2. Franchising
Franchising originated from the
French word “Franchir”, which means
“for free”.
It is a marketing concept – an
innovative method of distributing
goods and services. It is not a
business itself, but a method of doing
business, wherein the franchiser
license trademarks, and tried and
proven methods of doing business to
a franchisee, in exchange for a
recurring payment, and usually a
percentage piece of gross sales or
gross profits, as well as the annual
fees.
3. Franchising Business Models
(1) Manufacturer-Retailer Relationship. It is
where the retailer, as franchisee, sells the
franchiser’s product directly to the public.
(2) Manufacturer-Wholesaler Relationship. It is
where the franchisee under license,
manufactures and distributes the franchiser’s
product.
4. Franchising Business Models
3) Wholesaler-Retailer Relationship. It is where the
retailer, as franchisee, purchases products for retail
sale from a franchiser-wholesaler who have formed a
wholesaling company through they are contractually
obliged to purchase.
4) Retailer-Retailer Relationship. It is where the
franchiser markets a service or a product under a
common name and standardized system, through a
network of franchisees.
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6.
7. Commercial Marriage
The “commercial marriage” between
franchiser and franchisee is ultimately a legal
relationship with the full obligations and
responsibilities of both parties outlined in a
highly detailed franchise agreement.
8. History of Franchising
Modern franchising came to prominence with the rise
of franchise-based restaurants. This trend started
initially in 1930s with traditional sit-down restaurant,
like the early Howard Johnson’s, and then, exploded
in 1950s with the development of fast food chains, of
which McDonalds has been the most successful
worldwide.
Franchising operations in the Philippines started in
early 1900s with the entry of Singer Sewing Machine,
followed by Eastman Kadak, which saturated our
economy in the 1980s and 1990s.
9. History of Franchising
The telecommunication sectors, principally the
television, radio network, and telephone
companies exist and operate also on the basis
of a franchise granted through legislative
authority.
The Philippine Franchise Association (PFA)
reported that there are now, as of 1999, 306
foreign franchise.
10. How much does it cost to buy a Franchise?
The franchisee receives benefits for which the franchisee has to pay
some money, and the typical costs or expenses involves the
following:
• Initial licensing fees
• Security deposits
• Building cost for the outlet
• Pre-operating expenses
• Initial operating capital
11. Is buying a franchise better than putting up
independent business?
There is a proven business system that is passed on to
franchisee.
Business set-up mistakes are minimized.
The franchiser mentors the franchisee throughout the term of
the franchise.
The franchisee rides on an established and successful brand.
There is reduction of risk you will b taking for your
investment.
They get better deals on supplies.
They often get instant recognition from customers.
12. The Rules on Franchising Fees
The right to the franchise is sold by the franchiser
to the franchisee for an initial sum of money, often
called the up-front entry fee or franchise fee.
The initial franchise fee does not include anything,
except the rights to use the name and system,
and sometimes training, procedures, manuals,
and other assistance like the site collection. It
does nit include any of the necessary inventories,
fixtures, furniture, and real estate.
13. The Rules on Restrictive
Covenants
The success of most franchises is based on
the operating systems methods and products
produced. For this reason, franchisers must
protect their proprietary information and
trademarks. In order to do this, they most
establish restrictive covenants for their
franchisees.
14. What is a successful franchise?
A successful franchise is one where the
franchiser has developed a system and
procedure that works. This means he has
defined his market, established a niche,
developed an operations manual, perfected a
training program and put up a research and
development team that has successfully
launched products, introduced new ones, and
made the brand competitive.
15. How do we select the right
Franchise?
First of all think about the work environment you
are interested in, and the requirements to run a
business.
Once you identified the general category of
business you want, visit some of the franchising
website, search on what investment levels you
can afford, the type of business you want, and
sometimes the geographical location.
When you get a list put together, begin contacting
the franchisers for additional information.
16. The Franchising Process
1) The franchiser will send you brochures and other
materials, and most likely request that you
complete a questionnaire.
2) The next step will be your evaluation of the
company’s Uniform Franchise Offering Circular
(UFOC).
3) Visit as many of the franchiser’s existing
franchisees as you can. Meet directly with the
owner of the establishment, and pay close
attention o opinion of the franchiser.
17. The Franchising Process
4) Review the
franchiser’s
business plan,
operations,
manuals, and
market analysis.
18. What is a Franchise Agreement?
It is a contract that binds the franchiser and the
franchisee to the franchise relationship, and
indicates the terms and conditions of the
franchise.
19. What should I look for in the
documents?
The site/location
The projected financial plan
The franchise agreement
20. For the franchiser:
How long you have been in business?
Where is your first franchise branch?
How much is the total investment?
What does the investment include?
How do I apply for the franchise?
When do I get to see the documents for my review?
What kind of support do I receive when I become a
franchisee?
What niche does your company have
How often do you meet with franchisees?
21. For the franchisees:
How did you decide on getting the franchise?
How many franchise outlets are you opening?
What kind of support do you get from the
franchiser?
Given another chance, will you get the same
franchise?
Are you in touch with your fellow franchisees?
22. How do I manage my franchise
business?
Once you have secured a franchise, it is your
duty to see to it that the business runs
according to the standard set by the franchiser.
23. The Philippine Franchising Association
Advisory
The Philippine Franchising Association of the
Philippines (PFA) is the forefront of promoting
franchising business in the Philippines and
advises prospective entrepreneurs going into
franchising.
