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The Good News of Franchising in the Philippines

GOOD NEWS 1. More businesses in the country are expanding through Franchising. In the early 80’s these were just a handful. While these include both foreign and home-grown businesses, the number of local companies has substantially increased through the years and these outnumber foreign franchise systems.

GOOD NEWS 2. Home-grown companies have recognized the many advantages of expansion through franchising over internal growth and company-owned branches. More than just growing nation wide , number of homegrown companies have taken bold steps into the global arena. The stream of Filipino Franchisors staking the Philippine flag in countries like Middle East, Asia , Europe and North America continues to grow. To witness home grown franchisors open their branches globally is indeed a treasured moment and makes one proud to be a Filipino. Yes, we can! The international potential is vast and is there for the taking.

GOOD NEWS 3. Years ago, Franchising was primarily perceived as a food business. Franchising in the service sector is fast emerging. Now, one sees the proliferation of hair salons, beauty bars, spas, preschools and courier services. This has widened the scope of franchising by broad strokes and has enabled more franchisors and franchisees to experience growth and expansion.

GOOD NEWS 4. Franchising has also offered a better alternative to our modern day heroes — our Overseas Filipino Workers. Years ago, a “kabayan” would dream of getting into business such as tricycles, a sari-sari store or buy and sell. Nowadays we see them becoming franchisees. They have grown tired of enjoying the sweet life for a few months then living like paupers while waiting for their new overseas contracts. Franchising has provided them a route to invest hard earned money in proven business systems with the guidance of a big brother — the Franchisor. We have seen how their life has changed by adding their signature to a Franchise Agreement. Besides, by contributing to the Philippine Economy, they know in their hearts that their future is secure.

GOOD NEWS 5. More family businesses are turning to franchising to expand. Franchising has forced entrepreneurs to hire professional managers and standardize their operations. These are issues they have to face if they want to successfully franchise their business. With franchises now involved, the usual quirks of family businesses will have to be unlearned. For family businesses that have taken the bold decision to franchise, we can only admire the success levels they have achieved.

GOOD NEWS 6. The buzz word in franchising nowadays is Responsible Franchising. Franchise Associations and franchise seminars all promote Responsible Franchising. This is a way the proponents of franchising can block if not completely eliminate “pseudo franchisors” from the market. Responsible Franchisors are committed to the success of their franchisees in contrast to pseudo franchisors that are out to just collect the franchise fees. Authentic franchisors are fully aware of the responsibilities they take when they franchise their business. They are ready to provide professional support and technical assistance to their franchisees. This movement for Responsible Franchising has generated success since franchise applicants are now educated on franchising and can ask relevant and important questions even at the application phase. Responsible franchising is the only way for franchising growth to be sustained and can go to higher levels.

GOOD NEWS 7. Franchising creates business synergy . Franchising pools together people from different experiences and business background. The colorful interplay of these differences brings about betterment and growth of the franchise system. Several of McDonald’s products like the Big Mac were the idea of a franchisee. McSpaghetti and Burger McDo was the idea of the Philippine Master Franchisee. These are just a few results of the business synergy created in a franchise system. While the Franchisor starts with a proven business system, franchising continually improves the system thus making it relevant to changing market environments and capable of growth despite its distance from the Franchisor.

GOOD NEWS 8. Franchising is here to grow and will last. With the business synergy it has created in the economy and the many benefits it has brought not only to Franchisors but more so to countless franchisees, franchising will always be a route to expansion entrepreneurs will take. But I think more that all these benefits, it is the personal relationship established. Franchising strengthens these relationships among people involved. Very much like a marriage, it is not void of problems and difficulties but facing them and using them to move forward, has made franchise systems grow from one or two branches on to hundreds and even thousands internationally.

GOOD NEWS 9. Franchise Investments are now affordable. Present franchise investment levels are much lower now than the early years when investments were in the million brackets. From a study we conducted in GMB Franchise Developers, 60 percent of franchise investments fall below the P1-million mark. This, however, does not mean these franchises are not credible investments. They are affordable to more individuals willing to become franchisees. Regardless of investment required, here are steps to ensure you choose a responsible and credible franchisor.

“IFBI” -Investigate First Before Investing. One needs to understand how franchising works. There are several alternatives. Look for franchise materials and read them. One can attend franchise seminars which are usually published ahead of time in the major dailies; or for a modest investment, get hold of a copy of “Learn Franchising”. It is in DVD format and can be played and repeated right at one’s convenience. The first of its kind in the country, the “Learn Franchising” DVD is available by logging www.gmbfranservice.biz. This was recently launched by this writer as a way of helping those who want to know about franchising.

People looking for a franchise business often wonder where to get a directory. There is in DVD entitled “Franchise Listings”. It is also available by logging on to www.gmbfranservice.biz. It is a compilation of the latest franchise businesses. This DVD will enable you to search for a franchise concept instead of calling each franchisor’s office one by one.

Get to Know and Believe in the Franchise Concept. Successful franchisees are convinced about the products and services and they are positive about its potentials. There is no point in getting a coffee shop franchise if you do not drink coffee at all, nor getting a skin care franchise is not for you if you really don’t care about how you look. Franchisees exude the same commitment to the franchise concept as the franchisor. Visit the shops and ask yourself the question, will I be happy managing this shop and will I want to talk to customers about our products and services? Meet the franchisor.

Since franchising is a personal relationship, have a meeting with the Franchisor. Ask yourself the question, can I work with the Franchisor for five (5) years or for the duration of the Franchise Agreement? Match your personality with the Franchisor since not all personalities can work together. Obtain Family Support and Feedback. Make sure you involve your family members in the decision making process. Be open and have a dialogue as there may be pros and cons. Listen and be open. After all, the reason one invests in a franchise business is for the future of the family.

Be Clear About the Investment Package and The Location Requirements. Ask all the questions on the Investment Package. Clarify coverage of fees and extent of the build out investments. Check who will construct and who the accredited suppliers are. Find out when the payments are due. Check if the Investment Package is all you need to enable you to open your franchised branch. Be sensitive to some hidden costs.

Speak With Existing Franchisees. Assess how the franchisees feel about the franchise. The Franchisor is not in the business of popularity. There will always be problems in any franchise system. A vibrant and growing franchise system will have its share of unhappy franchisees. It is up to the individual wanting to get a franchise to discern and make the final decision to pursue. What is important is the validation of these concerns versus the over all growth pattern of the franchise system.

Choose Your Partners. If you will need partners, make sure you are on the same page when it comes to business. Friendships and even families break up due to business. Communication among and between partners are extremely necessary. There is no short cut to this. Clarify and put to writing agreements. Be very clear as to who will communicate with the Franchisor. Normally, Franchisors will want to relate to only one person who will represent all the partners.

Study your location. Take time to know the local culture and buying habits of the population. Franchisors franchise their business with one basic assumption; the Franchisee knows the local market and will undertake local networking and marketing of products and services. Be able to convince yourself that indeed there is a market for the franchise concept in your proposed location and be able to identify where the market will come from.

Study The Franchise Agreement. In the United States, part of the Franchise Regulation is to allow a franchise applicant to study the agreement for no less than 10 days. A Franchisor cannot call the applicant within this period. The rationale of this Regulation is to give applicants uninterrupted time for review. Even if the Franchise Agreement is voluminous, take time to read each section and put notes on sections that are not clear. Only after you have read all the pages will you seek Legal counsel to explain sections which you have noted. The Franchise Agreement is a vital document which will be the basis of your relationship with the Franchisor.

Investing in a Franchise or becoming a Franchisor is indeed not easy but the engaging and difficult processes make its goal more endearing to the beholders.

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