Overview
Taiwan is well-known for its high concentration of franchises in multiple industries, including dining, shopping, beauty and health, real estate, technology, and education. As of May 2022, the top ten U.S. franchises in Taiwan by number of stores were Starbucks (533), McDonalds (411), Pizza Hut (296), Domino’s (184), Kentucky Fried Chicken (183), Subway (126), Burger King (88), Cold Stone Ice Creamery (41), Haagen-Dazs (38), and TGI Fridays (16).
The food and beverage franchise market in Taiwan is highly saturated and extremely competitive. Fierce local competition and the established presence of well-known international brands make it difficult for foreign firms with limited brand recognition in Taiwan to enter the market unless the brand is well-positioned. Taiwan’s consumers enjoy a moderately high standard of living and pay close attention to famous or high-end brand names, as well as exciting new products coming into the market. Consumers often line up for hours to attend the grand openings or pop-up stores of internationally recognized franchises that are new to Taiwan. Another challenge is high real estate prices, particularly in Taipei, which can cause difficulties when negotiating reasonable rent and lease terms with local landlords.
To increase their competitiveness, major players look for vertical or horizontal integration. Several recent deals have reshaped the market landscape. For example, the largest supermarket company, PX-Mart, spent $433 million to acquire the hypermarket RT-Mart in July 2022. A few days after PX-Mart’s deal was announced, Uni-President, the operator of 7-11 Taiwan, announced a US$1 billion deal to acquire 68 hypermarkets and 272 supermarkets from the French retailer Carrefour. This acquisition extended Uni-President’s footprint in the retail market.
While hypermarkets, supermarkets and convenience stores started working with food delivery service providers during COVID-19, Foodpanda opened panda marts, an online supermarket, making the competition even more intense. 7-11 Taiwan acquired foodomo, a food delivery service provider, to extend its services to more customers. Uber Eats is also gaining popularity with franchisors.
Taiwan authorities’ Fair-Trade Commission reported that an increasing number of franchisors have started recruiting franchisees through messenger platforms. The channels are not only limited to company websites and mobile apps, but also include online franchise matchmaking platforms, Facebook pages, and LINE* Biz- Solutions.
*LINE is the most-used mobile instant messaging app in Taiwan.
Current Market Trends & Needs
According to research by the Taiwan Chain Stores and Franchise Association (TCFA), franchise brands in 2022 decreased by 0.6 percent to 2,872 brands; however, the number of stores increased 2.9 percent. This research covers the retail, food and beverage, and other service sectors. There is a total of 116,415 chain stores in Taiwan, including 51,691 company-owned stores that have reported an annual growth rate of -0.6 percent, and 64,724 franchise stores that have reported an annual growth rate of 5.8 percent. Growing store numbers can be attributed to several factors, including but not limited to:
- Online enhancements – offline integration capability
- Greater flexibility and viability of franchise stores relative to company-owned stores, which was advantageous during the pandemic. During this time, many unemployed people started their own business by buying a franchise from a reputable brand.
- Growth of digital technology-related businesses and online sales, which eliminated the underperforming company stores.
- Rising competition costs are reshaping the food and beverage market landscape and furthering market concentration.
Although the number of brands decreased, medium and large brands in recent years have still actively expanded their stores in the market.
Although Taiwan had COVID-19 under control in 2020 and 2021, the Omicron variant caused Taiwan’s most serious COVID-19 outbreak starting in May 2022, with over 90,000 reported cases per day for a period.
Taiwan authorities evolved from a zero-COVID policy to “co-existing with the virus.” According to the local Chamber of Commerce’s research, sales in the service sectors, including food and beverage, tourism, lodging, and retail, decreased by more than 50 percent during the Omicron variant spread. This major drop in sales may cause companies to withhold their investments in these sectors.
Consumer behavior and demand in Taiwan’s franchise industry changed fundamentally during the pandemic. Taiwan’s food delivery service industry grew by nearly 200 percent in 2020. This digitalization trend continued into last year. Online sales in the retail industry equaled $13.54 billion in 2022 with an annual growth rate of 8.26 percent.
Coming out of the pandemic, digital platforms have maintained an important position in the Taiwan market not only in sales channels but also in business operations and supply chain management. Digital tools were essential in company responses to the rapid market changes and heightened risks brought by the pandemic. Through this experience, digital tools became permanent features in the toolkits that Taiwan franchisors use to assess their investments. For example, 7-11 Taiwan, one of the most popular franchises on the island, offers its franchisees a digital platform, including marketing management, financial management, store management, human resource management, and Point-of-Sales applications. These platforms provide a wide range of services, such as printing, scanning, faxing, calling taxis, collecting online shopping packages, and even dry cleaning.
Best Prospects for U.S. Franchisors
There is great potential for U.S. franchisors in Taiwan’s green diet market. Healthy diets have become fashionable in Taiwan. Taiwan has three million vegetarians, making up 13.8 percent of the population, ranking second in the world. The vegetarian market value is $2 billion per year. In 2019, chain restaurants started to serve plant-based meat and milk. According to the Nielsen Company, sales of food with no sugar, extra fiber, and more nutrition has seen higher growth rates than regular products. For example, soymilk product sales grew by 13 percent in 2020 while soymilk with no sugar sales grew by a remarkable 21 percent.
The pet supply market is another area of opportunity for U.S. franchisors. According to the Taiwan Ministry of Interior (MOI) and the Taiwan Council of Agriculture (COA), the number of pets in Taiwan reached 2.95 million in 2021, exceeding the size of the youth population (people aged less than 15), which stood at 2.89 million. The continuing growth of pet ownership drives the pet market value to over $1.67 billion, which has grown threefold in less than ten years. Many retail companies in Taiwan are targeting the growing population of pet owners. For example, 7-11 set up a “Pet Zone” section in 500 stores. PX-Mart offers similar services in their flagship stores.
Demand for elderly care and service franchises will also see massive growth in the near future. The Taiwan National Development Council reported that Taiwan will become a super-aged society in 2026. Already, at least 20 percent of the population is 65 years old or older. Taiwan authorities amended the regulation to provide tax deduction incentives to encourage private-sector investment in long-term care.
Market Entry Considerations
In recent years, due to high initial capital investment costs and increasing competition from local franchises, Taiwan’s investors have adopted a more conservative attitude toward new foreign franchises. Though the market is gradually recovering from the COVID-19 outbreak in May 2022, investors continue to withhold investment in the service sectors—including food and beverage, tourism, lodging, and retail—that were significantly impacted by the pandemic.
To succeed in the Taiwan market, U.S. franchises should provide considerable support to their local partners by implementing best-practices, systems integration, personnel and customer service training, and quality assurance protocols.
Local Regulations
- Fair Trade Commission Disposal Directions (Guidelines) on the Business Practices of Franchisors
- Consumer Protection Act
- Act Governing Food Safety and Sanitation
- Trademark Act
- Commodity Labeling Act
- Business Entity Accounting Act
- Personal Data Protection Act
Local Franchise Association
Trade Events
In most major industries, industry associations work with the Taiwan External Trade Development Council (TAITRA) to organize local trade shows. Participating in major trade shows and advertising in relevant Taiwan trade publications are effective ways to boost sales in the market.
Information about upcoming trade shows in Taiwan is available on TAITRA’s website. TAITRA also offers several helpful lists, including a frequently updated calendar of TAITRA-sponsored international conferences, and exhibitions held at the Taipei World Trade Center and the Nangang Exhibition Center.
The largest local franchise exhibition, International Chain and Franchise Exhibition, is organized by the Association of Chain and Franchise Promotion, Taiwan (ACFPT). There are two exhibitions (summer and autumn) in Taipei, one in Kaohsiung, and one in Taichung. ACFPT also organizes online matchmaking events.