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TAITRA executive VP urges Taiwanese chain operators to be more global

TAIPEI -- Taiwanese players in the franchise and chain sector should think more globally and expand overseas to drive the growth of the country's service sector, Taiwan's main trade promotion body said Wednesday.

Walter Yeh, executive vice president of the Taiwan External Trade Development Council (TAITRA), said his council helped many local chain operators open new stores abroad last year, with 60 percent investing in China and others targeting markets such as Indonesia, the United Kingdom and Germany.

"We expect more chain operators to enter the global community, which will contribute to the exporting of our service sector," Yeh said at the Taipei International Franchise Summit Forum and Business Networking.

Currently, Taiwan has more than 2,000 franchise and chain operators, but only 140 of them do business abroad, the executive said.

He suggested that Taiwan's small- and medium-sized enterprises make use of TAITRA's wide service network across the globe to help them collect market information and find store locations.

Chang Chun-fu, director-general of the Bureau of Foreign Trade, said at the forum that Taiwan's franchise and chain sector, which has more operators than any country in the world except for South Korea, the United States and China, has been a big contributor to the country's economy.

Domestic franchise and chain operators had revenues of NT$1.75 trillion (US$58.6 billion) in 2012, accounting for 50 percent of Taiwan's retail and food sector sales and 25 percent of the service sector's sales as a whole, Chang noted.

"The diversity in the operating models of companies in the franchise and chain sector has been an important driver of Taiwan's business development. It is expected to become a major trend in our service sector in the future," he said.

Tom Hsu, chairman of the Association of Chain and Franchise Promotion Taiwan, said companies must consider if they can generate a high enough gross profit to cover their management costs before jumping into the business.

Those companies must also be capable of training employees at a rapid pace to keep pace with a fast expansion of stores, he said.

Roman Shaw, chairman of Shanghai-based private equity firm DT Capital Partners, said he has observed two new trends in the sector in China, where many foreign franchise and chain businesses operate.

One trend is the "urbanization bonus," where the growing migration of rural residents to cities will increase consumer spending by US$10 billion per year, adding to the franchise market's potential, Shaw said.

The other trend is the rise of Chinese brands, which are improving their brand images to increase their margins rather than simply manufacturing goods for contract customers, he said.

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