BusinessWorld, July 22-23, 2011
CONSIDERED A less risky option because of its tried and tested business models, franchising has become very popular, especially among aspiring entrepreneurs.
Business partners Napoleon L. Casibang and Masanori Ueno introduced to the country in the 1980s by foreign companies like McDonald’s, franchising now covers a wide range of business ventures — from restaurants, drugstores and Internet cafes to salons, review centers and repair shops. According to the Association of Filipino Franchisers, Inc. (AFFI), there are an estimated 50,000 franchisees in the country today.
This figure is not surprising, considering the advantages of franchising over starting one’s own business from scratch. The Department of Trade and Industry (DTI) cites franchise systems’ tried and tested concepts as one such advantage. Because franchisers have already gone through the process of trial and error to develop their products and methods of operation, franchisees need not go through the same process anymore, saving them considerable time and money.
“Franchising gives you a significantly high chance of success since these are already trusted businesses with proven concepts and operating models. You also need little experience to operate your own franchise business since these are like plug-and-play businesses that enable entrepreneurs to start their business right from day one,” said AFFI president Paulo M. Tibig.
The DTI says on its Web site that franchises have a 90% success rate compared with sole proprietorship businesses, of which only about 18% continue to operate after 10 years. As for return on investment (ROI), the department estimates that it usually takes one to three years for franchisees to get their capital back.
Public promotion will not be a problem because franchisers would have already established their customer base and can fund advertisements.
Should problems arise, franchisees can also count on the support of franchisers, who would naturally want to protect the reputation of their brands.
The DTI, however, warns franchisees against becoming too dependent on franchisers. It adds that many franchise contracts have been terminated early because of the franchisees’ failure to follow specified procedures and rules on selling prices and trademark use.
The department also advises entrepreneurs to be wary of people selling franchises for only P10,000 to P25,000, saying they will most likely take off after their victims have paid the “franchising fee.”
Entrepreneurs should also beware of franchisers who do not operate at least three to five branches but promise a 100% ROI in a very short span of time, and those who refuse to give them time to study the franchise agreement. Refusal to let them talk to other franchisees is also a telltale sign of a bogus franchise system, the DTI said.
To avoid being victimized by scammers, entrepreneurs should check if the purported franchisers are registered with the DTI, Securities and Exchange Commission and Bureau of Internal Revenue. Trademarks can also be checked with the Intellectual Property Office of the Philippines.
After verifying the legitimacy of the franchisers, entrepreneurs should still weigh their options carefully before signing contracts. “We did a lot of study before we started this business. We tried different fastfoods,” said Masanori Ueno, co-owner of a Binalot branch in Makati City. He and business partner Napoleon L. Casibang said they finally settled for Binalot because they found the food chain’s packaging concept very unique.
Mr. Casibang said they knew very little about running a business when they got their franchise in 2009. He was a performer with Ballet Philippines, while Mr. Ueno was an employee in a Japanese-Filipino company. Still, they were able to manage because of the continuous support of their franchiser.
Two years into running their business, Mr. Casibang said they still have a lot to learn, especially when it comes to marketing. “It’s not a matter of sitting down here and checking everything. Mr. Ueno and I have to go out. We have to market our product,” he said.
Former AFFI president and Binalot Fiesta Foods president Rommel T. Juan said people from diverse backgrounds stand to benefit from franchising “so long as they’re willing to take the giant step forward, even little steps, baby steps at first.”
“[When] you believe in something, it doesn’t matter who you are or whatever you’re doing. Anybody who really has the heart for it can really be an entrepreneur,” Mr. Juan said.
— Aubrey E. Barrameda | Business World Online