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[F562]Franchising Business In The Philippines

by Diarmuid Kieran, Dia

Satisfy an enduring need with suitable reward.
The product or service offered must have long-term market potential. Franchisees will have been advised to look for business opportunities that take advantage of coming trends and avoid those based on passing attractions or fads. Although franchisees may not expect substantial returns on their investment in the first couple of years, they will expect by the end of the initial franchise period to have paid off their bank loan (as will the bank) and to have achieved a reasonable return on their initial investment. The franchisor must ensure that there is sufficient margin in the business for the franchisee to pay on-going fees to the franchisor and to make money for him/herself.

Possess a clear identity.
Potential franchisees will evaluate the clarity and distinctiveness of the franchisor's identity, name and image. They will be looking for an operation that has the potential to develop sales through its brand and reputation.

Display a proven track record.
As with any good investment an investor will need to be able to evaluate the past success of the concept. Potential franchisees, and those from whom they may be borrowing, will want to be assured that the franchise is proven, both financially and operationally.

Possess easily transferable operational methods. Successful franchises are based on operations that do not require a potential franchisee to have any experience of the particular business. Regardless of the franchisee's experience, the methods of conducting the business must be transferable, allowing the franchisee to run it as successfully as the franchisor.

Have capable management to provide adequate support. For the franchisor, franchising means decentralisation, with greater power being handed down to unit level. It also means the franchisor will have to deal with a new type of workforce whose motivation is very different to that of the company's own staff. While franchisees can be highly motivated, they can also be very demanding on the franchisor's staff. As the franchise develops the franchisor will be expected to invest in research and development to ensure that the business methods, products and services continue to meet changing consumer needs. It will also be necessary for the franchisor to provide on-going support to franchisees to assist and encourage them to develop their business and to improve its overall performance. In addition, the franchisor must see to it that the level of support provided is sufficient to ensure that the network as a whole maintains the quality standards set out in the operating manual.

Most people are familiar with franchising. For the benefit of those who are not, according to franchising is the system of doing business wherein a franchisor licenses trademarks of a product and tested methods of doing business to a franchisee to receive payment like a percentage from gross per sales or gross profits as well as the annual fees agreed upon, as compensation for the trade secrets shared as part of the franchising agreement. Sometimes legal contracts may vary as to the terms of franchise and may not fit the definition above. Sometimes, the methods on how to do the business may not be part of the franchise or other benefits that other franchising companies give may not be available to others.

The most common franchising companies known to the public would be chain of food stores like McDonald’s which nowadays offer some franchising strategies to reach a wider consumer market. McDonald’s has become a household name since it was able to reach a wider consumer market that is not only limited to the United States and the Americas but to the rest of the world. The success behind McDonald’s becoming a household name and the one of the most known trademarks around the world is due to the system of franchising. Aside from the buildings that McDonald’s rent to the franchisee, it also has a stake on the sales of the franchise and the cost of the supplies charged to the franchisee. To help out in the quality of products and services offered in each food chain, McDonald’s sends a member from the franchisee to their Hamburger University in Oak Brook, Illinois. This is one support benefit that the franchisee would get once they franchise a restaurant for McDonald’s.

Like any business, there are advantages and disadvantages that franchising offer to anyone who wish to venture into it.

Advantages

Popular labels are widely known and are likely to sell. Popular trademarks like McDonald’s are likely to sell than a new restaurant that has not reached a market such as McDonald’s. It is selling a well known product to a consumer market which knows the product being sold.

No need to develop a new product that has not been well researched. Venturing into franchising would allow the franchisee to have access to information that the franchisor have about an existing product and put up a business in a shorter period of time.

Trainings and seminars would be provided to the franchisee about the product. It would be easier to operate and manage the business since there are available trainings and other support methods for the franchisee.

Disadvantages

High standards held by the franchisor raise costs of maintenance in the franchise. Since the standards of the franchisor would definitely be high, sometimes the cost of maintaining a franchise can escalate. Unless the materials used would be second rate and low in cost.

Development of new products might still need to be passed for approval to the franchisor. If the franchisee would like to add a product which they think would be saleable in their market range, the new product has to be approved first by the franchisor and this may take time and it would likely be rejected if it does not meet standards of the trademark.

Profit is limited since the franchisor has stake, most of the time, on the profits of the franchise. Not only does the franchisee have little control of the franchise due to many stakes that the franchisor has on the franchise, the profit of the franchise would also be split between the two. Therefore, there is a limit to how much the franchise would earn.

Even if there are several disadvantages in franchising, still there are advantages. If you think you could handle this kind of business, all I can say is, business is gambling. In any industry there are players and you might be lucky that you would be on top once and sometimes at the bottom. Get to know the game play and start playing to win the game.

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Both Diarmuid Kieran & Mario Churchill are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Diarmuid Kieran has sinced written about articles on various topics from Franchise Opportunities In, Franchise and Information Technology. Webmaster for websites.. Diarmuid Kieran's top article generates over 40500 views. to your Favourites.

Mario Churchill has sinced written about articles on various topics from Credit Cards, Anger Control and Credit Cards. Mario Churchill is a freelance author and has written over 200 articles on various subjects. For more information on a great and learn. Mario Churchill's top article generates over 246000 views. to your Favourites.