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Franchising Firms Still Doing Brisk Business

Not content with making more money this year than last year, the association of local franchisors is working to further continue growing its members’ sales next year by encouraging them to open more stores or branches. Last year, their store revenues already grew by 29 percent to P13.8 billion from P10.7 billion in 2006. This translates to a daily sale of about P37.8 million.

In a recent press briefing, the Association of Filipino Franchisers, Inc. (AFFI) said the group would target a revenue growth of another 25 percent to 30 percent for this year.

This would be achieved “by encouraging more [AFFI] members to open more stores and more branches,” said Armando 0. Bartolome, AFFI member and president of consulting firm GMB Franchise Developers.

AFFI’s 80 members also sustained 24,039 jobs last year, in a total of 4,046 branches nationwide. About 1,416 or 35 percent of these branches are company-owned while 2,630 or 65 percent are entirely franchised.

“Each AFFI member company has been in the business for an average of 15 years. They have achieved a ‘high’ 98.6 percent rate of success or profitability,” Bartolome also said.

AFFI president Rommel Juan of Binalot Fiesta Foods noted the advantage of buying a local franchise, instead of a foreign one. “When you’re a foreign franchisor, you’re watching two things: your business cycle and the currency exchange. With a local franchise, you concentrate on your core business,” Juan said.

Richard Sanz, AFFI public relations officer, pointed out that “franchising is one way of cutting short the entrepreneurial process since investors would buy an established business.”

He said franchising would also help the government’s micro, small and medium enterprises (MSME) agenda, which would solve unemployment by encouraging over 800,000 MSMEs nationwide to hire two additional workers every year.

This program will almost cover the estimated 1.8 million new workers that enter the labor force every year, Sanz said.

At the forefront of the financial support for the SMEs is Small Business Corporation, formerly the Small Business Guarantee and Finance Corporation (SBCorp). It has three SME “target sectors”: pre-bankable firms, or startups who cannot get a loan from banks; near-bankable firms or those who can obtain a bank loan but will have to shell collateral; and bankable firms who are seen as having no problems securing credit.

“SBCorp provides direct lending to pre-bankable firms and credit guarantee covers for near-bankable firms. For bankable firms, we provide funding to banks to reduce the rates of medium-to-long-term financing. We have also recently introduced risk-based lending as a product offering,” says SBCorp chairman Virgilio R. Angelo.

“As a matter of fact, we have lent a total of P13.7 Billion to some 7,082 SME borrowers since 2004. We aim to help the 743,628 micro, 60,785 small and 2,922 medium entrepreneurs in our country today. They are the backbone of our economy as they employ about 69.9 percent of the country’s labor force,” Angelo adds.

In most cases, franchisers agree to give up to a 50 percent corporate guarantee to franchise buyers, he said. SBCorp however requires franchisers to have an operating manual, three years of franchise experiences and three profitable franchises.

“As a safeguard, we do not encourage people to do business with new franchises that do not have an established track record yet,” Angelo concluded.


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