Sunday, August 11, 2013

Franchising in the Philippines

Franchising in the Philippines

Franchising is the right or license granted by a company to an individual or group to market its products or services in a specific territory. For the Franchiser, it is an alternative way of growing the business without actually using much of the company's capital. For the Franchisee, it is a shortcut of owning a business. Less the cost of trial and error of building a business from the ground up. 

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A quick look at the industry the Philippines has seen a tremendous growth in the franchising business over the past decades. During the Franchising and Licensing Asia 2010 convention in Singapore, the Philippines is the top franchising nation in the ASEAN, followed by Indonesia and Singapore with half the number of franchise concepts that we have. The franchise model has spread throughout the nation in leaps and bounds. With over 1,000 franchise concepts existing in the country, recent studies show that the most popular franchised products remain to be food with a 43% share, followed by retail franchises at 28% and services at 21%. In fact, this trend remains the same both regionally and globally, with food still being the top choice when going into the franchise business. 

What are the advantages and challenges of going into franchising? 

According to Philippine Franchise Association (PFA), the pioneer and largest franchise association in the country. 

The Advantages are: 
High success rate - A franchise is a business model based on proven ideas and implementation. As opposed to having to build a new business from scratch, a franchise business comes with a reduced calculated risk. 
Recognized brand and trademark - A franchise offers a product or a service that has become a household name. The powerful brand names that your franchise carry will guarantee your success. 
 • You are not alone - Franchisors discover and perfect operating and management efficiencies that they pass on to their franchisees. These powerful and superior training and coaching system offered by the franchisors are designed either to help a franchisee overcome his lack of experience in running a business, or polish an acquired business sense. 
• Ease in financing / Re-saleability of the franchise - Financial help for businesses with established good reputation come easy. Businesses with high success rates get nods for loans from banks and financial institutions. Moreover, a good franchise is an appreciating asset, thus maintaining its re-saleability at all times. 

Some of the Challenges includes: 
Control - As franchising involves the use of a proven business expertise, trademark, knowledge and training, the franchisee is required to follow the system. Some franchisors impose on a certain degree of control that makes following the system difficult. 
On-going costs - Aside from the franchise fee and royalty, franchisees pay a certain percentage of their franchises’ revenues to the franchisor each month. Additional fees for services provided, such as advertising costs, are also charged regularly to franchisees. 
Failed expectations - Conflict may arise in a franchisor-franchisee relationship due to incompetence. Franchisors can destroy its franchisees by failing to give ample support or by squeezing them too aggressively for profits. On the other hand, franchisees who tend to be lax in adhering to franchise agreements create dents on the established system, later on creating damage to the business or the brand. 

If you are planning into doing business and you have identified the kind of opportunity that is available. You have to Ask yourself next whether you have the experience or having some first-hand knowledge about it. Because If not, going into franchising is the best step to take. Especially if the type of business is very competitive - like a competitor is already present. The more familiar Brand would definitely help you give a boost. 

Here are some available materials if you want to dig deeper into the subject. 

FAQs on Franchising in the Philippines 

Sample Available Franchise and Upfront Cost 

Future Trends in Philippine Franchising 

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Good Luck with your Endeavor!

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