Many mid-scale and large businesses in various industries in the Philippines have raced to tremendous growth because of franchising. Often, franchising is the key entrepreneurs use to expand faster and penetrate the market further on a smaller investment.
But those who wish to replicate the success of their own establishments should first identify “strong indicators’ that gauge the readiness of their business to fully offer a franchise. [Find out what support the franchising industry needs from the government here]
“A first-time franchisor should ask himself, ‘Has my business been profitable in the past years of its operations?” says Ma. Alegria “Bing” Limjuco, chief executive of Francorp Philippines, the local arm of the world’s largest franchise development and consultancy firm. “Has the business established credibility in the market and among the consumers?”
According to Limjoco, a certified franchise executive – can be reflected in a number of ways. This may include organization size, number of units, years in operation, “look” of the prototype unit, publicity, consumer awareness of the brand and strength of management. [See eight requirements to franchise a business here]
Limjoco says that besides credibility, profitability is another important factor among the consulting firm’s critical criteria of business franchisability.
Another integral part of franchising, she says, is capital. Although a franchisee’s investment is used for expanding or opening another branch or outlet, franchise owners or business developers still need capital and resources to implement a franchise program.
“While franchising is a low-cost means of expanding a business, it is not a ‘no-cost’ means of expansion,” Limjoco stresses. [See three things to consider in franchising a business here]
The means, or capital, required to initially implement a franchise program “will always vary depending on the scope of the expansion plan,” she says.
In Francorp’s estimate, $15,000 (about P660,000) may be enough to complete the sale of one or two franchised units, including the necessary legal documentation.
For franchisors aiming for aggressive expansion, start-up costs can run to $100,000 (P4.4 million) or more, Francorp adds.
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