The Philippine Franchising Association (PFA) is gearing up for its annual Franchise Asia Philippines 2015 convention and trade expo, a hub for franchise players to meet, brainstorm, and explore partnerships. Set to unfold from June 10 to June 14 at the SMX Convention Center in Manila, the event underscores the PFA’s dedication to boosting micro, small, and medium enterprises (MSMEs), equipping them with insights and chances to thrive in the franchising world.
The Tightrope Walk: Expanding Quickly Without Franchising
When companies think about getting bigger, one big question comes up: “Should we franchise?” Let’s break down what happens when a business tries to grow super fast without using franchising. Alan Escalona, the head of Fruit Magic, makes a great point: growing fast is a smart move if you want more people to know about your brand and get your name out there. But here’s the catch – you need to have enough money and a team of strong managers to pull it off.
Not having enough money or not finding enough people who know what they’re doing can really slow things down. Think about it: most businesses in the Philippines are small. We’re talking about less than 0.5% being big corporations with deep pockets that can just muscle their way into rapid expansion. Which leaves the rest of the business owners on the sidelines. That kind of growth only helps a few big players; it doesn’t do much for creating jobs or boosting the economy for everyone. That’s where the PFA steps in, suggesting franchising as a way for small businesses to speed up their growth, create more jobs, and give the economy a real shot in the arm. Franchising could be the boost those MSMEs need!
Can Franchising Be a Lifeline for Struggling Businesses?
So, can you fix a struggling business by franchising it?. According to Mauro Agustines, who leads Mister Donut, basically, franchising works best when you’ve already got a working machine, something that’s proven to work. If your business is stumbling, franchising might just spread those problems around like bad seeds. Instead of fixing things, you’re just making more copies of what’s not working.
Think of it this way: franchising isn’t a magic trick to solve your money problems. The fees you get from franchisees shouldn’t be your lifeline. They’re meant to help your franchisees succeed. Those royalty fees, the cut you get from their sales, aren’t going to keep you afloat if your business model is sinking. If the core business model isn’t solid, franchising isn’t a viable option. Basically, get your own house in order before you start inviting others to build on your foundation, only do so if the business is already successful.
Spotting the Green Light: Is Your Business Ready for Franchising?
How do you know when your business is ready to be franchised? It’s a big question, as Benjamin Liuson, who’s in charge at The Generics Pharmacy, explains, you need to have been in business for at least two years, showing that you’re making money consistently and that people recognize your brand. Having a business that makes money is super important since you’ll be sharing that money with your franchisees through royalty fees. More than that, you need people to know your brand, to want what you’re selling. When you get customer after customer showing interest and brand loyalty—that could be your signal to start thinking about franchising.
Franchising vs. Dealerships: Untangling the Terms
Sometimes people get ‘franchising’ and ‘dealerships’ mixed up. Francis Glenn Yu, who leads Seaoil, helps clear things up. Dealerships are actually a type of franchising, specifically when you’re dealing with products. But in the Philippines, when people talk about franchising, they usually mean something bigger – business format franchising. This is when you give someone not just the right to sell your stuff, but also the whole system you use to run your business, plus your support to help them make it work. It’s a complete package designed to give franchisees the best shot at succeeding.
Franchise Fees and Royalty Fees: Understanding the Costs
Let’s talk money – franchise fees and royalty fees. These two are very different. As Kenneth Yang, from McDonald’s Philippines, explains, franchise fees are what it costs to get a new franchisee up and running. This covers picking the right people, training them, and helping them get ready to open their doors. Franchise fees should reflect your brand’s worth but should be competitive enough to attract new franchisees. Royalty fees, on the other hand, come from the franchisee’s sales. They’re how the franchisor makes money moving forward.
Choosing the Right Partners: What Makes a Great Franchisee?
Picking the right franchisee is like choosing a business partner. Vic Gregorio, the CEO of Shakey’s, puts it perfectly: you want people with some experience, people who have support around them, and who aren’t afraid of hard work – that’s a good start. You also need people who can follow directions and work well with others. These qualities are key to thriving as a franchisee.
Full-Time vs. Part-Time Franchisees: Which is Better?
Does it matter if a franchisee is all-in or just doing it on the side? Siu Ping Par, CEO of PR Gaz, thinks full-time is usually better, especially if the franchisee is new to the game. They can give the business their full attention which, if done right, can seriously improve the results. But, really, the most important thing is that the franchisee believes in the brand and is 100% committed to making it succeed, no matter how much time they put in.
Location, Location, Location: Why It Matters
Everyone knows that location can impact business success, right? Rebecca Bucad, from K2 Drug, emphasizes that while having good products is a must, the right location can make or break you. You want lots of foot traffic, sure, but you also need to be where your target customers are. For instance, drugstores want to be near hospitals and schools. Victor Paterno, who’s in charge at 7-Eleven, agrees that knowing how many customers you can expect is important. He also said you need to think about your brand. Does the location fit who you are and what your customers believe in? Being easy to get to is essential for customers, and that ease directly impacts how well you do in the long run.
Franchising, a Great Tool for MSME Growth
The PFA’s work to support MSMEs through franchising shows just how important it is to have solid strategies for business growth. By helping businesses form strong franchise partnerships, the PFA helps businesses grow and create more jobs where they’re needed. All that hard work helps boost the economy big time. What the leaders in the franchising world say points to the fact that doing your homework, planning well, and making sure franchisors and franchisees see eye-to-eye are super important.
FAQs: Your Franchising Questions Answered
Q: What makes franchising a good deal for small businesses?
A: Franchising lets small businesses grow faster without needing as much money. They get to use a brand that people already know and get support with running things. Plus, it creates jobs in the communities.
Q: How can a business tell if it’s ready to franchise?
A: If you’ve been successful for at least two years and people recognize your brand, franchising might be a good move.
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Q: What should someone look for when thinking about buying a franchise?
A: Check out the support the franchisor offers, how well-known the brand is, if you can make money, and whether you like what the business does.
Q: How do franchise fees and royalty fees work?
A: Franchise fees cover getting a franchisee ready to open, while royalty fees are a percentage of sales that the franchisee pays to the franchisor.
Q: How important is location for a franchise?
A: Location matters a lot. It affects how many people come to your store, what people think of your brand, and how much you sell, so it needs to be where your customers are and easy for them to visit.
References
Philippine Franchising Association
Fruit Magic
Mister Donut
The Generics Pharmacy
Seaoil
McDonald’s Philippines
Shakey’s
PR Gaz
K2 Drug
7-Eleven
Are you ready to take the next step towards business growth? Franchising could be the key to unlocking your business’s potential. Contact the Philippine Franchising Association today to explore how franchising can help you expand your brand, create opportunities, and contribute to the vibrant Philippine economy. Don’t just dream of expansion—make it happen!
