Franchising Reviewer

Franchising: definition and nature
In layman’s term, FRANCHISING MEANS acquiring a right from the business franchisor to market the same product or
services of the owner, including its trademark, logo, name, and the business model and systems for a fixed price.
As a licensing agreement, franchising is bound by various legal documents and considerations to ensure the smooth
operation of the business. It starts with a Franchise Agreement (FA) document - the paper that specifies all the duties of
the franchisor and the franchisee, including all information in terms of duration and the provisions.
Franchising is just temporary in nature; hence, the FA should include the Terms of Agreement. Here, the franchisee must
know the type of business relationship he/she agrees with the franchisor. Moreover, the FA must include the duration of
their agreement, the renewal period, the overall investment amount and fees, training and support, purchase of products,
territory, and the termination of the contract.
In most franchises in the Philippines, franchisees prefer a corporate business model since it is ideal having a separate
identity from its shareholders. Businesses with corporate models often have varied nature of business ranging from the
food industry such as Jollibee and McDonald’s to the oil conglomerates like Shell and Petron.
Types of Franchising business
There are three common types of franchising business:
a. Product Franchising (Trade Name Franchising) In this type of franchise, the franchisor grants every franchisee the
right to sell its products and use its trademarks for a fee but without any method of doing the business. Common examples
are car dealerships and service station businesses.
b. Manufacturing Franchising In this type of franchise, the franchisee does not only have the right to sell the products
but also has the right to manufacture the product following the manufacturing guidelines. An example is the food and
beverage company, Coca-Cola. The franchisor only supplies the syrup ingredients to soft drink bottlers (franchisee) who
then proceeds to mix, bottle, and distribute the final product.
c. Business Format Franchising In a business format franchise, the franchisor does not only allow the distribution of the
products but also gives franchisees the right to the franchisor’s business concept or model. Here, the franchisor gives the
franchisee access to its overall business methodology, This could also include providing training, marketing, and
supply of needed equipment and materials depending on the agreement.
An excellent example of this is the food cart franchise. This has now become a trend in the Philippine market and
is a very lucrative business since Filipinos love food. A food cart franchise is the choice of inspiring entrepreneurs
because of its promising low initial investment and high returns in the long run.
Why franchise a business?
There are many reasons why you should franchise business. Simplified, the idea is that it allows you to manage a business
that has lower risks of failing than start-ups.
Here are other reasons why you must consider franchising as an option:
Evident collaboration - You are always assured that the franchisor is there for you to succeed.
It offers a better chance to succeed - As said earlier, a franchise business has low risks since it is well-established
already
Owners get freedom factors - Every franchisee considers flexibility, money, and status before starting a franchise. This
gives them the freedom to choose if it suits them or not at a specified period.
Happy franchise owners make more money - As the business grows, the franchisee also earns well.
INTERESTING FACTS IN FRANCHISING
If there is one thing that must keep you excited about franchising, it is the fact that you can be the boss at all costs. There
are many interesting facts in franchising, and here are some for you.
In the local arena, the Philippine Franchise Association (PFA), the face of franchising in the Philippines, defines
franchising as the method of practicing and using another’s business concept. It is a growing relationship in which
the franchisee is granted the right to market a product or service under a marketing plan or a system that uses the
trademark, name/brand, logo, and advertising owned by the franchisor.
Franchising consultants and associations have organized themselves to boost the industry via mounting franchising
expos that highlight consultancy, business opportunities, introducing and identifying franchising trends - to
promote the success of homegrown and international brands.
The PFA, for one, promotes growth in the industry by churning out programs that will open opportunities for
expansion of Philippine franchisees here and abroad by assisting micro, small, and medium enterprises (MSMEs).
Moreover, the premier franchise association promotes cream of the crop Philippine franchisees to the international
market and promotes the Philippines as good soil for investment for top international franchise brands. Members
of this organization will be assisted in their franchising endeavors
Another organization that is under PFA is the Filipino International Franchise Association (FIFA), which are both
members of the World Franchise Consultants.
PFA’S GUIDE TO FRANCHISING FEATURING ITS CHALLENGES
Working Within the System - People who have difficulty following directions or who dislike working within a system
may find franchising extremely frustrating. Conformity to the franchise system is critical if consistency among franchises
is to be maintained.
The Risk- Because you own the business, you, to a great extent, determine the success of your venture. The franchisor
may have a great program and a respected name, but in the final analysis, much of the risk is in your hands.
Working with the Franchise System
Get to know the franchise system through the following methods.
•Visit the corporate headquarters. Seek to get a feel for the staff and how smoothly the operations run.
•Talk to other franchisees. Ask what their relationship with the franchisor like.
•Read as much about the franchise as possible.
False Expectations – Franchising, like any other business, requires tremendous time, initiative and industry. Obtain from
the franchisor a realistic picture as possible as to what is required in operating that particular franchise.
Managing the Business - Some individuals are more prepared to manage a business than others. They have some
business experience and have learned to get along well with people. Other individuals may find that managing a franchise
is a tremendous burden. You must honestly assess your preparation to run a business. If you find that you have little or no
experience, you may want to seek special assistance from the franchisor in the business management.

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Franchising: definition and nature

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