Shopping mall rental rates should be regulated: AFFI

THE GOVERNMENT can advance entrepreneurship in the Philippines further by regulating rental rates in malls, cutting red tape and lowering income taxes, among others, according to the Association of the Filipino Franchises, Inc. (AFFI).

The industry association is discussing with honorary member Senator Sherwin T. Gatchalian a piece of legislation that would tackle high rental rates in malls, its Executive Director Raffy G. Canare said during the media launch of the group’s Franchise & Business Expo on Wednesday.

“We requested some help to propose in the legislative body to create a law to monitor rentals in the malls and also to kind of standardize [them] to help all the SMEs (small and medium enterprises),” Mr. Canare told reporters.

AFFI Executive Vice-President Ricardo Z. Cuna noted rent represents about 15-18% of gross sales on average and that leasing a six-square meter space in malls could cost P30,000 a month or double the P15,000 seen a decade ago.

“I think most of the business people, when you talk of malls, big rent is really an issue,” Mr. Cuna said. “We always tell our members, the avenue is big. I mean, we don’t have to keep on squeezing ourselves in big malls, where the overhead is too high.”

The proposed measure would not necessarily require mall operators to lower their rental rates, AFFI Chairman Armando O. Bartolome said during the media launch.

“Actually, we will not ask them to cut their rental rates because, really, they’re businessmen, just like the entrepreneurs. But you also want to know how they can be friendly, especially to start-ups,” Mr. Bartolome noted.

“We also want for them to understand that start-ups also need help — incubation, as they say. That’s the reason why we would like to have a sort of a ‘reach out’ to the malls and we want to be on a win-win basis,” he added.

For instance, mall operators may supposedly allocate certain areas for start-up businesses and offer preferential rates in the first two years or until the entrepreneurs have established their operations.

AFFI also welcomed the initiatives of the Department of Trade and Industry to make doing business easier for smaller enterprises by streamlining permitting processes and pushing for a simplified tax structure, among others.

“Actually, the most common question or concern among entrepreneurs is the ease of doing business — so, the bureaucracy they have to go through just to set up their business,” AFFI President Jerry Neil C. Ilao said.

The interventions would allow entrepreneurship to further flourish in the Philippines, which Mr. Bartolome believes has emerged as a franchising hub.

AFFI expects its member franchisors and entrepreneurs to generate an aggregate P150 billion in sales for the fiscal year ending August 2017. This marks a 40% surge from the P107 billion recorded previously.

To date, the association’s membership has expanded to 210 franchisors and entrepreneurs operating 35,539 outlets and employing 213,569.

“If you think about it, is there a steady growth for franchising? There is. In Metro Manila, there is a new avenue — not anymore in the malls but in the new communities being developed, like condominiums,” Mr. Bartolome said.

Mr. Bartolome further noted that more homegrown franchise businesses are expanding outside the country.

AFFI members Aquabest, Crystal Clear, Eat Bulaga, Figaro, Fiorgelato, Goto King, Lay Bare, Mang Inasal, Potato Corner, Julie’s Bakeshop, Binalot, Ferino’s Bibingka, NASA WATER, Reyes Hair Co. International, Adobo Connection and Acquasuisse currently have global presence.

“Last year, we spoke about very few franchisors going global. This year, we have 16 franchisors, from 12 last year. It goes to show that more and more franchisors are getting inspired to go global,” Mr. Bartolome said.