During these tough financial times, many Filipinos are exploring different ways to earn, secure, or grow their income to achieve financial stability. While some individuals dive into their own business ideas, others, especially first-time entrepreneurs, prefer franchising—and for good reason.
Franchising offers the opportunity to start a business without having to build it from the ground up. It’s a safer and often more rewarding option for aspiring business owners. The Philippines is even projected to be a hub for the global franchise market in Asia, with a revenue growth rate between 10% and 13% over the next five years.
### The Advantages and Disadvantages of Franchising
Like any business, franchising has both positives and negatives that should be weighed before making a decision. Below are some key points to consider:
Franchising Advantages
Lower Risk:
When you franchise, you’re adopting an already proven business model, reducing the risk that comes with starting a business from scratch.
Brand Recognition:
You benefit from a recognized name and customer base, making it easier to attract customers.
Established Operations:
The franchise comes with established systems and best practices, eliminating the trial-and-error phase.
Quicker ROI:
Since everything you need is already in place, you can expect a faster return on your investment.
Support from Franchisor: Many franchisors offer help with marketing, employee training, and even site selection.
Franchising Disadvantages
Fees and Royalties:
Franchising comes at a cost, including initial fees and ongoing royalties.
Limited Control:
You cannot make changes or innovate without approval from the franchisor.
Shared Accountability:
Problems at other franchise locations can harm the brand, and by extension, affect your business.
Types of Franchises
There are three main types of franchises:
Product Franchising:
Similar to a supplier-dealer agreement, you sell the franchisor’s products under their trademark.
Manufacturing Franchising:
You are allowed to manufacture the franchisor’s products, following their guidelines and procedures.
Business Format Franchising:
You not only sell the products but also adopt the franchisor’s entire business model, including training, quality control, and marketing strategies.
Franchise Business Costs
The cost of starting a franchise can vary significantly depending on the brand and business model. While franchising may be more affordable than starting a business from scratch, it still requires a capital investment, which can range from thousands of pesos to over a million.
How to Start a Franchise in the Philippines as a Franchisee
Here’s a step-by-step guide to starting a franchise in the Philippines:
Step 1: Do Your Research
Franchising may be less risky, but it’s still a major investment. Look into franchise options that offer a good return on investment and aren’t already present in your target location. Evaluate costs like initial capital, rent, and ongoing fees.
Step 2: Contact Franchisors
Reach out to companies offering franchises in your preferred industry to inquire about costs and requirements. You can contact them directly or through franchise associations and expos.
Step 3: Submit Franchise Requirements
After making contact, submit the necessary documents such as a completed application form, a letter of intent, a map of your proposed site, and personal details like your resume and IDs.
Step 4: Meet the Franchisor
If your application passes the initial review, you will be invited for a meeting to discuss the franchise opportunity and your qualifications. Site inspections will also be conducted.
Step 5: Review the Franchise Agreement
Once the meetings are complete, you will be given a draft of the franchise agreement. Review it thoroughly, or consult a lawyer to ensure you understand all terms before signing.
How to Start a Franchise in the Philippines as a Franchisor
If you’re a successful business owner looking to expand through franchising, here’s how you can get started:
Step 1: Assess Your Readiness
If there’s demand for your business to be franchised, it may be time to expand. The Philippines has no strict laws regulating franchising, so it’s up to you to decide if your business is ready.
Step 2: Gather the Necessary Information
Prepare key information about your business to present to potential franchisees, such as your business concept, registration details, and financial requirements.
Step 3: Create a Franchise Agreement
This legal document outlines the roles and responsibilities of both parties. Make sure it complies with general business laws and is clear on key terms like fees, responsibilities, and contract duration.
Step 4: Promote Your Franchise
Establish an online presence through a website and social media to attract potential franchisees. Showcase why your franchise is a good investment compared to others in the market.
Step 5: Offer Continued Support
Support your franchisees with ongoing assistance such as site operations, employee training, and marketing efforts to maintain consistency across all locations.
Final Thoughts
Entering a franchise, whether as a franchisee or franchisor, is like entering a partnership. It’s essential to ask questions and assess compatibility before making a commitment. Once the agreement is signed, ensure that you are ready to fully dedicate yourself to the success of the business.
