The franchising sector flourished in 2008 and is expected to remain strong despite the global economic crunch. This was the conclusion of an informal survey among members of the Philippine Franchise Association (PFA), the country’s largest franchise association.
“Franchising has always been the better investment option because of a proven business formula. With over 90 percent success rate, it has evolved as a business model primarily identified with minimal risk,” PFA Chairman Emeritus Samie Lim said.
According to the said survey, respondents revealed growth in sales in 2008 averaging 10%. But for a certain pizza company, which has just begun its franchising operations, sales posted 50% growth. This can be attributed to the fact that franchising can be compared to the proverbial shot in the arm which boosts the growth of the number of outlets, which naturally increases sales. Other respondents also revealed increase in number of franchised outlets. These despite the fact that the economy was rocked with fuel and food price hikes.
“With its mission to promote franchising as a tool for national development, PFA continuously provides services to help our members to be always a step ahead,” declared Mr. Lim. “These services include a continuing education program, seminars promoting global best practices, local and international expos, as well as support in issues affecting the franchising sector. This constant service is PFA’s proactive effort to strengthen PFA members and prepare them for any economic contingencies – like the fuel and food crisis and the ongoing financial slump. So crisis or not, PFA members are equipped to face any eventualities.”
Despite recession fears, PFA and its member companies continue to have a positive outlook of 2009.
Red Ribbon Bakeshop, one of the leading bakeshops in the country, is eyeing to continue the local expansion of its store network. “We plan to open stores in the Bicol, Cagayan Valley and Zamboanga Regions,” Froilan Manotok, Head-South Luzon Operations said. He added that the company will also create new business formats or store models to reach untapped markets.
Apart from sustaining its regional roll out, Waffle Time, ubiquitous kiosk in metro train stations, is also targeting on penetrating other international markets, specifically in the Asia-Pacific region. At present, the company has outlets in Indonesia.
Going international has also been the strategy of another cart-type food business, Potato Corner, and Mr. Jose Magsaysay, Jr., CEO of Cinco Holdings Corp., which runs the business, is grateful to PFA for encouraging them to go international. Mr. Magsaysay is now also expanding into the stand-alone restaurant concept with the Bamboo Asia Grill Restaurant chain. His wish list for 2009 includes that malls and shopping centers to keep their rental rates reasonable.
On the other hand, Dr. Alan Escalona, president of Fruit Magic, said that heightened initiatives in promoting the local franchise business will aid in hurdling the challenges in 2009, confident that local, regional, and even international expansions are in the loom for his company.
An advocate of entrepreneurship through franchising, PFA believes that something good will come out of the global economic downturn. “With the prospect of lay-offs in the horizon, and the possible return of many OFWs, PFA still sees a silver lining because these disenfranchised individuals can become prospective franchise investors,” Lim posited.
“In fact, long-time employees are ideal franchisees because a franchise, in order for it to work, must follow a system,” Lim explained. “Therefore, those who are used to working in a disciplined environment have the makings of a successful franchisee. But the bonus is they are their own boss – which is what everybody wants.”
This is the beauty of franchising. When times are good, franchising goes well, but when times are bad, franchising still fares well. Aside from having a very high success rate, franchising makes the best out of a bad situation by providing opportunities to people – who have the money, the time and the connection – but have lost their jobs or cannot find a good one.
With regard to what type of business will zoom in these sluggish times, Lim foresees that businesses dealing with the essentials will still soar – particularly the food, apparel, health and education. But since people will be more price-conscious, businesses that will offer more affordable items will be favored. Lim also sees wellness and beauty will continue to pick up this year because these have already become essentials to many Filipinos. But the winning formula will still be the pricing, at least in the domestic scene.
This was echoed by 3M Pizza Pie President Duke Sage, who foresees their business to continue to grow “since their products aim to provide affordable food to Filipinos.”
“Another growth area will be green or eco-friendly products, but when it comes to investing in business, people will choose tried and tested brands,” Lim noted. “This is especially necessary when we see many pseudo-franchises promising quick returns, taking advantage of the uncertain times,” he cautioned. He also noted that PFA members adhere to the Fair Franchising Standards, which help ensure fairness and transparency in their business dealings.
But with regard to Philippine companies eyeing international expansion, the key factor will be to show the best of what the Philippines can offer. “It will all be about branding and packaging that Filipino touch, which is a unique combination of hospitality, caring and creativity loaded with lots of smiles,” Lim concluded.