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Pernas: Empowering Growth Connecting Opportunities
Cover Story
Mohd Hilaluddin bin Abd Shukor, Chief Executive O cer (CEO) of Perbadanan Nasional Berhad (Pernas) speaks to Christina Thomas on the agency’s mandate to lead the development of Malaysia’s franchise industry.
H
elming the leadership of Pernas, an agency owned by the Ministry of Finance Incorporated (MOF), Hilaluddin is determined to drive the agenda of developing Malaysia’s franchise industry while increasing the number of franchise entrepreneurs. Operating out of Pernas’ headquarters at Menara Pernas in Bangsar South City, Kuala Lumpur, Hilaluddin is no stranger to the business world. Holding a Master of Business Administration in Business Finance from the University of Hull, and a Degree in Finance and Legal Studies from She eld Hallam University in the United Kingdom, Hilaluddin’s career spans two decades in nance and banking.
He commenced his career in a commercial bank, and subsequently moved on to a merchant bank, now known as an investment bank, managing private debt securities focusing on capital markets. In banking, Hilaluddin managed various sectors and industries such as plantations, telcos, and other corporates. He has also served in Deutsche Bank covering the corporate and retail sectors.
His illustrious career also includes serving Khazanah Nasional Berhad, Malaysia’s sovereign wealth fund, for 5 years managing the industry sector, where he had his rst taste of the start-up industry, and venture capital fund management. His stint in managing venture capital has given him a good idea of the industry and the market. He personally witnessed the growth of a dairy milk company, their diversi cation e orts and the innovation of products and market cannibalisation. In fact, he saw text book theories come to life such as market segmentation, di erentiation and diversi cation. That experience broadened his perspective and has enabled him to understand the market better in order to structure nancing requirements for customers.
FRANCHISING – A VERY RELEVANT OPTION
In sharing his thoughts about franchising, Hilaluddin declares that the bigger question is whether or not franchising is still relevant in current times. Using Gloria Jean’s Co ees as an example, he says, “Nowadays you o en see artisan co ee emerging. The franchise business is very challenging. We are talking about millennials, and whether or not they want to take up this business.”
Hilaluddin explains that the franchise business is all about brand names. “It is the brand name that can sell. You need to build new franchise brand names. The franchise business is challenging for both newcomers as well as existing businesses, yet it is relevant.”
Where Pernas is concerned, the agency is focused on two key elements, which include attracting franchisees and developing as well as nurturing home grown brand names. The agency is driven by its vision “to be the premier corporation for franchise and entrepreneurship excellence” and its mission “to create and sustain wealth through diversi ed businesses while providing opportunities to entrepreneurs”.
“During the pandemic, the franchise business is very relevant, especially when people lose their jobs. One may want to go into business,” explains Hilaluddin.
“If you want to start a new business, you need a strong brand name that can help you kick-o the business immediately, otherwise it takes time to build a brand presence,” he highlights.
To help entrepreneurs, Pernas introduced the Xcelerator project to drive homegrown franchise businesses and to help them penetrate the market quickly.
We Remain Steadfast To Our Mandate And Deliver On Our Brand Values And Promise
Vision
Mission
Corporate Values To be the premier corporation for franchise and entrepreneurship excellence
To create and sustain wealth through diversi ed businesses while providing opportunities to entrepreneurs
P - Professional I - Innovative E - Ethical
Brand Promise Empowering Growth, Connecting Opportunities
Brand Tagline Malaysia’s Franchise Champion
PERNAS’ KEY STRATEGIC THRUSTS
Since taking over as CEO of Pernas in 2020, Hilaluddin explains that the key strategic thrusts of the agency is focused on 3 pillars namely; franchise development, whereby Pernas develops home grown brand names and provides them nancing; medium-enterprise division comprising equity nancing and equity participation; and, property, which is to provide security of tenure.
“We are aligned with Dasar Keusahawanan Negara (DKN). Under the 5th objective of DKN, we aim to drive entrepreneurship as the rst choice of profession, hence we need to increase entrepreneurship,” he explains.
Elaborating on the rationale of these strategic thrusts, Hilaluddin says that o en when businesses commence, they succumb to high rental rates, whereby pro ts are insu cient to cover overheads, especially rental, and eventually the businesses close down. Recognising this, Pernas purchases properties and leases it to its clients for a more secure tenure.
“Where renovation costs are concerned, entrepreneurs need the security of tenure. There are many cases whereby entrepreneurs have spent lots of money on renovations, and the landlord sells the property. Therefore, security of tenure is critical for business survival,” he stresses.
Pernas provides its clients the option to Rent-to-own properties whereby entrepreneurs can eventually buy it over a er some time.
BE YOUR OWN BOSS PROGRAMME
To attract more people into entrepreneurship, the agency has introduced the “Be Your Own Boss (BYOB)” programme, comprising a four-week classroom training series sponsored by Pernas.
“The rst week is all about mindset change, followed by book-keeping, marketing, and franchising,” Hilaluddin shares.
“A er 4 weeks, the trainees are given a list of franchise brand options to pick their choice of a preferred business they would like to do. Then, we match them with the chosen franchise brand, they undergo training, and once they are well-equipped, we nance them,” he adds.
“In this way we also help the franchisors to get franchisees – it’s end-to-end – covering the entire value chain,” he continues.
For the BYOB programme, Pernas targets to achieve 1,000 participants per year – with 250 trainees per quarter in 4 cohorts per year. The agency has repositioned itself from a more conservative approach of just waiting for entrepreneurs to come through its doors, to a more proactive stance of going in search of prospective entrepreneurs and drawing them into the programme.
BUSINESS IN TRANSFORMATION (BIT) PROGRAMME & XCELERATOR PROJECT
BIT program which began in 2013 is an incubator-like programme for micro businesses that identi es and develop their business into franchise potentials. Under this programme, micro-businesses are nurtured into becoming franchisors through guided training especially on how to build a franchise system that helps them grow their businesses. From this programme, Pernas have created 5 franchisors.
“Meanwhile, under the Xcelerator Project, which began in 2021, we registered 8 new franchisors under this programme,” Hilaluddin shares.
With BYOB, Xcelerator and BIT programmes in place, Pernas is well on its way towards developing Malaysia’s franchise market. Todate, more than 150 loans have been approved since last year for new franchisees – a record high since the start of this programme.
“Typically, we disburse RM20-25 million per year in loans but last year we disbursed close to RM35 million,” he reveals.
REACHING OUT TO STRUGGLING FRANCHISE BUSINESSES
In addressing the struggles of businesses during the pandemic, Hilaluddin explains that Pernas provided entrepreneurs a moratorium with no compounding interest on the outstanding amounts. The moratorium comprises an extension of tenure.
“Even where our properties are concerned, we give our tenants discounts and moratoriums,” Hilaluddin explains.
We also provide RECURVE nancing of RM500,000, for working capital, to restock raw materials, salary and rental for those a ected franchise businesses,” he adds.
PERNAS’ 2021-2025 BUSINESS PLAN
On Pernas’ 2021-2025 business plan, Hilaluddin explains that a er the launch of BYOB last year, Pernas introduced project NEXT, which addresses the next steps for entrepreneurs, especially franchisors.
“It can be product development or market development. We aim to export them abroad as there is so much potential,” he points out.
“This project is aimed at how we can bring our brand names overseas. The test bed is for these businesses to rst go to Sabah and Sarawak,” he elaborates.
“There is a collaboration between Pernas and the Ministry of Industrial Department Sabah (MID) – we have several interested stakeholders, Kementerian Belia dan Sukan, Ministry of Women, Family and Community Development, and Majlis Agama Islam. The Sabah government also has an entrepreneurship programme and they liked our programme,” Hilal says.
“So, they have embarked on our programme whereby we bring our franchisors and do the pitching. The rationale is, if they can do well in Sabah and Sarawak, then they can go abroad. Likewise, as for the franchisors from Sabah and Sarawak – we want to bring them here,” he continues.
Pernas is also collaborating with MARDI for advisory on product development, hygiene standards and raw materials used for food preparation and preservation to extend shelf life.
Under its incubator programme, Pernas has 150 entrepreneurs, through which the agency nurtures them and drives collaborations for the bene t of its entrepreneur pool.
“We have had a collaboration with DIGI for our e-commerce platform, Pybli, and along the line we collaborated with POS Malaysia, then we have had KPMG providing solutions to help entrepreneurs enhance their business operations. This is how we connect opportunities,” he shares.
DIGITAL AGENDA
Pernas has a digital agenda in place, o ering its incubator pool of franchise entrepreneurs advisory on digital solutions through its collaborations with various partners.
“We need to digitise and automate business operations with end-to-end electronics – we digitalise our processes and services such as loans applications, processing and approvals,” Hilaluddin stresses.
“This is part of our mandate to partner companies who have growth potential.
Pernas also embarked on equity partnerships with strategic business partners in order to bene t their franchisees and franchisors.
PERNAS’ CALL TO ENTREPRENEUR
In calling out to potential entrepreneurs, Hilaluddin explains that people must rst understand the bene ts of the franchise business, as well as the key requirements to run the business such as nancing and administrative resources, among others.
His advice to entrepreneurs is to aim for the international markets.
“We can become your business partner by sharing our experience with you and assisting in nancing or equity partnerships,” he adds.
“O en, the rst impression is that franchise is big business, however, that is not necessarily so. Even small businesses can be franchised. Come to us and we will help you – both large and microbusinesses,” Hilaluddin advises. For those intending to go into the franchise business, Pernas o ers a wide range of pre-franchise and franchise options, which the agency says is able to generate good income with gross pro t margins potentially reaching 50 percent to 60 percent, while net pro t margins can be double digit, in the high teens.
“We have more a ordable franchise scheme, especially for youth and women where Pernas can nance up to 90%, and remember that business is all about location. You get the right location and you are set for success,” he emphasises.
“Pernas is not only for franchisors but also for franchisees,” he reminds.
In his message to MRCA members, Hilaluddin says “MRCA is very active and a very good platform for business owners. Moving forward, people can’t be working on their own. You have to collaborate and leverage on network. MRCA is one good example o ering a wide spread of members where there is always an exchange of information, and collaboration is on the table.”
