In the Philippines, franchising would have to be one of the most reliable form of businesses catered to those experienced and beginner entrepreneurs. But to be successful in this field, you have to know important details about the company or the franchise you’re going to buy.
Let’s start our journey into Philippines Franchising
I. Why you should Franchise
You should franchise your business if you want to significantly expand it, that is if you want to grow your business to its optimum size and maximum profitability. Many great fortunes have been built on Franchising. This is done by Franchising a business concept, growing it to a level where it fits the profile for an IPO and then take the company public. The market can value your company at a level much greater than the gross sales and profits of the company can justify. If the market thinks your company has the potential for Great Growth, then the market will value your company and its stock highly and you can become richer than you ever dreamed possible.
II. Profile of a Franchisor
Not all businesses can be franchised but most business concepts can be. A profile for a franchise would be as follows:
- Unique- New or unique concept that has the potential to expand Nationally and even Internationally.
- Profitability- the concept must be consistently profitable and the degree of profitability should be predictable.
- Systematized- all the operating systems of the concept should be very polished and efficient. These systems and procedures should be in manual form.
- Training- It should be relatively easy to train others in the use of the Systems and Procedures.
- Excellent margins- The profit margins built into the concept should be great enough that every franchisee who adheres to the system can realize an attractive Return on Investment. This ROI should exceed 20% before taxes.
- Affordable- If the franchise is very expensive there will be few who can afford it.
View franchising as a way to grow your business.
The Advantages of Philippines Franchising As A Way To Grow Your Business
- Capital is always scarce in growing a business. In franchising the capital needed to expand the business is provided by the Franchisee. It is the classic case of using OPM, or other peoples money.
- Trained, motivated management is part and parcel of franchising. It is difficult to find and keep good experienced managers, who are so necessary to grow a business. With franchisees, you have people who are well trained in the franchise systems and who are also very motivated because their capital is at risk.
- Efficient- Profitable, Franchise units tend to be better run, therefore more efficient and profitable than company owned units, for the simple reason that the Franchisees capital is at risk and they tend to be very motivated.
- Rapid Expansion- Today’s marketplace changes very quickly, often if you don’t move quickly on expanding a concept, someone else will. The window of opportunity will close, and you just miss it. There is no other way to grow as rapidly as franchising allows.
- Achieve optimum size- maximum profits are realized by getting very large. Because there are few impediments to growth through franchising, it offers the opportunity to have 1000’s of units through out the world, and no other business expansion model can offer that.
- Great buying power- The large number of units allowed by franchising enables the company to buy for the entire system and at great savings to the individual franchisees. This greatly enhances profit margins and gives the franchisees a very strong advantage over all competitors.
- Securing locations- As a franchising system grows it begins to take on an image in the marketplace of size and success. Landlords like to have well known, successful Franchises in their shopping centers. It’s simply much easier to secure great locations as a franchisor than it would be for a non-franchise business.
- Market Dominance- Because franchises tend to grow rapidly, they tend to locate many units in a given market and essentially squeeze out the competition. A franchise can do extensive advertising in a given market because the cost are spread among many units. This combination of having many high profile locations with large advertising budgets is a competitive advantage that can’t be overcome.
- Development of advertising materials- Most franchisors require that the franchisees pay an ad royalty to the company. These monies are pooled to make top quality advertising materials for the franchisees. Again it’s the advantage of spreading cost over a large number of franchisees, so that everyone benefits.
- Maximum income- Franchises make money in a number of ways such as the following:
- Franchise fee
- Franchise royalties
- Equipment sales
- Supplies, materials sales
- Sales of Services
- Property Rental
- Rebates from vendors of equipment and supplies.
All these income streams from large numbers of franchisees equals big money.
11. Get super rich- Franchise companies are high profile, grow quickly, and have the potential to get very large. These qualities make Franchise Companies very good candidates for being bought by a large conglomerate and for going public. Either of these two possibilities can yield millions of dollars to the owners of the franchise company.