The lure of steady and stable returns have always made franchises a popular choice among the investing public. However, this appetite has also led to some unscrupulous people to take undue advantage through scams and half baked business systems.
According to Philippine Food Asia Corporation President and CEO Richard Sanz, not all franchises are created equal. He counsels investors to do their due diligence and not be blinded by attractive terms and other come ons companies use to attract franchisees.
"Before signing anything, check the legitimacy of the franchise you are considering. Go to the Department of Trade and Industry and see if the franchise is indeed registered. This way, you know that you are not dealing with a fly-by-night operation. Do not accept excuses about the business being registered elsewhere. The absence of a DTI registration should immediately signal you to back off," he said.
Next, he advises people to check if the franchise is affiliated with any of the existing legitimate franchise groups in the Philippines such as the Philippine Franchise Association (PFA), which Sanz' Bibingkinitan chain of food stalls is an active member. Members of the PFA have been vetted and have gone through a tedious membership process that is meant to protect investors.
"As much as possible, go for franchisees with a good track record. If you see a certain store sprouting all over the place, do not think that it is the next big thing. Be wary of those franchises that are expanding very quickly. If you see the same service or product being sold at almost every street corner, then that should be a red flag for you," he cautions.
DON'T BE AFRAID TO ASK QUESTIONS
Sanz advises potential franchisees to vet franchises by following this simple checklist:
1. Ask the franchisor to explain how you will make money from the business. Ask what kind of support and assistance they will extend to you. A responsible franchisor will guide you patiently as you set up your business, and will assist you in finding a good location, finding the right people, and preparing for opening day. It will look out for all your needs and make sure you are prepared for everything beyond the launch. Its support extends to your day-to-day operations, and includes marketing, training and service training.