Filipinos Putting More Money in Franchises
Just a little over 10 years ago, franchising was virtually unheard of in the Philippines.
For the few who were familiar with it, they thought it was a business expansion strategy limited to the big foreign food companies, such as McDonald’s, Shakey’s and Pizza Hut.
Franchising in the Philippines has definitely gone a long way since then, and the industry is showing no signs of slowing down, just of speeding up.
The latest data from the Philippine Franchising Association (PFA), the biggest and oldest franchising group in the Philippines, show that there are close to 900 franchises operating in the country from just 50 in 1995 and 64 percent of these are homegrown. These are largely in food, service and retail.
Franchising has thus become a major force in the economy, accounting for an estimated 15 percent of the annual retail sales of roughly $5 billion.
“Franchising has become the fastest growing sector in the country today and will continue to be a major sector in the near future,” according to the book, “A Guide to Franchising in the Philippines,” produced by the PFA.
Alegria Sibal-Limjoco, chairperson of the 12-year-old PFA, says in an interview that the franchising industry continues to grow in the Philippines, partly because more Filipinos are planning to put up their own businesses, especially among the youth.
Perhaps due to growing exposure to success stories of entrepreneurs who have either acquired a franchise or have become franchisors themselves, many from among the Filipino youth are willing to risk putting their money in a franchise.
“Many of these young people go to our trade shows and I like them because they are brave and are willing to try out new things and go into a business, even if they are also employed at the moment,” Limjoco explained.
She added that with more Filipinos below 30 becoming more exposed to new trends in food or fashion through the Internet and travels abroad, they get to experiment new ideas in the market place.
There is always that possibility that some of these new ideas will become the next Jollibee or Bench — two of the biggest names in the Philippine franchising industry.
The industry is also expected to become a major dollar earner because of the royalty paid collected by Filipino brands now operating in foreign markets.
These include Jollibee (food), Chowking (food), Islands Souvenirs (novelty goods), Hotshots (food), Reyes Haircutters (salon services), Figaro Coffee (food), Video City (video sales and rentals), Crystal Clear (purified water), Kamiseta (apparel) and Netopia Internet CafÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â© (Internet services).
Armando Bartolome, one of the Philippines’ leading franchise consultants, expects more Filipino companies to become franchisors outside the Philippines as part of their expansion strategy.
“Franchising is definitely a growing market,” Bartolome says. “Every month, there are entrepreneurs starting to expand via franchising. More and more Philippine companies that are franchising here are now inspired to expand beyond the shores like within the ASEAN region, Middle East and North America. I could see that within the next decade, almost all businesses will be into franchising.”
This entails some tweaking of the concepts to suit foreign markets, says Pacita U. Juan, CEO of Figaro Coffee Corp., which has branches in China.
Juan, an officer of the Association of Filipino Franchisers Inc., says gone are the days when franchise companies used a cookie-cutter approach to franchising, which means one system will work for all territories.
With competition, she says more franchisors have learned to adapt their operations to suit the market where they operate.
Figaro, for instance, had to modify its dessert offerings to go with the coffee in China because the Chinese have a lower tolerance for sweets compared to Filipinos.
Foreign franchises have adopted the same approach in the Philippines.
McDonald’s, for instance, has had to expand its fried chicken line because Filipinos buy more fried chicken than hamburgers.
Bartolome says the composition of the franchising industry changed over the past decade.