Business

Monday August 31, 2009

Extol MSC in talks with 12 potential franchise partners

By RACHAEL KAM


PETALING JAYA: Information and communications technology security solutions provider Extol MSC Bhd is in talks with about 12 potential franchise partners in Asia as part of its overseas business expansion, said chief executive officer Justin Tan.

It was now evaluating and shortlisting potential franchisees, including in the Middle East, he told StarBiz.

“We hope to finalise some talks really soon and should have a couple of franchisees by the end of 2010,” Tan said.

Extol had carried out market studies on the locations and suitability of its partners to ensure the success and viability of the partnerships, he added.

Tan said franchisees would get sole rights to Extol’s product distribution, production and copyrights.

“It is just like any fast food franchising. Franchisees pay licensing fee for the use of Extol’s logo for their business,” he said, adding that franchising was the easiest way for the 25-year-old company to expand with minimum costs.

“Setting up offices on our own in a foreign land needs a big sum of investment and it is very time consuming,” he said. “I have learnt great things in setting up offices in Vietnam, Indonesia and Singapore, But, they (overseas offices) have not been a great success yet.”

Asked if Extol’s franchise business would become its future main source of income, Tan said: “It is too early to project now as this is a completely new product. We may end up making more money but it’s just something (earnings) that is difficult to promise or estimate now.”

Tan admitted that the global financial downturn had affected Extol’s business as most of its clients were large banks and multinational corporations.

“Financial institutions are the first to be hit during a crisis. Fortunately, local banks did not get involved directly in the subprime issue and suffered no big impact,” he said.

Local clients make up 90% of Extol’s clients. Due to rising demand, Extol has developed more affordable IT security management systems.

The company plans to reduce prices further to expand its business to home users.

The company sees lower profits this year and for 2010 due to spending on R&D. “It is difficult to predict this year’s sales as some of our existing customers are facing business slowdown. Moreover, our franchise business is still in the early stages,” he said.

Extol recently returned to the black, posting a net profit of RM187,000 for the third quarter ended June 30, from a net loss of RM71,000 in the previous corresponding period.

Revenue rose 38.7% to RM6mil from RM4.3mil previously, partly contributed by new clients in the media telecommunications sector.


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