FRANCHISING

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.

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.

Franchising Business Models3) 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.

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.

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.

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.

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

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.

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.

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.

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.

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.

The Franchising Process1) 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.

The Franchising Process

4) Review the franchiser’s business plan, operations, manuals, and market analysis.

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.

What should I look for in the documents?

The site/location The projected financial plan The franchise agreement

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?

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?

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.

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.

Thank You All!!!!!