Franchising Filipino brand names up for grabs

Philippine Daily Inquirer, Business Section

Want to put up a business but don't know where to begin? Then getting a franchise may be the best option.

In the world of franchising, one can instantly gain access to an established name and tested business system, all for an up-front fee. Simply put, franchising allows one to buy into the success of a known brand.

The biggest chains - global brands as McDonald's, Pizza Hut, Dunkin Donuts, Kentucky Fried Chicken, and local giants such as Jollibee, Max's, Tropical Hut, Goldilock's, Aristocrat - all grew via this route.

Granted, a franchise of these top names means an investment in the steep, seven-digit category. But the good news is that the neophyte businessman, who is usually more guts than budget, can wade into franchising waters for as little as P50,000.

The key is to look at a growing number of seasoned, Pinoy-run businesses that are becoming available for franchising.

The First Filipino Franchise Show held recently at the SM Megamall's Mega Trade Hall showcased myriad local names that are literally up for grabs. There were food firms like Balay Bacolod, Binalot, Brother's Burger, Cabalen, Figaro Coffee Company, Family Fried Chicken, Goto King, Hap Tian, Potato Corner and Tacomio.

There were also service and retail companies such as ACT Electronic Center, Freeway, Foto-Me, Metropole Laundry and Dry-Cleaners, Net Surfers Club, Pharmashoppe, Reyes Haircutters, Spoofs Ltd, Tips n' Toes and World Link Couriers.

The exhibition was organized by the Association of Filipino Franchisers Inc. (AFFI). Of the roughly 60 participants, 25 are AFFI members.

Chit Juan and Butz Bartolome

Pacita Juan, president of AFFI and CEO of Figaro Coffee Co. explained that the fair was envisioned "to give small and medium-scale players a venue to showcase their offerings, and to encourage retailers to see franchising as a way of expanding."

AFFI is open to firms that are wholly Filipino-owned, are capitalized at below P50 million and have operated successfully for at least six months.

"We are the only group to pool together small and mid-sized local companies into a franchise show. There are other fairs which include the big names, the international names, but we wanted something in its purest form," Juan explains.

Affordable

AFFI members are encouraged to keep their franchise fees affordable, and a quick survey of its members show this to average at roughly P150,000.

As AFFI's flyer points out, franchising is usually a win-win situation. The franchiser is able to expand by letting other committed entrepreneurs use his trademark and put up the capital for a new branch.

The franchisee, meanwhile, is ensured a higher success rate, given a know brand and tested business system.

There are added bonuses in the package if the franchiser is a mid-sized, homegrown operation. Since the franchiser is not huge, "both sides relate to each other as co-entrepreneurs," Juan notes

And often, the relationship turns personal as franchisers are on call 24 hours a day.

"We get calls in the middle of the night if a problem crops up for the franchisee, " she recounts, smiling. "Usually what happens is the franchisee gets to know us; they meet our families, our spouses; they know where we live…"

While the setup allows franchise to shortcut the learning curve, there is still a lot of grunt-work required. As in any venture, success is not guaranteed.

She also cautioned investors on fly-by-night operators. As she says, when it's too good to be true, chances are it is. "The P10,000 franchise is a myth," Juan says.

Apparently, AFFI has received reports of some unscrupulous quarters that offer business franchises for as low as P10,000. As it turns out, these payments are mere "reservation fees" and some investors end up being fleeced of P100,000 or more, with still no franchise in sight.

AFFI's smaller members charge as low as P50,000 and Juan notes that it is nearly impossible to bring it down lower that that. Given the hard work that goes into systematizing operations and brand building, it would be ludicrous to expect a businessman to sell his expertise for a paltry amount.

Safeguards

Armando Bartolome, president of GMB Franchise Developers and an AFFI stalwart, reveals these so-called "franchise operators" usually avoid introducing the investor to the owner of the business, parody the name of a know brand to ride on its success, and even refuse to issue receipts.

Bartolome stresses the need to police and safeguard the local franchising industry. "That's one of the main and most important roles of AFFI," he says. The organization is careful to screen its membership and has established ethical standards among its ranks. This is among the reasons the group has been accredited with the Small Business Guaranty and Finance Corporation (SBGFC) under the Department of Trade and Industry.

"Eventually, our vision is to establish AFFI as the seal of good housekeeping, a stamp that shows this company is in compliance with good business practices," Juan says.

Juan also tells investors to "go into business that you like - you should use, buy or eat the products yourself. Don't get a Figaro franchise if you don't drink coffee!", she illustrates. This way, the franchisee gains a more enjoyable, if still unpredictable, business experience.

To help guide new franchisees and yes, franchise owners, AFFI has come up with the Franchise Times.

Says Juan: "All the books are from the US or Britain. We saw the need for a publication with local color." Each monthly issue will feature encapsulated "Franchising 101" articles.

If the crowd in the franchise fair was any indication, there appears to be a growing interest in local franchises. Juan cites the slowing economy and rock bottom interest rates as the main impetus for this trend, as Filipinos look for investment - and employment - alternatives.

"You have people exiting companies on early retirement packages, and that money will only make 2 to 3 percent. AT least if you put it in a business, you have a chance of making a higher return."

And then there is also the dignity of ownership. Whether one has been recently laid off or is merely looking of an alternative to corporate life, Juan notes that "it just feels good when you can say 'I have my own business'."
(AFFI can be reached at tel. No. 813-5836 or email: info@filfranchisers.com)

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