Inq7:
The leading lights of the local franchising industry are all predicting a bright future for this way of doing business, once written off as the ‘tamad’ (lazy) route to entrepreneurship.
Consider this little piece of statistic: According to the Philippine Franchise Association (PFA), the number of franchised businesses has grown in the past few years from a mere 5% of all retail shops in the country to an estimated 15%. That means that 3 in every 20 stores or establishments you will encounter along the typical street is a franchise business, compared with 1 in 20 a few years ago.
This ratio will be even higher inside a shopping mall in this mall-crazy country, where as much as 2/3 of all tenants are franchisees. One would think that this threefold growth in recent years would have already brought franchising to its plateau. Not so, says the widely-acknowledged ‘father of Philippine franchising.’ Speaking to the media in a press conference earlier this week, PFA chairman emeritus Samie Lim encouraged aspiring businessmen to considering the franchise trade. ‘The opportunities are there, and they are big,’ he said. ‘When people ask me, Is it too late to get into franchising? the answer is no, because we still have a lot of room for growth.’
Lim feels that the local business scene has the potential to mimic the US retail industry where franchise businesses make up about 40% of all retail establishments in the consumer sector - a staggering 2 out of every 5 stores on the street. Why is the Filipino business psyche attuned to it franchising, standing out among even the traditionally more entrepreneurial minds in the region like the Chinese or the Indians? The franchising business involves the ’selling’ or ‘renting out of a business’ concept and brand to a 3rd-party that will operate the retail outlet according to guidelines set by the original owners.
The franchisees’ risks are reduced by riding on an established brand or product, while the franchisors’ revenues are multiplied through the royalties paid to them. In actual practice, the size spectrum of franchise businesses varies greatly from large restaurants and fast food chains like McDonald’s and Jollibee to small carts situated in shopping malls or street corners.
The PFA - the umbrella organization of the country’s franchisors and franchisees - says this is evidence of the potential of the business model, whether the businessman holds a franchise from a food chain, a fashion establishment, or a service business like a spa or a dry cleaning and laundry business. More.
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