The risk is present for both franchisor and franchisee, but the rewards can be great.
Franchising is fast becoming a popular, viable investment vehicle for Filipinos. Whether you’re an individual seeking financial independence, or a family looking for supplementary income, investing in a proven franchise is a tried and tested way of making money, more so than starting your own business, where the startup risks are often higher.
The franchise model can also work for businesses looking for a way to expand. Indeed, growing your enterprise this way could potentially lead to your brand to becoming a household name.
As in any business, franchising can be a sink-or-swim affair—the road is paved with potential pitfalls and potential benefits as well.
You must find the right “fit” for your franchise business to succeed. For a franchisee, here are some basic pointers to consider:
1. Step back and evaluate: The first and the most important part of any franchisee checklist is the self-assessment test. What are your inclinations? Do you have the time and passion for this? Are you more comfortable in a particular concept more so than others? Keep in mind your passion drives your initiative, so you should have this one covered before you proceed.
2. Show me the money: As an investor, it is important that you have your finances set. Ask a potential franchiser what the return on the investment or ROI will be, how you will reach this number, and most importantly, how much it would cost you to start the business.
3. Create a short list: Come up with a roster of franchise concepts that interest you. By comparing and eventually paring down the number of concepts, you will be able to have a better idea of what concept to go for.
4. Check and verify: Once you have zeroed in on a franchise you want, do your homework and talk to its other franchisees. It is important to note the sentiments of these people to get a sense of how the company really works, what type of support is out there, and what you can expect once you start operations.
5. A support structure is key: Determine what kind of support you can expect from the franchiser, in the form of marketing, logistics, operations, etc. Make sure that you are provided an operations manual, which will serve as your bible in running the business.
6. Cover your bases: Once you’re set, you must pore over the franchise agreement with a lawyer to iron out kinks or ask for clarifications. Since this is a binding contract, it is very important that you know what rights and privileges you will have under the agreement.
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This article was originally published in the May 2010 issue of Entrepreneur Philippines.