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FAQs on Franchising in the Philippines

1. Question: I want to have my own business and have thought of buying a franchise, but I just don’t have a deeper knowledge on the franchise advantage. What do I need to know about franchising before I get into it?

Before you engage yourself in franchising, it is important that you know your self very well – your passion and interest whether in food, retail or service – because franchising is not meant for everyone. You may want to have your own franchise now but sooner or later you may realize that it is not just meant for you. That’s why, it is important to know your business interest.

Franchising is a method of doing a business by which a franchisee is granted the right to engage in the business of offering, selling or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchisor and which is substantially associated with the franchisor’s trademark, name, logo or advertising.

When you buy a franchise, you will automatically become your own boss. You are doing your own business not for yourself alone; you are doing it with your partner – the franchisor. In the franchising business, a franchisee must be a good follower. He must follow the franchisor’s systems religiously so as to avoid conflicts in the process of operating the franchised business.

It is important for the franchisee to obey everything that is stated in the franchise agreement. Disobedience to it will definitely result to legal suits. You have to remember that franchising is like marriage; it entails mutual relationship and benefits. That is why in most cases, franchising is not meant for everyone.

Also in franchising, previous experience is not necessary. Even if you do not have a direct experience on how to run a business, you can be assured that you can manage your own franchise because the franchisor provides the franchisee with initial training, ongoing support and consulting, national and local advertising programs, ongoing research and developments, assistance in franchising and even in site selection.

The best thing about investing in a franchise is that it has success rate of 90 percent. When you buy a franchise, you already have an established total concept. You don’t have to start from zero in the first few years of the business operations. You can be assured, too, that your business has already a proven system of operation, an identity, standardized products and system, and collective buying power. It is necessary, though, that when you get a franchise, you know the success story of the business you’re buying and that you get a good location for your own franchise.

2. Question: My business started very small but it has now grown, having opened its seventh outlet this year. I want to have it franchised. How do I know if my business is ready to franchise?

Franchising is a duplication of a successful business. It is important that you know very well the success rate of your business before you have it franchised. To test the franchise-ability of your business, you have to consider your business’s size and longevity, profitability, teachability, systematization, marketability, transferability, originality and affordability. When you want to franchise your business, it is important to determine where you want to go geographically and to develop your marketing plan. Likewise, you have to determine the profile of your prospective buyers / franchisee.

It is deemed important that you seek a professional help from franchise firm to really find out if your business is ready to be franchised. A lot of homegrown concepts such as Julie’s Bakeshop, Netopia, Hotshots, Reyes Haircutters, Folded and Hung, Bayo, Kamiseta, and Islands Souvenirs, to name a few, have grown so fast because they had their businesses consulted by a franchise expert. If you think you have a very good and successful concept and if you’re willing to expand and grow via the franchising format, then consult your business with a franchise expert.

3. Question: I am currently looking at the possibility of running my own business and be my own boss. Would you recommend a good franchise to start with?

Right now, there are several business opportunities open for franchising but you have to be careful, though, as there have been pseudo-franchises mushrooming around.

Before you get a franchise, check out the facts first. Franchising is a duplication of a successful business; thus, it is deemed necessary that before you get a franchise, you have to make sure that the franchise you are buying is of good standing or successful. We suggest that you seek the assistance of the Philippine Franchise Association (PFA) to test the credibility of your target franchise.

If you want to get a franchise with an investment capital ranging from P200,000 to P500,000, then get a kiosk, such as Potato Corner or Candy Corner, among others.

4. Question: I am an overseas contract worker planning to put up my own franchise business in the near future? How would I get the right franchise?

Before you get a franchise, it is important that you have to learn first the ins and outs of franchising as it is not meant for everyone. If you are the creative type and you want to innovate on your own way, then you have the heart of an entrepreneur. However, if you are the type who wants to obey certain rules and does not want to start from scratch, then franchising might be good for you. But it is important that you get the facts first.

Learn what franchising is all about before you get yourself into it. You may get in touch with the Philippine Franchise Association (PFA) for assistance in getting the right franchise for you. If you want to get your own franchise business in the Philippines, PFA can help you get in touch with the right franchisors.

Every year, PFA has a showcase of existing and new concepts that are highly franchiseable at the Franchise Expo from July 14 to 16 at the World Trade Center. Successful franchises such as Reyes Haircutters, Cebu-based Julie’s Bakeshop, Islands Souvenirs, Hotshots, and Memory Magic were among the new concepts once featured at the Incubation Center during the Franchise Expo. Today, these concepts have grown many outlets / franchises nationwide.

On the other hand, if you want to learn more about franchising and its latest trends, industry updates, you may join PFA’s franchise conference slated on July 13 and 14.

5. Question: I have heard several enterprises that have grown fast because they have them franchised. I am currently running a business that is quite successful with more than five outlets already. I want to open my business to franchising. How will I introduce it to potential franchisees?

If you are confident that your business is already successful, then don’t just sit on it, franchise it! Remember that franchising is one of the most viable business strategies that will help your enterprise grow and expand. Successful businesses such as Reyes Haircutters and Julies Bakeshop, even Jollibee, have grown fast because they have it franchised. Every year, the Philippine Franchise Association (PFA) showcases highly franchise-able concepts during the three-day expo.

You may check with PFA with regard to the details on how to join the franchise exhibit. It will be a good opportunity for you to showcase your concept. Your business will have a chance to be known by highly potential franchisees who are currently looking for possible business opportunity. You may also consult with a franchising expert to help you test the franchise-ability of your business enterprise. PFA can refer you to the franchise experts.

6. Question: I came across an advertisement for an affordable franchise. How would I know if it’s worth investing my time and money?

Franchising is a proven and tested investment formula with over 90% success rate. It is important, though, that you have to be careful in choosing or buying the right franchise as there have been a lot of small businesses that are getting in to franchising. Before you invest your hard earned money in franchising, check the facts first. Check the stability of the business, how successful it has been? It is also important that you have to check if the franchise really suits your business interest.

Franchising is not meant for everyone, so have a deeper understanding of the kind of business that you want to invest in. Also, consult with PFA if the franchise is already a member so that you can be assured of the stability of the business and its ethical practices. PFA provides strong organizational support to its franchise members, from micro to large enterprises, with proven track record and a lot of success stories.

The PFA membership is bound by the Fair Franchising Standards, a code of ethics regulating the relationship between the franchisor and franchisee. It contains measures that enable any would-be franchisee to have an opportunity to check the PFA members’ business credentials that lead to an informed decision regarding the franchise at stake. Make that important inquiry.

7. Question: I am thinking of enrolling in a short term franchise course. Would you suggest any short term program that will help enhance my knowledge in franchising?

Every year, the Philippine Franchise Association (PFA) brings in the Certified Franchise Executive (CFE) Mini-MBA Program which allows enrollees to earn credit points leading to the widely-recognized CFE designation of the Institute of Certified Franchise Executive (ICFE), an arm of the IFA Educational Foundation. The PFA has been accredited by the ICFE as the only institution outside of the US to offer some of the courses in order to earn points. Before the Philippine accreditation, the entire course will have to be taken in the US making it more expensive for the enrollees.

Now, foreign speakers will be coming in to the country to conduct the CFE Program, which will be held on July 11-12 at the Asian Institute of Management (AIM). To date, the Philippines already produced CFE graduates who are mostly PFA members. CFE graduates can put CFE after their names on stationery, business cards and all forms of address, a title seminar to professionals in other fields.

8. Question: Does a franchisor provide a full list of their franchisees and allow a potential franchisee to contact anyone on the list?

One of the first stages for any prospective franchisee is to investigate the franchise business thoroughly. This due diligence exercise should include an examination of the day-to-day operation of the franchise business to ensure that you understand exactly what is entailed in operating the franchise business. One of the best ways to do this is by talking to and visiting an existing franchisee of the franchise business.

Franchisors are usually happy to allow you to do this, so it is not unreasonable to expect a franchisor to provide you with a list of their current franchisees and their contact details. You may rightly be suspicious if the franchisor only wants you to talk to certain franchisees, as the suspicion is that the franchisor has picked franchisees that will give a favorable account of the franchise business, or not allow you to speak to any franchisees at all.

As speaking to current franchisees may provide you with some confidential information about the franchise business, it is fairly common that franchisors may require you to sign up to what is known as a confidentiality agreement. This is usually the first “legal” document a potential franchisee will be asked to sign and prohibits you from using the franchisor’s confidential information, or disclosing it to a third party. It is legitimate for the franchisor to ask you to sign up to such a document, but it is always sensible to have the document checked by a specialist franchise lawyer before you sign it.

You may get in touch with the Philippine Franchise Association at 6870365-67, fax 687-0635.

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