Franchising seems to be immune from the global financial crisis, with some firms expanding even during the economic turmoil, officials of the Philippine Franchise Association (PFA) told The Manila Times in an exclusive roundtable interview on Monday.
They added that during the economic crunch, most budding entrepreneurs adopted tried-and-tested operations and strategies of well-known franchises.
“During these hard times, investors look for something that is viable. If you have they money, you would rather invest it in a sure thing, such as a franchise,” Elizabeth Pardo-Orbeta, association president, explained.
Ma. Alegria Limjoco, association chairman, cited a study which noted that franchised businesses in the country have an about 90-percent success rate, while only 22 percent of businesses that start from scratch do flourish.
“Entrepreneurs that open franchises follow a system, so there’s no hit or miss. If they follow the operations manual, they are going to be successful,” she added.
Better way to begin
Pardo-Orbeta said, “Unless a budding entrepreneur has a very different, unique, novel product, and money to back it up, there’s no better way to begin a business than to franchise.”
She added that franchisors grant marketing and operations support to budding franchisees, and her association conducts seminars and trainings for franchisees.
It also helps that a financial institution like the Small Business Corp. assists those who are interested to become franchisees.
“Small Business Corp. lends to businessmen who want to franchise, as well as matches them with PFA members,” Limjoco said.
She added that one could start a franchise business with an investment of only P100,000, enough for a food cart or kiosk.
Limjoco said the Philippine franchising sector has been growing about 20 percent annually, and this country was currently the most robust in Southeast Asia.
She added that franchises account for about 25 percent of the $26 billion sales of the domestic retail sector, or about P300 billion.
At present, the industry was composed of about 1,000 local and foreign concepts, Limjoco said.
Services grow the fastest
Limjoco added that franchises that offer services, such as Internet cafés, beauty salons and spas, have been growing the fastest—although food franchises were still dominant in the country.
Plus, many of homegrown franchises are also creating buzz abroad, the association officials told The Times.
Pardo-Orbeta cited the overseas expansion of Filipino food brands, such as Chowking, Goldilocks, Jollibee, Max’s, Potato Corner, Red Ribbon, Tokyo Tokyo and Waffle Time; in fashion and clothing lines Bench, Island Souvenirs and Kamiseta; and service-oriented concepts like Reyes Haircutters salon and Netopia Internet shops.
She said that the Philippines was now exporting local brands, thanks to Filipinos’ ingenuity.
For instance, Pardo-Orbeta cited the concept of Potato Corner, a stall fully devoted to flavored French fries. “There had been no similar concept in the US,” she said.
Its uniqueness has helped Potato Corner seal a deal for 10 outlets in the US, of which one is already
operational and another is set to open by yearend, Pardo-Orbeta said.
Reyes Haircutters franchise, meanwhile, reportedly was drawing in customers in London, as it offers more affordable rates than other salons there, Limjoco said.
Many Filipino franchises are now present in Guam, the Middle East, the US and our Southeast Asian neighbors, where they use the presence of Filipino communities as a beachhead for their business, Pardo-Orbeta said.
“But Filipino companies later on also adjust to the needs of their consumers abroad, they diversify,” Limjoco said, adding that they later target mainstream markets, adjusting their formula to suit the tastes of customers in the expansion market.
Dubious franchises
Limjoco noted that franchising was defined as “replicating a successful business.”
But the franchising association officials said there were some dubious companies capitalizing on the popularity of franchises.
Pardo-Orbeta said interested franchisees must first take a closer look at the brand they want to franchise.
She added that entrepreneurs should be wary of those who ask for money right away. Franchisors tend to be careful to whom they sell a franchise, because they want to protect the reputation of the company, she explained.
Also, Pardo-Orbeta advised entrepreneurs to ask for assistance from Philippine Franchise Association in choosing a good franchise to invest in, as the association screens prospective members to ensure that neither fly-by-night nor pseudo firms are accepted. –BEN ARNOLD O. DE VERA REPORTER, Manila Times
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