Franchising is a business method in which a franchisor (business owner or manager) allows a franchisee (person or entity) to market products or services under its name and trademark, and in strict adherence to a system the franchisor prescribes.
The total capital investment depends on the business to be franchised. It could range from as low as below P500,000 up to P10,000,000 and above.
Would-be investors have the option to franchise businesses engaged in food, services, and trading.
- Food franchises are businesses such as restaurants, kiosks, and food carts.
- Service franchises are those that cater to needs such as health & wellness, computer shops, and travel.
- Trading franchises deal with retail including convenience stores, clothes shops, and drugstores.
- High success rate – franchises follow proven business models.
- Recognized brand and trademark – Consumers are familiar to brand names of some franchises.
- Assistance from franchisors – Franchisors provide training and coaching to franchisees.
- Ease in financing – It is easier to get loans from banks and financial institutions if the business has high success rates.
- Re-saleability of the franchise – The value of good franchises increase. Thus, it can be easily sold.
- Huge profit – Lower-cost materials are easily obtainable through franchisors. Combined with proven business models, profits have the possibility to increase.
- Lack of control – Franchisees are required to follow the system set by franchisors.
- On-going costs – Franchisees still need to pay royalty and renewal fees.
- Possibility of franchisor-franchisee conflict – Problems may arise from either side of franchisors or franchisees.
- No law and governing body– As of November 2014, the Philippines does not have any specific laws and governing bodies that regulate franchising industry.
Since the Philippines does not have regulations and agencies to govern franchises, the Philippine Franchise Association (PFA) acts as a voluntary self-regulating governing body for franchising. It has developed the Fair Franchising Standards based on United States franchising laws that serve as criteria when accrediting franchise businesses.
PFA is not governed, supervised, and regulated by any government agency. For the protection of potential franchisees, they may consult with the Intellectual Property Office and submit such contracts for review and registration. The IPO will register contracts that follow the Intellectual Property Code. Otherwise, the IPO will require appropriate revisions before registering the contract.
There are various options and choices in the franchising industry depending on the desire and interest of the would-be investor. There are also different models of franchising being offered such:
a. merely investing and letting the franchisor operate and manage the outlet or;
b. being actively involved in the management and operation of the outlet.
It is best that would-be franchisees study each possible opportunity to make infromed decisions.
Visit the PFA website: http://www.pfa.org.ph/
Visit websites of other Franchising Associations
Association of Filipino Franchisers, Inc. – http://affi.com.ph/
Filipino International Franchise Association – http://fifa.ph/
Sources: Nicolas & De Vega Law Offices, Intellectual Property Office, and Philippine Franchise Association