US Fast Food Chain May Herald New Era of Investment

Unless knockoff chains like the Holiday International Hotel, Pizza Hot and the new Goo Chi restaurant are counted in the tally, Cambodia ranks among Southeast Asia’s most isolated countries when it comes to the proliferation of Western franchises.

That’s why a decision by the US-based Dairy Queen—recognized for its “Blizzard” whipped ice cream desserts—to dip its toes in the Cambodian flood plains has created some chatter.

“I’ve known Dairy Queen since I was a small boy,” said Jack Spencer, 60, an aid worker from the US at the franchise at Phnom Penh Inter­national Airport.

“I heard that they’d opened one here and I had to come and find out.”

The chain’s frozen snacks and rotisserie hot dogs still remain somewhat mysterious and too steep in price for the vast majority of Cam­bodians, but the country’s first Western franchise has drawn the attention of officials.

With the ice cream giant opening up shop last November, many say they hope it represents the dawn of a new and brighter investment age.

“All we needed was one franchise and Dairy Queen was it,” said Sok Siphana, secretary of state for the Commerce Ministry. “Now let’s see who else comes.”

Commerce Ministry officials welcomed Dairy Queen’s arrival—with its shiny countertops and uniformed staff—as a way to heighten the standards of other companies in areas such as hygiene and customer service.

But business observers agree with Sok Siphana that maybe the most important underlying aspect about the advent of a West­ern franchise was the “psychological dimension.”

“One thing is clear, there is an unrelenting drive here right now to be acceptable, be like everyone in the world,” said Bretton Sciaroni, partner at the law firm Tilleke and Gibbins and Associates and president of the Inter­national Business Club.

“In America, they wouldn’t see the opening of a franchise as a status symbol, but they do here,” Sciaroni said. “This is another indication that they have joined the mainstream—a symbol that they’ve joined the rest of the world.”

The franchise attraction extends beyond the new generation of moneyed youth, who continue to emerge from nearly three de­cades of civil war, lunging toward everything modern, including new local burger joints, movie theaters, music stores and gas station mini-marts.

Officials said they hope it will lure other potential foreign investors who have long hesitated to invest here. Reasons for this include increasing investor interest in China, a lack of consumers, and the “hidden costs” of operating in a country notorious for corruption.

Businessmen say Phnom Penh’s lack of zoning, shoddy legal infrastructure and a recent amendment to investment law, which aims to bring more money to the government, are also prohibitive.

But the most commonly cited reason for the lagging foreign investment is the political uncertainty of the country, highlighted by the factional fighting that erupted in the capital in 1997, and most recently by the Jan 29 anti-Thai riots.

“Franchise businesses come back every couple years, kick the tires a little, and decide not to take the plunge,” Sciaroni said. “You look at other countries that have had their share of problems, like Indonesia, and you see fast food. It doesn’t seem to affect them.”

For this reason, promoting the country’s main­stream image has been paramount for some officials, whose schedules have been filled in recent months with trips to the US and Europe as Cambodia prepares an entry bid to the World Trade Organization in Septem­ber.

However government leaders, frustrated at watching potential investors come and go over the years, say the perception that franchises are the marker for solid investment climate is absurd.

“Some people dream of having a certain way of life, and it’s trendy to go into a franchise shop,” said Sok Chenda Sophea, secretary- general of the Cambodian Investment Board at the Council for the Development of Cam­bodia.

“But the presence or actions of McDonald’s or other franchises should not be criteria for potential investors’ decisions to settle here,” he said. “What is a franchise? Ask most Cam­bo­dians and they have no idea.”

 

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