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Franchising for expansion

Mention the word franchising and most enterprise owners looking to grow their business would probably tell you they have, or still are, thinking of it as an expansion tactic. And why would they not, as franchising seems to guarantee a steady and proven way of making money.

By: Entrepreneur Staff | Oct 21, 2013 10:00 am

Mention the word franchising and most enterprise owners looking to grow their business would probably tell you they have, or still are, thinking of it as an expansion tactic. And why would they not, as franchising seems to guarantee a steady and proven way of making money.

The fact that it's a buzzword among entrepreneurs doesn't make the franchising route easy. For one, not all kinds of businesses are franchisable. Aside from that, franchising requires a special kind of partnership between the franchiser and his franchisees, therefore, those who shun the idea of sharing their trade secrets are better off thinking of a different way to grow their business. As franchising expert Armando Bartolome of GMB Franchise Developers says, "The success of any franchise business lies in creating a harmonious relationship between the two parties involved."

How do you know you're ready?

Samie Lim, chairman of Francorp Philippines, says franchising essentially involves transferring a successful business formula to another person or company. 'Successful,' then, is the operative word in franchising. "In contrast, a 'fake' franchiser doesn't know how to be successful; he or she just thinks of how to make money," Lim said.

According to Reymont Choachuy, President of Noble House , the mother company of Sam's Everything on Sticks, Itlog on Sticks and Sumo Mai, an indication of your readiness to franchise, or if you already have a 'successful business formula' is to base it on your income statement. "You have a branch, this is how you run it, you've worked out the kinks, and you're earning money. So it's a matter of duplication and finding the right locations," Choachuy says. Noble House, which also helps other companies build their brands, is behind the re-packaging and marketing of Ferino's Bibingka.

However, Choachuy doesn't advise plunging right ahead. "We believe in trying to adopt the formula given by the Philippine Franchise Association which we are a member of. [Its recommendation is to run the business for] 3 years and [have] 3 outlets prior to franchising a brand. Now, [we try to] learn from [each venture] for three years before we start selling the business." 

Carson Tan, President and CEO of Global Quality Waters and Environmental Solutions Technologies, Inc. (GQWEST), emphasizes that, "for you to offer [your brand], you yourself should have your own existing stores, so you can say [to your prospective franchisees], 'Look, these are my stores and these are making money. You just need to duplicate me." [There are some who simply] join the band wagon, but they don't even have a [company-owned] store. It's not realistic." GQWEST's flagship brand, Aquabest, is one of the country's top brands of water refilling services as well as a bottled water brand, and has won several times in Entrepreneur Philippines' Franchise Awards. GQWEST also offers water treatment products and services such as waste water treatment, industrial water treatment, filters and ionizers.  

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