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Food Biz: to franchise or not to franchise

Should you start your own business or franchise one?
By Prof. Francisco Jay Bernardo III |

Q: It’s been my dream to start a food business; however I am torn between starting my own, using my own chicken recipes, and franchising a popular fast food brand. What are the things that I should consider to come up with a decision?

A: That question is very typical: whether to get a franchise or put something of your own. And the first thing you should consider is yourself and your personality.

If you are the type of person who wants to go into business in order to make money to add to your income and you don’t want to start from scratch, then franchising is the best way to go. Their brand is already established, their operations are already manualized, there’s a standard operating procedure. All you need to do is to find the right location and to market it. You don’t have to start from scratch as far as all the systems are concerned.

However, if you’re the type of person who wants to experiment, and you have that special recipe, and you want to take it big in that context, because you’re a good cook or you can bake well, then franchising is not for you.

In franchising, you cannot bend or change the products that you have. You will end up doing things on your own, which is not going to be allowed by the franchisor. The franchise, however, may be a good step for you in order to understand the processes and the operations and how to manage a business because it’s already manualized. But it will not allow your creativity and innovativeness to flourish, because you are dictated upon by the mother franchise and you have limited capacity of production.

Ask yourself: What’s your personality type and what’s the purpose of you going into this type of business? Is it to make immediate money? Then maybe franchising, being more stable, might be the way to go. Is it to support your itching desire to launch your product? Then setting up your own business might be better for you.

If you do have products in mind, make sure though that your products have been tested and you have been able to establish that there is a good demand for the product. It might happen that your relatives tell you that your products are good or taste great. But when you try them out in the market, the market doesn’t really appreciate them. If you’re going to start your own business, make sure that your products have been tested and you have established that there is a good demand for the product. If you do that, then the probability of putting up your own business is likely to succeed.

In entrepreneurship, it’s three things: you need to be passionate about it, you need to be able to consistently deliver a quality product, and you have to ensure that there’s a demand for the product.

Financially, sometimes start-ups can be very costly. Usually, if it’s for food, you would usually start in a tiangge or in a mall. Meanwhile, for franchising, there’s a big upfront cost. When you start on your own, you can grow gradually. In franchising, you select a location, and you invest all your money on that location. So it’s hit or miss.

In franchising, you commit less process mistakes because the process is already okay. In a start-up, you might commit a lot of process mistakes that may be even more expensive than a franchise. And that’s what the franchise system is selling you: a process that’s already set. I can’t say if one is more expensive than the other. But the demand will dictate your growth. In a start-up, if the demand is high, you will grow. In a franchise, you’ll just stay in that location and pull people in.

Editor\\\'s note: This article was published in the April 2011 issue of Entrepreneur Philippines. Prof. Francisco “Jay” Bernardo III is a director of the ACE Center for Entrepreneurship and Management Education Inc. His fields of expertise include entrepreneurship, enterprise development, marketing, creativity and innovation, operations management, outsourcing, logistics, distribution, human resource management and entrepreneurial finance.


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