FRANCHISINGDefinition: A continuing relationship in which a franchisor provides a licensed privilege to the franchisee to do business and offers assistance in organizing, training, merchandising, marketing and managing in return for a monetary consideration. Franchising is a form of business by which the owner (franchisor) of a product, service or method obtains distribution through affiliated dealers (franchisees).
FRANCHISINGFranchisee An entrepreneur whose power is limited by a contractual agreement with a franchisorFranchisor The party in the franchise contract that specifies the methods to be followed and the terms to be met by the other party
WHAT IS A FRANCHISE?A form of business where the franchisor sells or provides to a franchisee: the right to do business under a particular trade name or brand the right to use/sell a proprietary product, process, or service training and assistance in setting up the business a business and marketing plan economies of scale for purchasing and marketing a financial (accounting) system regular inspection and quality checks once the business is established
ADVANTAGES - Well-known brand name -A proven system of operation and training in how to use it -New franchisees can avoid a lot of the mistakes startup entrepreneurs typically make because the franchisor has already perfected daily operations through trial and error. -Reputable franchisors conduct market research before selling a new outlet, so youll feel greater confidence that theres a demand for the product or service. -The franchisor also provides you a clear picture of the competition and how to differentiate yourself from them.
ADVANTAGES -Franchisees enjoy the benefit of strength in numbers Youll gain from economics of scale in buying materials, supplies and services, such as advertising, as well as in negotiating for locations and lease terms. By comparison, independent operators have to negotiate on their own, usually getting less favorable terms. Some suppliers wont deal with new businesses or will reject your business because your account isnt big enough.
ADVANTAGES - Probability of success: Proven line of business Pre-qualification of franchisee Overall lower failure rates - Operating benefits: Location feasibility study Marketing assistance Quick start-up time
DISADVANTAGES -Franchise costs Initial franchise fee Investment costs Royalty payments Advertising costs -Restrictions on business operations Products sold Hours of operation Restrictions on expansion/growth Franchisor only source of supplies
DISADVANTAGES -Loss of independence -Lack of franchisor support Termination/renewal clauses -Possibility of suspension or termination of franchise if there will be violations in the contract
THREE TYPES OF FRANCHISE OPPORTUNITIESAND THEIR ASSOCIATED RISKS AND BENEFITS
FRANCHISING ARRANGEMENTS Product and Trade Name Franchise Grants the right to use a widely recognized product or name Business Format Franchise Provides an entire marketing system and ongoing guidance from the franchisor Master Licensee An independent firm or individual acting as a sales agent with the responsibility for finding new franchises within a specified territory Multiple-Unit Ownership The holding by a single franchisee of more than one franchise from the same company Area Developers Individuals or firms that obtain the legal right to open several franchised outlets in a given area Piggyback Franchising A retail franchise operation within the physical facilities of a host store
INVESTIGATE INQUIRE MAKE A STUDY ASK QUESTIONSBEFORE BUYING A FRANCHISE
QUESTIONS TO ASK BEFORE BUYING A FRANCHISE Does the franchisor have an excellent reputation in the industry? Is the franchisor in partnership or any other legal relationship with another franchisor? If so, how will the franchisee be protected should that relationship fail? Is the franchisee required to do anything that appears questionable from a legal or ethical perspective? Under what circumstances can the franchisee or franchisor terminate the franchise agreement and what are the consequences to either party? Will the franchisor grant an exclusive territory? Is that area subject to reduction or modification? If so, under what conditions?
MORE QUESTIONS TO ASKBEFORE BUYING A FRANCHISE Will the franchisor reveal the certified financial figures for one of its franchises and can those figures be verified with the franchisee? Will the franchisor provide a management training program, an employee training program, public relations and advertising support, or credit? Does the franchisor assist in finding a suitable location? What is the financial health of the franchisor? Can financial statements be verified?
EVEN MORE QUESTIONS TO ASKBEFORE BUYING A FRANCHISE What is the track record of the franchise? Has the franchisor conducted an in-depth investigation of the franchisee to assure that he or she has the necessary skills and financial requirements to operate the business successfully? How much capital will be required to start and operate the business to a positive cash flow? Does the initial fee include an opening inventory of products and supplies? What do royalties pay for and how are they calculated?
EXAMPLES OF SUCCESSFUL FOOD FRANCHISESIN THE PHILIPPINES Jollibee Franchise Philippines Jollibee is the number one fast food chain in the Philippines. It also belongs to the top 100 corporations in the Philippines for the more than two decades now. It also was the first food service company to be listed in the Philippine Stock Exchange, meaning Jollibee’s performance was booming so quick in the track thus it continues to sustain its expansion not only in the Philippines but also globally. Jollibee has achieved numerous awards of excellence in Asia and the world. There is a page which shows all of its awards. Those facts are reasonable enough why it’s best to franchise Jollibee if you have what it takes to be a franchisee. The requirements to franchise Jollibee are on their official website and the cost to franchise Jollibee is around 15 million pesos to 30 million pesos (USD 266,445.00 to USD 532,890.00) depending on the site.
EXAMPLES OF SUCCESSFUL FOOD FRANCHISESIN THE PHILIPPINES Mc Donald’s Franchise Philippines Everyone knows Mc Donald’s. It is also one of the top fast food here. The numbers of Mc Donald’s franchised stores in the Philippines is still growing. I’ll never get sick of their mc flurry and fries, just the best. If you’ve got enough capital investment, you’re financially secured and has a good leadership skills, you can be qualified to franchise Mc Donald’s store in the Philippines. How much will it cost to franchise Mc Donald’s in the Philippines? The franchise cost of investment ranges from 25 to 35 million pesos depending on the size of the site, building, location and land cost.
EXAMPLES OF SUCCESSFUL FOOD FRANCHISESIN THE PHILIPPINES Mang Inasal Franchise Mang Inasal is the fastest growing barbeque fast food chain in the Philippines, serving chicken, pork barbeque and other Filipino favorites. Wow, grilled barbecue in charcoal, rice wrapped in banana leaves, a marinade concocted out of local spices and herbs, every time I pass by Mang Inasal, the smoke and aroma is calling me. With just 1.2 million pesos initial franchise fee, you can open your own Mang Inasal store anywhere in the country. The initial franchisee fee covers the operation support, use of brand name and trade name, opening marketing support and training support.