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What’s Trending in the World of Franchises in the Philippines?

The shorter answer would be what’s not? With 50 foreign brands investing in franchising and partnership opportunities this year there is a lot of opportunity for businesses and individuals in the Philippines to get involved and take advantage of the general trend towards foreign investment. With less responsibility, a respected brand name to operate under, and less expenditure on things like property and liability cover, it’s easy to see why franchising is growing. However, among this general trend there are a few distinct trends which seem set to impact the Philippine franchise landscape for the next few years.

The boom in education franchises

Education franchises are nothing new, they’ve been around for many years before; however, in the last year there has been a real boom in the volume of education businesses opening up to the possibilities of franchising. Online education, basic reading programs, specialist skill schools and much more are getting involved. This trend is both down to home-grown factors and foreign influence.

Education in the Philippines is in high demand, which is a fantastic as we continue towards the status of ‘developed country’ over the nest decade or so. It’s also been fantastic for influencing education businesses to franchise. Another alternative explanation for the boom in education business is the growing number of parents willing to spend on their children’s education. Alongside regular schooling, many are willing to spend money on courses that will help with their child’s overall development and give them a better chance in life. The growing young population is another driver closely linked to both of the above reasons.

Whatever the true cause of the boom, the fact is that more and more enterprising Filipinos are choosing to go into the education business, many of which are starting up as franchisees. There are many brands already starting to franchise in education, including The Canadian Tourism and Hospitality Institute, Readsmart Learning Center, Explorations Pre-School, and CMA Mental Arithmetic, and there is no reason not to expect many more in the coming few years.

The opportunity to reduce of distribution layers with franchising

It used to be that a franchiser was a business owner, usually of a retail store or restaurant, who franchised his business in order to increase the number of outlets. However, there is a new breed of franchiser on the horizon for a different reason: original manufacturers and master distributors keen to reduce their layers of distribution.

One example in the Philippines is the Generics Pharmacy. Originally they would supply to distributors, who would in turn supply to distributors, who would supply to distributors, and so on until the products reached the store or retailer. Many manufacturers are cutting out steps in the distribution channel by directly opening their own stores and making them available to franchising. Generics Pharmacy have already done exactly this. Instead of being at the mercy of third-party retailer, they are now controlling their own sales opportunities by specifying how the point of sale should look and operate. Even the price can be totally decided right the way throughout the chain resulting in cheaper products for the consumer. Many more manufacturers are looking into setting up like this using the opportunity of franchising.

Franchise formats become more complicated

Franchise formats in the Philippines have always been relatively straight-forward – until now. As the industry grows and becomes more lucrative, more innovative, and much more complex formats have been thought out.

Multi-unit formats are one such development. Whereas a single unit franchise is more common, area development franchises or even so called ‘master franchises’ are also being added. The master franchisee would have the rights to franchising across entire areas, or perhaps across the whole of the Philippines and would also have the option to sub-franchise to a third part (a franchise of a franchise). This has proved to be a good method for international expansion and will most likely e seen to appear in the Philippines sooner rather than later.

Conversion franchises are also on the cards in some cases. This is where a store owner with a similar business will have the opportunity to convert their store to a different brand to become a franchise. Conversion franchises are often offered a better deal than more traditional franchises, earning as both a franchiser and stakeholder at the same time.

In conclusion

As franchising becomes more and more popular in the Philippines more innovation as well as opportunities will certainly become available to those willing to take advantage of the boom. Hopefully, the expansion of franchising will be a great success and lead to prosperity for many people across the country and a brighter future for our growing number of young people.

Author: Gemma Murphy, photo from www.freedigitalphotos.net

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