Franchising In Singapore

Benefits, success stories, trends, and key considerations

Franchising offers a unique opportunity for businesses to expand their reach and for individuals to embark on a journey of entrepreneurship with established brands. Singapore, with its robust business environment and diverse consumer base, presents an ideal landscape for franchising.

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Benefits of Franchising

Franchising provides several advantages for both franchisors and franchisees.

Overall, both franchisors and franchisees co-share the financial risks and rewards of the business. Franchisees benefit from the franchisor’s experience and support, reducing their risk of failure. At the same time, franchisors participate in sharing the revenue through franchise fees and royalties, while also investing in the success of their franchisees.

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Success Stories and Trends

Singapore is home to several inspiring franchising success stories across various industries:

The franchise market in Singapore is growing rapidly, boosting the region's economy. The Asia-Pacific, including Singapore, represents over 30% of global franchised businesses. Worldwide, the franchise market is expected to grow at a CAGR of 10.41% from 2024 to 2028, adding USD 1.96 trillion in value. This growth benefits both franchisors and franchisees by offering opportunities for expansion, innovation, and higher profitability.

Singapore remains an ideal hub for franchisors aiming to enter Eastern markets, acting as a bridge between the East and the West due to its active franchise networks and business-friendly environment. Current franchising trends in Singapore include coffee culture and educational services.

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Key Commercial and Legal Terms for Success

When entering into a franchising agreement, it is essential to consider the following commercial and legal terms:

Typical fee arrangements include franchise fee, initial start-up costs, advertising fee, ingredients or supplies costs, and royalty fees.

Generally, the Singapore government has long advocated for reducing business red tape, making it popular for franchisors. Unlike neighbouring countries, Singapore does not have specific franchise laws, relying on general company regulations. The Franchising and Licensing Association (FLA) of Singapore provides ethical guidelines, binding FLA members and offering a valuable framework for non-members. In contrast, Malaysia strictly regulates franchising with laws governing development agreements, corporate franchisees, and capital disclosure.

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Conclusion

Franchising in Singapore offers a wealth of opportunities for businesses and individuals alike. The co-sharing of financial risks and rewards between franchisors and franchisees makes franchising a mutually beneficial arrangement. Successful stories such as Ya Kun, Modern Montessori International, and 7-Eleven demonstrate the potential for growth and success in this vibrant market.

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Legal Guidance for Successful Franchising

Having a good adviser can help structure rights and responsibilities fairly, fostering long-term, win-win relationships and ensuring both franchisor and franchisee achieve their goals. Legal guidance can provide clarity on contract terms, protect IP, and ensure compliance with local regulations.

For franchisors, this means securing their brand and business model while clearly defining the support and expectations for franchisees.

For franchisees, it ensures they understand their obligations and rights, helping them operate within legal frameworks and avoid potential pitfalls. Ultimately, informed legal advice contributes to a stable and prosperous franchise relationship, benefiting all parties involved.

Our Corporate team regularly advises businesses in franchising, including term sheets, franchise agreements, and separate agreements in the areas of trademark licensing, leasing, supply, and support. Get in touch with us to learn more.