trademark law and contract law) do not restrict franchising structures and allow parties to generally contract as they desire.
Section 52 of the Law Concerning Marks, Trade Names and Acts of Unfair Competition requires all license agreements that relate to registered marks to be recorded. Currently, there is a recordal process to record license and franchise agreements with the Department of Intellectual Property Rights (DIPR) under the Ministry of Commerce in Cambodia.
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On 13 January 2020, the Department of Intellectual Property Right under the Ministry of Commerce (“MoC”) issued a Prakas on the procedure of Recordal of License and Franchise Agreement. The Prakas was issued to implement the Law on Marks, Trade Names and Acts of Unfair Competition and to provide fair competition for investors’ intellectual property right protection in Cambodia in relation to goods or services under a license and franchise agreement. This Prakas applies to the following:
1. recording, the depositing and renewal of the contract licenses and franchise,
2. the authorisation to continue running the business on the registered mark; and
3. the application of mark registration in the sovereignty of the Kingdom of Cambodia to protect against unfair competition and illegal uses by third parties.
According to this Prakas, both registered marks and pending applications can be the subject of the license and franchise agreement. The license and franchise agreement must provide details such as mark, registration or application number, classification, detail of the goods/services, the type of the agreement, such as whether it is exclusive or non-exclusive, and duration of the agreement.
Our association is currently reorganizing its structure to be able to handle the situation, as well as work with government to develop the franchise industry in Cambodia.
What is attractive about franchising in the country right now in terms of franchisors looking at locating here and investors looking to potentially become franchisees.
Before the pandemic Cambodia saw some of the fastest economic growth in the region. In 2019 we had 10 percent of people living in poverty compared with 47.8 percent in 2007. Cambodia’s economy is forecast to grow 4.0% this year and 5.5% in 2022, as the economic recovery in our major trading partners boosts demand for Cambodia’s exports. Although the economy contracted by 3.1% in 2020, the government has responded quickly to the recent spike in cases, and we expect the economy to
return to growth in 2021. This will help increase household incomes, but not all sectors and regions will benefit equally, so it will be essential to closely monitor household welfare and the need for additional support,
Due to strong economic data and the revision of some government regulations in fighting against the pandemic, I believe Cambodia’s economy will continue to grow, which will mean more opportunities for international investors within the franchise sector.
Where does the organisation see the greatest potential for franchising in Cambodia by franchise type and location-wise?
Franchising can occur in all types of industries. so there are a number of opportunities in many fields, both big and small. However the best and most profitable franchise business opportunities in Cambodia are in F&B, automobiles, electronics, gasoline, fashion & lifestyle, health & beauty, as well as potentially in the hospitality and tourism sectors post-Covid-19.
The most workable locations would be in the big cities of Phnom Penh, Siem Reap, Sihanoukville, Kampot, and Kep with potential in some of the smaller locations in the east and west of the country.
In other countries with a more developed franchise sector, investing in a franchise is not limited to just the well off or well financed groups. Is there potential for franchises financially within the reach of average people to become franchisees coming into the market?
Most of the franchises currently in Cambodia are well-known international brands which are indeed expensive to open and operate.
Before Covid-19, there were a lot of local brands operating, which although not always up to international standards were affordable for those with lower budgets. We expect more hone-grown brands like this to start in the future.
If you are interested in getting interviewed by Cambodia Lifestyle please get in touch.
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