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How to qualify as a master franchisee

Are you fit for the role?
By Erlinda Bartolome |

One of the reasons that shopping malls come to life is the presence of well-known franchise concepts, many of them foreign, which have set up shop in the country. There are hundreds of these so-called master franchise concepts that have made malls more exciting, created more jobs, and forced local retailers to shape up to compete more effectively against them.

A master franchisee is one who has gained the right to use a franchisor’s trademark and business system in his (the former’s) country or territory. How do you become one?

Financial capability

You need big capital, for starters. Based on the results of a survey provided to the participants of the International Franchise Expo in Washington, DC, in April 2003, 28 percent of the master franchisees polled invested less than $100,000, 36 percent put in $100,000 to $250,000, 21 percent injected $250,000 to $500,000, 17 percent invested more than $500,000, and over 74 percent shelled out more than $100,000.

For the Philippines, you will have to pay $150,000 to $200,000 for the master franchise fee and put up more money to finance your branches and their franchise fees. You may need a minimum of P30 million to get a master franchise running.

Shopping for a master franchise

The Internet is the cheapest way to shop for a master franchise concept. Many master franchisees in the Philippines, however, pick their concepts abroad, where franchise expositions are popular venues for “franchise shopping.” Today the International Franchise Expo in Washington is the premiere franchise show, but many countries have begun to organize their own. You may log on to www.franchise.org for information on these shows. You never know when the opportunity arises for you to join one.

Check out several concepts

After shopping, select two or three concepts to your liking. Then write a letter of intent to the franchisor. Be specific about wanting a master franchise and ask for brochures. Some franchisors will provide you with information on the license and other fees immediately, but others will give them to you later.

After reading about the business concept, study whether there is a market for the concept in the Philippines. If there are companies already offering the same product or service in the country, is there a market segment you could still tap? How big is this market?

Ideally, the concept should be pioneering or first to satisfy a particular market need. But, as a result of the influx of foreign franchises, and the growth of homegrown ones, expect to have direct and indirect competitors. In any case, look for a market segment you could tap for the franchise concept.

Choose the franchise you like

After checking out the various brochures, select one franchise concept. Then communicate with the foreign franchisor and get more information. Pay particular attention to the basic terms and fees of the master franchise for the Philippines and the steps to pursuing the application process. The application process varies depending on the franchisor.After you sign the Master Franchise Agreement, your payment of all the fees gets the development schedule going. You will have to train at the franchisor’s head office for two to four weeks. This is free, but you will have to pay for your airfare, accommodations and other expenses.

This article was first published in the Novermber 2010 issue of Entrepreneur Philippines.

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