The art of duplication
Philippine Franchise Association president Robert Trota shares his insights on the present state and future prospects of the local franchising industry.
How do you assess the franchising industry in the Philippines today?
The industry is one of the most mature and developed sectors in the country today. From only 45 concepts in 1995, the industry has grown to more than 800 concepts. It now covers other high-growth markets, like food and retail, and previously outlandish businesses, like beauty salons, health spas, and water-refilling stations.
How viable is the Philippine market for any franchise business?
Franchising is a proven business formula with a 90% success rate. Compared to a start-up business, a franchise business is less risky. This innate feature of a franchise, when matched by a good market and an excellent pool of resources, makes it worthy of duplication.
The Philippines has all the essentials for a franchise business to flourish. It boasts of a large population of 85 million, with a significant number under age 29. Lately, there has been stronger participation from the younger generation, especially new graduates, who are as eager as the seasoned businessmen to open a franchise business. For some of these young entrepreneurs, putting up a franchise business only costs just as much as a full-year tuition in a university.
Moreover, the country's proximity to Singapore, Malaysia, Japan, Australia, China, India, and other Asian countries-which make up for an unsaturated market of 3.8 billion-has earned for the Philippines the term the "Gateway to Asia." In addition, the country has a big resource of highly skilled professionals in the fields of marketing, finance, and the legal profession, owing to its high literacy rate, English-speaking people, and exposure to international markets and cultures. Filipinos are also rated as one of the best managers in Asia.
Today, a number of PFA members have gone far, evidenced by expansions outside the country.
Please cite some best-practice cases of PFA members.
Reyes Haircutters is one. Since it joined the PFA franchise expo incubation center in 2001, Reyes Haircutters now has over 200 outlets, including a newly opened shop in New York. Another success story is Julie's Bakeshop. Julie's started in 1981 and has grown to over 500 outlets nationwide. It is the country's biggest network of neighborhood bakeries. Island Souvenirs, Memory Magic, Plains and Prints, Folded and Hung, Crystal Clear (with two outlets in Malaysia and Indonesia), Hotshots, and Netopia Internet Café have all also proven how fast business growth is through franchising.
What's in store for the industry in the future?
The franchising sector is expected to grow more as PFA continues its campaign of bringing the franchising concept to the countryside. We have already identified potential franchises in Cavite, Pampanga, Baguio, Cebu, Aklan, Davao, and Cagayan de Oro. We hope to help new concepts from these areas become the next franchise giants in the country.
The food, retail, and service sectors are still the highly "franchise-able" businesses. Specifically, we are looking at the "3 Fs"-food, fashion (retail), and fun (entertainment)-and the "5 As"-air (including sea and land transportation), access (transport), accommodations (hotels), attractions (tourism as a sunrise industry), and activities (fun and entertainment, health and wellness). We expect these sectors to boom in the short term.
One issue, though, that the industry has to guard against is the mushrooming of fly-by-night franchises. Lately, there has been a rise in the number of start-up businesses that disguise themselves as franchise businesses. People have to take caution and study their options carefully. As the voice of the franchising sector, it is our duty to protect the people from these fly-by-night franchises.
What advice can you give on determining what franchise business to undertake?
There is no hard and fast rule in franchising. Most important, though, is knowing what the person's passion is, whether it's food, retail, or service. He should familiarize himself with the ins and outs of buying a franchise or in having their business franchised.
Second, know the pros and cons of franchising, because franchising is not meant for everyone. The entrepreneur has to be careful in choosing the right franchise. Check the company background and its profitability. Franchising is a duplication of a successful business, so it is important that the franchise the investor is buying has a good track record.
Lastly, we advise the entrepreneur to check with the PFA, or any other recognized franchise organization in the Philippines, if the franchise he is planning to buy is legitimate. When a franchise is in their list, potential franchisees are assured that the said franchise is not a fly-by-night one. The PFA has fair franchising standards in accepting members. Potential franchisees are required to undergo rigid evaluation and screening to check whether their business is viable and if they are capable of franchising their business.