Introduction to Franchising

1. Jamaica Tan, MBA
Franchising
Philippine Setting

2. Course Learning Objectives
Franchising (Franchisee Perspective)
• Learn the basics of Franchising
• Discuss components of a Franchise Agreement
• Tips on Selecting and Choosing a Franchise

3. Course Learning Objectives
Franchising (Franchisor Perspective)
• Know if your existing business is ready and “franchise-able”
• Study and explore strategies from existing franchise business in the
Philippines

4. What is Franchising?
• Franchising is acquiring a right from the business
franchisor to market the same products or services of
the owner, including its trademark, logo, name, and the
business model and systems for a fixed price.
• It is a method of practicing and using another’s
business concept.

5. Types of Franchising Business
Product Franchising
• The franchisor grants every franchisee the right to sell its products
and use its trademarks for a fee but without any method of doing
the business.
• Examples: Car dealerships

6. Types of Franchising Business
Manufacturing Franchising
• The franchisee does not only have the right to sell the products but also has
the right to manufacture the products following the manufacturing guidelines.
• Examples: Coca-Cola
• The franchisor only supplies the syrup ingredients to the bottlers
(franchisee) who then proceeds to mix, bottle, and distribute the final
product.

7. Types of Franchising Business
Business Format Franchising
• The franchisor does not only allow the distribution of the products but also
gives the franchisees the right to the franchisor’s business concept or model.
• The franchisor gives the franchisee access to its overall business
methodology.
• Examples: Food Cart franchises like Master Siomai, Potato Corner, etc.

8. Why franchise a business?
• There is a lower risk of failing compared to start-ups because it is well-established
and because of the familiarity and loyalty of customers.
• You are always assured that the products are already sold successfully in the market.
• The franchisor and their internal team’s management experience increase the
success of the business.
• You can obtain goods at a lower cost through the franchises’ purchasing power.
• The franchisor provides an efficient and a proven system of operations.
• Franchisors provide marketing assistance like professional advertising campaigns for
regional and national scale, and developing effective marketing programs per area.

9. Challenges in Franchising
• Conformity to the franchise system is critical if consistency among franchises
is to be maintained. This is going to be difficult and frustrating for people who
have difficulty following directions or who dislike working within a system.
• Regardless if the franchisor has a great program and a respected name, as a
franchisee and owner, the risk of the business succeeding is still in your
hands.
• To avoid false expectations in the franchise, obtain a realistic picture from the
franchisor as to what is required and needed in operating, and research as
much as you can about the franchise.

10. Independent Business vs. Franchising
Independent Business Franchising
Ownership Model
Can test or do trial and error if their
products or services are optimized for
the market
No freedom to change their products or
services based on preferences or
market conditions
Cost
Higher investment costs to operate the
business; have more control over the
investment
Fixed total investment; little to no
control over investment
Brand Recognition
Likely to have low to no brand
recognition
Positive brand recognition because it is
established already
Operational Resources Alone, and from scratch
Assisted by the franchisor and provided
with the operations manual

11. Thank you!