Entre 12 Module Franchisee
Entre 12 Module Franchisee
Entre 12 Module Franchisee
(Introduction)
Don’t be fooled into thinking that you have to start a business from scratch to be a business owner, or
that you aren’t an entrepreneur unless you go it alone. That is non-sense. Being a franchise owner is
one of the greatest ways to achieve business ownership and satisfy your entrepreneurial spirit by being
in the driver’s seat of your own destiny. Since it is a great way to get start in this chapter we will cover
the basics to give a solid understanding of what it means to be a franchise owner.
Inspire Oneself
Stimulating Learning (Motivation)
Before we start our lesson 1 in franchising, let’s have some review in your early management subject.
In your management 1 you’ve learned the basic forms of business ownership namely, sole
proprietorship, partnership, corporation and cooperatives. Now, where does franchising belong?. In
your business finance you’ve learned the different concepts in the proper assessment of your business
financing. Now, what are the odds of franchising in terms of financial management and returns?
Can u still remember when the 1st franchise of Jollibee established in the province was? When is the
second and the third? Why is that milk tea shops, burger stands, ice cream parlors, siomai carts is just
popping out in every corner? The very reason why franchising is included in your curriculum is because
it is the fastest growing industry in the field of business. This course will give us the answers in the
questions above mentioned. So lets start your amazing journey in the field of FRANCHISING.
LESSON 1 History of Franchising
Franchising developed over time as an efficient way to do business and there were versions of
franchising employed in Europe centuries ago. The origin of the word franchise goes back to Anglo-
French, meaning freedom, liberty, and from Middle French, franchir, to free, and earlier from Old
French franc, free. A proven business model that has stood the test of time
Franchising really began to blossom in the post-war 1950s and 1960s. Franchisors of convenience
goods and services seemed to be popping up on every corner. McDonald's, Kentucky Fried Chicken,
laundry services, dry cleaners, hotels, and rental car franchises flooded the marketplace.
Franchising Disadvantages
1. Expensive startup costs
The capital needed to start a franchise business is its biggest drawback. Usually, the initial investment
is twice as (or even higher) that for opening a business from scratch.
The following are the typical startup expenses when starting a franchise business.
• Franchise fee – This one-time, upfront fee is what you pay to gain the license to use the
franchise brand’s proprietary information legally, such as its trademark, logo, and trade secrets. The
more popular the brand is, the higher this fee is charged.
• Royalty fees – The royalty payments for franchise businesses in the Philippines typically range
from 3% to 10% of the monthly gross sales. It’s paid every month, so this can reduce your net income.
Not all franchisors charge this fee, though.
• Advertisement and marketing fees – These are a small percentage of the gross monthly sales,
which are used to fund the franchisor’s marketing support.
• Cost of supplies – Although some franchisors provide the initial supplies as part of the franchise
package, franchisees have to keep buying the next batches either directly from the franchisor or its
accredited suppliers. This can cost you higher compared to sourcing your own suppliers.
2. Limited flexibility and autonomy
Franchising doesn’t offer much to franchisees in terms of creativity and innovation. You’re bound to
follow the rules in the operating manual and franchise agreement.
When you want to do something differently, like switching to a cheaper and more accessible supplier,
you’ll have to seek the franchisor’s approval first. If the company doesn’t agree to it, you have no
choice but to comply.
3. Lock-in period
Franchise contract terms range from two to five years or longer. Within that period, you’ll be stuck
with the company regardless if it’s performing well financially or not.
Renewing the contract depends on the franchisor’s evaluation of your business relationship and your
franchise business’ performance throughout the contract term.
4. Business risk
Just like any kind of business, franchising is also a risky venture. Your success will depend on the
franchisor’s success. If the company fails, the reputation and performance of its franchisees will suffer
as well.