Franchising In the Philippines

h10 Questions Before You Franchise

noreply@blogger.com (The Franchise Guru) — Sat, 08 Aug 2009 00:06:00 +0000

10 questions before you franchise

by Erlinda Sabio-Bartolome

Before opening your business to franchisees, you must first satisfy some important questions

We have come across franchisers with nothing else to offer the franchise applicants but a franchise agreement. While this is an important document in franchising, it is only one of the many components of the franchise system. You have to put a number of things in place before you open your doors to franchising.

Below are several of the questions you must answer before you entertain any franchise inquiry:

QUESTION 1: What is your franchise business model? How would you know if the franchisee would make money or not?

QUESTION 2: What is your value proposition to the market?

QUESTION 3: What are your reasons for franchising the business?

QUESTION 4: What are your short- and long-term goals?

QUESTION 5: Who will be involved in franchising?

QUESTION 6: What are the franchise fees and royalties, its breakdown and computations?

QUESTION 7: What are the phases of the application process and the rationalization of each phase?

QUESTION 8: How will you evaluate franchise applicants?

QUESTION 9: What franchise organization will you set up?

QUESTION 10: What support and assistance will you provide prior to opening and while the franchise is operational?

SUCCESS NOT GUARANTEED

noreply@blogger.com (The Franchise Guru) — Wed, 09 Apr 2008 02:17:00 +0000

SUCCESS NOT GUARANTEED

By Erlinda Sabio Bartolome, CFE

It’s not quite true that franchises are failure-proof . Here’s why some of them are not able to sustain their operations as envisioned

Because franchising has proven to be a very popular way of getting into business or expanding an existing one, a myth has arisen that franchises can never fail. The reality is that franchising is not failure-proof. Just like any other business , it will have its own share of failures. The only difference is that the failure rate will be much, much smaller than starting your own independent business.

The US Department of Commerce has placed the failure rate of franchised businesses after 10 year at only 5 percent, versus 82 percent among independent businesses. In the Philippines, among the members of the Association of Filipino Franchisers Inc., the success rate is 98.6 percent and the average business lifespan of franchise systems is 14 years.

Exactly why do some franchises fail? Since Franchising is a personal and contractual relationship between two parties, it’s easy to see that no one party has a monopoly of possibly causing a franchise to fail. Normally, both parties will contribute their share of failure factors; it’s only the degree of responsibility that will differ.

Getting into Franchising for the wrong reasons

Here are just a few of the wrong reasons for getting into franchising:

“…I will franchise because my competitor has expanded the number of it branches and I also want to expand.”

“…collecting franchise fees may be the best way to fatten my bank account and to enable me to travel wherever I want.”

“…I want to give my son or daughter a business, so I will get him or her a franchise.”

“…I better just get a franchise since I will automatically have very good sale and profits.”

When franchisors and franchisees have these mindsets, the franchise is definitely on its way to failure at the very onset.

To avoid failures, both franchisors and franchisees should be very clear about their reasons for going into franchising. They should manage their expectations and realize that their respective franchising goals are complementary to each other. These goals should therefore be mutually inclusive rather than exclusive. Indeed, the franchisor’s success of the franchisees, and when both Franchisors and franchisee accept this philosophy, they build a strong foundation that reduces the chances of failure of their mutual enterprises.

An admirable example of a statement of this fundamental franchising objective was that made by Ray Kroc, the founder of McDonald’s. He said that his basic goal in franchising is to make his franchisees successful before him. His first successful franchisee, Sandy Agate, clearly understood this franchising goal and methodically followed the business system that Kroc had laid forth. Other McDonald’s franchisees did the same over the year, making McDonald’s the best franchisor the world has ever known.

UNMANAGED GROWTH

Forward planning is an absolute must when a franchisor decides to expand his or her business through franchising , and the same is requires of anyone who goes into business as franchisee. Franchisers must ensure that their level of commitment and support to each of their franchisees is the same and consistent

whether the latter is the first or, say, the 50^th franchisee. In like manner, franchisees must make sure that they are prepared and ready to meet the demands of increasing sales volumes. This is because customers can be very unforgiving when a franchised outlet fails to provide the standard service and quality products that a franchised product or service is known for.

Successful franchise systems provide for built-in mechanisms to cope with such growth challenges. For sure, mistakes will be committed along the way, but great franchise systems build on these mistakes, then move on and become stronger as they wrestle with the challenges presented by their growth. In fact, franchising’s greatest competitive edge I that both the franchisor and it franchisees can work as a team to effectively address these growth challenges. This is the business synergy in franchising that other forms of doing business simply don’t have.

LOW SALES AND LOSSES

Most franchise failure result from low sales and operational losses, and the most common factors that lead to them are as follows:

1. Poor Location

This can result if one does not fully study the marker environment of the proposed franchised branch or outlet. Both franchisor and franchisee need to identify the success factors of the location, using as benchmarks the location of successful company-owned outlets and franchised outlets. Of course, since franchise concepts can differ widely, those benchmarks will likewise differ from one franchise system to another.

There re also other failure factors that are beyond the control of both parties. Some of these are sudden declines in the market due to road constructions, closure or relocation of major traffic generators as big business establishment and factories, entry of cutthroat competitors, and physical or economic deterioration of the franchise area.

2. Inability to control and manage finances

The most frequent complaint of franchisees is that they are not making enough profits from the business. This may in fact be true for some, but more than not, the low profitability of a franchised outlet results from inadequate financial management. In the food sector, in particular, franchisees should be extremely vigilant in controlling both food cots and operating costs. No amount of sale will generate profits if a franchisee is not properly managing the cash, inventory, purchases, and materials usage of the franchised outlet. It should always be kept in mind that people other than paying customers can consume food in a franchised outlet.

Indeed, when food is prepared but not served to paying customers, costs can escalate and ear up profits.

It is likewise important for franchisors and franchisee to understand financial reports. The monthly financial report are particularly important tools in making decisions on how to improve the financial performance of franchised branches.

3. Inadequate marketing and advertising

Both the Franchisor and franchisees must share responsibility for marketing the business, The former for system-wide marketing and the latter for local store marketing. Franchise failure can result if these marketing efforts are not done properly.

In these times of fierce competition, consumer choices are largely dictated by to-of-mind recall . This can be effectively achieved through advertising and promotions, but tri-media advertising will rarely be affordable by most small and medium franchise systems. Franchisors and Franchisees therefore should always be on the lookout for creative but low-cot ways to marker their products and services.

4. Breakdown in communications

As earlier pointed out, franchising is both a personal and a contractual relationship between the franchisor and the franchisee. In practice, however, the personal relationship becomes the more important success factor. In fact, failures in the business can often be traced to a poor relationship caused by communication problems between the franchisor and the franchisee.

This often happens when the franchisor get easily hurt and becomes emotional when a franchisee raises complaints against a perceived lack of support from the franchiser, as a result of which he or the simply refuses to talk to the franchisee. On the other hand, the relationship can break down when a franchisee continually grumbles and gripes about imagined inadequacies of the franchisor and the franchise system. When both parties are adamant and refuse to it down and thresh about their problems, franchise failure can result.

A successful franchising relationship is clearly the result of open communication lines between the franchisor an the franchisee. This because regular communication breeds mutual understanding, which in turn opens up even more effective channels for working together that can further strengthen the franchise system and maximize its chances of success.

BE A MASTER FRANCHISEE

noreply@blogger.com (The Franchise Guru) — Wed, 09 Apr 2008 02:09:00 +0000

BE A MASTER FRANCHISEE

Here’s a step-by-step guide to securing a master franchise for the whole country. If you’re up to it, the rewards may be beyond your dreams.

By: Erlinda Sabio Bartolome, CFE

Malls and shopping centers come alive because of the likes of McDonald’s, Marks and Spencer, Kentucky Fried Chicken, Kodak Express, Shakey’s, Kenny Rogers, and the rest of the more than 300 master franchise concepts in the Philippines.

Their entry has made the malls more exciting, created more jobs, and forced local retailer to shape up to compete more effectively against them.

A master franchisee is one who has gained the right to use a franchiser’s trademark and business system in his own country. How do you become one?

Financial capability

You need a 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, 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 74 percent shelled out over $100,000.

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

Shopping for a master franchise

The Internet is the cheapest way to shop for a master franchise concept.

Many mater franchisees in the Philippines, however, picked their concepts abroad, where franchise expositions are fast becoming 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.

Choosing from several concepts

After shopping, select two or three concepts that you’ll be happy with. Then write a Letter of Internet to the franchise. Be specific about wanting a master franchise and ask for brochures. Some franchisers will provide you with information on the license and other fees immediately, but others will give them to you later. Once you receive the documents, check out the following:

§ The franchiser’s record in international franchising. A franchiser with long years in the business will want higher fees compared with those that are new in franchising.

§ The number of company-owned and franchisee-owned businesses. A franchiser with more company-owned branches is more credible than one with more franchisee-owned stores.

§ The features of the business concept. From the brochures, are you able to identify the franchiser’s uniqueness? Do these allow you to put a value on the concept and to identify the features that will let you position yourself effectively in the market?

After reading the business concept from the brochures, make a study. Is there a market for it in the Philippines? If there are companies already offering the same product or service, is there a market segment you may still tap? How big is it?

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, it’s a good bet you’ll have direct and indirect competitors. Regardless, look for a market segment you can tap for the franchise concept.

Choosing the franchise you like

After checking out the brochures, select one franchise concept. Then communicate with the foreign franchiser 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. This process varies depending on the franchiser, but the following are basic:

The Qualification Form

Be honest and forthcoming when filling out this form. Franchisers do background checks.

A visit to the franchiser’s head office

You will have to meet the franchiser face to face to resolve the question of compatibility between the two of you. Most master franchises have a life of 10 years or more. Can you work with the franchiser that long?

During your visit, request a copy of the Unified Franchise Offering Circular from the US franchisers. These documents contain very important facts about the franchiser.

Memorandum of Understanding of Agreement

This document indicates a level of commitment to do business between you and the franchiser. The franchiser normally will indicate payment of a certain percentage of the license fee. If, at this point, you have even the slightest doubt about getting the franchise, don’t sign the MOU. Franchisers accept the reality that, sometimes, a franchisee needs more time to decide.

The Business Plan

In the Business Plan, you, the applicant, map out the strategies for developing the franchise in the Philippines. The franchiser usually provides the format, and it indicates a study of the market for the franchised business. The business plan and market study should provide you with the initial indicators of the success and viability of the franchise concept.

The Master Franchise Agreement

The franchise normally will give you enough time to review the Master Franchise Agreement. This document indicates the terms of your relationship in the coming years, and may not be amended except through mutual consent. Don’t be intimidated by the number of pages – usually 45 or more – but read through carefully and then write down your comments. Next, get a lawyer familiar with international franchising to review it. He should be able to translate legal jargon into layman’s language, and to make sure the agreement complies with Philippines laws. When reading the agreement, pay particular attention to the follow:

. The terms of the franchise and its renewal

. The continuing fees

. The development schedule

. Support from the franchiser

. The responsibilities of the licensee (this means you)

. The right to sub-franchise, its terms and the sharing of fees

. Termination and defaults.

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 franchiser’s head office for two or four weeks. This is free, hotels and other expenses.

Undecided? Let the following statistics from a survey of master franchisees by Master Franchising.com encourage you:

Of the 4,000 master franchisees operating worldwide, 28 percent reported annual company revenues of $1 million to $5million, 11 percent reported $5million to $10million, and 13 percent reported $10 million to $25 million
Thirty-one percent said they plan to buy additional master franchise
Sixty-seven percent have been operating their businesses for more than five years
These master franchisees will represent more than 111,000 units by 2005.

ARE YOU GETTING YOUR MONEY’S WORTH?

noreply@blogger.com (The Franchise Guru) — Wed, 09 Apr 2008 02:08:00 +0000

ARE YOU GETTING YOUR MONEY’S WORTH?

From the time you open your branch and your first customers start coming in, you look forward with mixed emotions to the next few years. What will be the future of your investment? How will you become a suitable franchisee?

Here’s a tip: Keep your relations with your franchiser healthy and you’ll get your money’s worth. For starters, understand the growth pattern of franchise relations to prepare you for the challenges ahead and to help you put certain events and circumstances in their proper perspective.

RELYING TOO MUCH ON THE FRANCHISER

If there’s ever a time that franchisees are bound to say “Wow!” this is on the first year of the relationship when they get all the attention of the franchiser. It is also during this period that the franchisees feel that the system of the franchiser is the best they’ve ever had. They make sure the franchiser’s system is followed to the letter and regularly call the latter to clarify points, even if just to make sure they’re doing the right thing. The franchiser, on the other hand, takes the position of the nurturing parent, though he may tend to get annoyed with this overdependence of the franchisees.

During this early stage, the openness of the franchisee to the advantage of the system should be explored through further meetings and training that could reinforce positive attitudes towards the system. The franchiser should bear in mind that over dependence will pass and he must, therefore, not be negative about it.

VEERING AWAY FROM THE SYSTEM

After about a year of operating the business, the franchisee learns to understand the business and begins to explore other ways of managing the branch. He even begins experimenting on some deviations from the franchiser’s methods and harbors questions on the franchise system.

Deviation may be very tempting at this phase but the franchisee should remember that he has invested in an entire system that has been proven to work for years.

At this point, it’s best for the franchiser to be helpful and be sensitive to the deviations the franchisee may be taking at this point. It’s likewise important for the franchiser to clarify the superiority of his franchise system over the deviations the franchisee has implemented.

There was a franchiser who had grown used to the almost daily calls of a franchisee. After some time, the calls started dwindling, and worried about what was going on, the franchiser visited the franchisee unannounced.

Basic operational flow was still according to standards except that there was a manager the franchiser had never seen before. The franchiser reminded the franchisee of the company’s policy requiring managers to be trained before they start working in the branch. He explained that the manager needed to know the business concept and system of the franchiser to enable him to operate the branch successfully.

MANAGING THE PAINS OF GROWTH

When the business becomes profitable, the franchisee faces the challenges of growth. He hires more people and discovers he has to learn employee management and not simply the operations of the franchise.

Franchisees must realize that the new challenges are part of growing the business and it is at this point where the franchiser can be the big brother whom he could call on to assist him. After all, one reason why franchising is usually a successful mode of entry to a business is that the franchiser has experienced these problems and would know what to recommend.

A licensee of a foreign franchise once consulted us about one franchisee that had piled up about half a million in accounts payable. What surprised us was that the order for supplies was regular and high. We could not think of a reason for the non-payment and recommended an unannounced visit was astonishing – the franchisee had recently renovated his house and turned it into a mansion; he had also replaced his old rickety Toyota with a new Mercedes Benz. We suggested that the franchiser stop all deliveries.

MAKING A MEANINGFUL CONTRIBUTION TO THE SYSTEM

Eventually the franchisee feels competent enough to manage the branch. Yet there’s a downside to this: he may belittle the franchiser’s contribution to the success of the store, resulting in strained communications between the two. It may be difficult to talk to the franchisee at this point because he thinks he can stand on his own.

When a franchisee becomes aware of this phase, he can turn his competence into a means of providing constructive input to the system. A franchisee should realize that the contribution of the franchiser is forever imbedded into the system.

There’s a homegrown food franchise that has made millionaires out of friends and relatives who have invested in the business. One particular franchisee, who now owns over 10 branches, has prospered from being a simple employee to a very successful businessman as a result of the franchise. Emboldened by the number of his branches, he felt that franchiser support was no longer needed. He became the questioning and doubting Thomas from among the ranks of the franchisees. There was nothing the franchiser could do right. His litany of complaints was endless. His attacks on the franchiser were unprofessional and even involved personal issues.

We were asked to intervene and talk to the franchisee. Prior to the talk, however, we discussed with the franchise what we could do about the problem. We were surprised that he was willing to terminate the agreement and release the franchisee of the non-compete clause of the agreement, meaning that he would allow the franchisee to continue on with the business minus the franchiser’s trade name and trademarks.

We met with the franchisee and discussed the termination and release of the non-compete clause. He was more than willing to cancel the agreement, and shortly thereafter, the trademarks and trade name were removed, and he went on operating the business. After about a year, the franchiser called us up to ask whether he should welcomes back that same franchisee because all his branches had folded up. We said no, pointing out that it could set a precedent to other erring franchisees and that the basic principle of trust in a franchise relationship had been violated.

RESOLVING CONFLICTS

This phase presupposes that after the defiance stage, the franchiser and franchisee come up with a compromise on what to do with the relationship. This could involve renewal of the franchise term or the action to be taken when there are major defaults in the agreement.

Before a franchisee applies for renewal, I would recommend that he think a hundred times – just as he did before investing in the franchise the first time around. It’s important that the franchisee review what has happened during the term of the franchise. What did he feel then? What does he feel now? Would he want to spend another five years working with the franchiser and with the business concept? Was the franchise concept worth the investment of his time and resources? Can he give the same focus and commitment to the franchise business? Has he had a truly fulfilling personal relationship with the franchiser? If the answers are positive, then by all means, write the renewal letter. There should be no buts or ifs when deciding to continue with the relationship.

If in the end, the resolution calls for parting of ways, I would recommend that both try to part amicably. Bear in mind that earlier decisions to enter into the relationship was a voluntary act on both parties, and regardless of what has happened, something good must have resulted from the partnership.

12 Questions Franchise Applicants Often Ask

noreply@blogger.com (The Franchise Guru) — Wed, 09 Apr 2008 02:03:00 +0000

12 Questions Franchise Applicants Often Ask

By: Armando O. Bartolome

Q: Am I guaranteed success if I get a franchise?

A: No. A franchise gives the franchisee the opportunity to follow the business system that the franchiser has proved to be successful. Your success as a franchisee highly depends on the commitment you give the business. Beware of any franchiser or company that will guarantee your success.

Q: Can I just invest without necessarily liking the franchise?

A: There is no room for investors only in franchising. Franchisees are expected to like the franchise business. If you don’t like the noise of pre-school children, you cannot apply for a pre-school franchise. Your success depends on your commitment, but if you hate the concept, how can you commit yourself to it?

Q: Can I get partners to raise the money for the franchise?

A: Avoid partnerships, but if it becomes necessary, make sure you are the majority shareholder to speed up decision-making. There are endless cases of business partnerships turning sour – even those forged by family members.

Q: What does the franchise investment cover?

A: The franchise fee, branch construction, furniture and fixtures, signage, and other items. The fee normally covers the right to use the trademark, business system, all the pre-operating services including training, the opening team, dry runs, pre-opening, and marketing support. It is critical to check with the franchiser the extent of coverage of the franchise investment and franchise fee. Expect variations in the coverage.

Q: Can I take the franchise agreement and show it to my lawyer?

A: By all means! It is your right as an applicant to seek legal advice. Beware when the franchiser does not allow you to bring the agreement contract outside their office.

Q: Am I obliged to get all my supplies from the franchiser?

A: This varies from franchiser to franchiser. However, the franchiser could oblige you to get certain supplies from them – particularly those that carry trademarks and those crucial to product quality and standards.

Q: Do franchisers put mark-ups on supplies delivered to franchisees?

A: Yes. The mark-up covers their cost of locating, buying, and warehousing supplies.

Q: Why do I have to go through an application process?

A: The application process enables you and the franchiser to decide if you can do business together. Avoid any franchiser who can’t wait for you to sign the agreement.

Q: Can the franchiser tell me my profit margins and payback period?

A: The franchiser can only give you estimates. The figures will depend on how well you manage your branch.

Q: Who will look for and choose my site?

A: Yourself, should be able to convince yourself that there is a market for the business concept in the site you choose.

Q: Can the franchise be taken away from me?

A: Yes. You lose your franchise if you violate the agreement and ignore the operations manual. The franchise fee will not be refunded to you. However, unless the infractions are serious, there is normally a “curing process” where the franchiser gives you a chance to correct your mistakes.

Q: Will the franchiser help me manage my branch?

A: An important part of franchising is the franchiser’s commitment to help your business. The assumption is that the franchiser has had years of experience that he will want to share to make your franchise successful. However, you have to be open and take him seriously.

MAKING THE FRANCHISE ENGINE WORK by Erlinda S. Bartolome, CFE

noreply@blogger.com (The Franchise Guru) — Tue, 01 Apr 2008 10:19:00 +0000

HOW TO ACHIEVE THE BASIC AND MOST OBVIOUS GOAL OF A FRANCHISE: TO MAKE THE RELATIONSHIP BENEFICIAL TO BOTH THE FRANCHISER AND THE FRANCHISEE

Franchising can be likened to having a car after a trip to the car dealer. Once we are done with choosing a franchise or deciding to franchise our business, we would need to address this crucial question: in the same way that we need to get the car out of the dealer’s premises after paying for it, in the same way that we need to get the car out of the dealer’s premises after paying for it, how do we make the franchise work once it’s in our hands?

Much has been written on how to franchise a business or to choose one, but this particular phase of franchising is simply the tip of the iceberg, so speak. It is making the franchise work making it succeed and grow into a viable and vibrant business that’s really the heart of the matter, and I must say that this is a challenge that is bound to test the maturity of both the franchiser and the franchisee.

The basic and most obvious goal of a franchise is, of course, to make the relationship beneficial to both parties, but even then, we must recognize that our actions in going into a franchise relationship may not necessarily be motivated by the material benefits that we can derive from it.

It could be that the benefits we expect are primarily social – “I want to own or belong to a successful team.” “I can prove my business has excellent potential.”- or psychological- “I just would love to do what franchise concept calls for.” “by franchising, I can now expand my business.” – or perhaps even emotional - “I will need a support system to start my business.” “I won’t be alone but have other entrepreneurs managing similar branches.” Still, the bottom line w0ill ultimately be the financial benefits that both parties can derive from the franchise relationship.

Indeed, franchising may be distinct from other means of expanding a business, but the expectation of a good financial return will always be at the root of it.

As in driving a good racing car to peak speeds of up to 220 kilometers per hour, you can make the franchise engine work at peak efficiency only if all of its components are working smoothly and harmoniously. Franchises are like vested cars in races –they have to be very well maintained and their parts must always be kept in tip – top condition.

So, to pursue the analogy further, if your franchises were a car, how would you make it work so you can derive the maximum benefit from it and harness its full potential?

The Operations Manual

The first thing to do is to make the franchise Operations Manual work for you.

Oops! Don’t make the mistake of keeping that manual in a secure and safe place or, even worse, keeping it under lock and key. The Operations Manual is meant to be understood and regularly referred to as you operate your franchise. You must read and fully understand the operating manual of the car. Why? It’s because that car manual identifies all the parts of the car, explains how they function, and shows the user how to maintain them. In the same token, the Franchise Operation Manual contains all the information you need to make the franchise functional, whether you are the franchiser or the franchisee. Because it prescribes in detail the standards of the business model, the Franchise Operations Manual is what will enable the franchise system to achieve uniformity and consistency in its implementation.

The franchisee should use the Operations Manual as the primary guide for running his or a static and inflexible set of rules. The franchiser should regularly update and improve it to enable the franchise system to keep up with technology. It won’t be an understatement to say that a franchise system that doesn’t regularly update its Operations Manual is headed towards disaster sometime soon.

The Communication Fuel

Tons of articles have been written about the importance of communication not only in franchising but also in general. To go back to the car analogy, what will keep the car running to our desired destination is fuel. In a franchise system, the equivalent of the car’s fuel is communication. It is communication that will enable the major participants in the franchise system – the franchiser and the franchise – to achieve unity of vision and objectives and to agree on how to achieve them. When there is basic acceptance of the importance of often dialogue between franchiser and franchisee, the franchise system is greatly enriched and grows much faster.

When the unity of minds between franchiser and franchisee is the goal, the communication dynamics in the franchise system be comes more challenging and exciting. On one hand, no longer will you have a franchiser who thinks his or her franchisees are just there to collect fees and not to provide support. In such a situation, even if the initial atmosphere may be stiff and uncomfortable, at least the franchiser and franchisee can now sit down in a spirit of openness and dialogue.

The franchiser often has to make the first move by going back to the basics, particularly on why there is a franchise in the first place and why there is a franchise in the first place and why he or she decided to franchise the business.

Then the franchisee can begin to verbalize his or her reasons for choosing the particular franchise among all his other choices. The dialogue can continue and move on to the identification of the present concerns of both the franchiser and the franchisee. They need to view these present concerns from the perspective of initial goals and objectives, and when they do they will find that their goals are not contradictory but actually the same, thus leading to a mutual desire to continue with their franchise relationship. Agreements can then be sealed with a handshake and both parties can leave the room in high spirits and on a positive note on how to further grow the franchise system together.

Preserving the Brand or Trademark

In the past, brands and trademarks were not given an actual value; today, however, the value of companies goes far beyond their actual physical assets due to the value of their brands and trademarks. The likes of such giant global brands as Colgate, Coca-Cola, and McDonald’s, for instance, are of such immense actual value. For this reason, preserving the brand in a franchise system benefits not only the franchise but its franchisees as well.

Some franchisees often frown at their franchisers’ strict rules in the use of the trademark; for instance, in the printing of promotional materials that calls for written approval of the franchiser in its use. This is actually an unjustified reaction. The preservation of the integrity of the trademark should be a paramount concern not only to the franchiser but to the franchisee as well, fro it is the trademark that the customers will remember about the franchised product or service, and it is only when a customer gets a “wow” experience from using that product or service – translated to a highly favorable perception of the brand – that a franchise system can expect to add that customer to its coveted loyal and regular customer base.

So important is the franchise trademark or brand that some franchisers even take pains in preparing a corporate identity standards manual to give precise specification for its use down to how a brand should be rendered in pantone colors. It is therefore extremely important for all parties in the franchise system to work closely together in communicating a consistent trademark or brand to the market and to its various other publics.

Constant Maintenance

The productive life of a car greatly depends on the constant care and maintenance it receives, and some classic cars are even known to outlive the life of its owners. What lesson can we derive from this analogy? It is that the franchise system’s engine could be expected to continue producing energy for growth only when the franchiser and franchisee are one in making sure the system undergoes constant improvement. Indeed, while improvements in the franchise operation manual are a must, the entire systems itself also need to undergo upgrading periodically.

The big questions to be asked are these: Is the franchise model still relevant to the changing market? Can the franchise application process be improved to screen applicants even better? When was the last time franchisers and franchisees sat down together to review the franchise agreement? Do franchisees regularly analyze their local market and their position? Is there a sustained effort to promote and market the brand? Are franchisees consistent in doing local store marketing?

Are changes needed in the format of meetings and conferences so that both franchisers and franchisees actually look forward to attending them? Does the franchise system regularly monitor its present market share versus its target?

Is there a corporate planning conference participated in by both franchiser and franchisees? Are initial franchise fees and royalties reviewed regularly? Are there comparative studies conducted to check the financial performance of both the franchiser and the franchisees?

These are some of the questions that need be answered if the franchise system is to outlive the life of its founder, like what McDonald’s has achieved by maintaining very strong and viable franchise system despite the demise of Ray Kroc.

Making the franchise engine work will always be a challenge to both the franchiser and franchisee, but when both parties keep their focus on the mutuality of benefits, the task need not be an adversarial and unpleasant one.

LOST IN THE CROWD by Erlinda Bartolome, CFE

noreply@blogger.com (The Franchise Guru) — Tue, 01 Apr 2008 10:11:00 +0000

“Investing in a large franchise system has its drawbacks even if there is almost an assurance of drawing in customers-here are a few things you know”.

The first question I ask those who have invested in a large franchise system is this: “Why did you invest in this system in the first place?” most of their answers center on brand equity, which of course is an innate advantage of large franchise systems. The brand well established, making it relatively easy to draw in customers and keep the cash registers ringing. The brand is well known in the market and already has a following. It has the resources for tri-media advertising and promotional placements that guarantee its being seen by a large number of potential customers.

Despite this advantage, however, some franchisees say that they don’t feel its effect on their bottom line. For instance, they say that while system-wide discounts offered by large franchisers draw in the crowds, they carry such a high cost of sales. Although all franchised branches have to offer the same system-wide discount, they complain, the franchisers don’t always offer subsidies for costs. Yes, the brand is benefited and the customers are brought into the stores, but the franchisees ask: “What about our profitability?” Indeed, the efforts of large franchise systems to retain market leadership sometimes fail to consider their adverse effect on individual franchisees.

Franchisees understandably expect systematized support and assistance from their franchisers and large systems invariably have big organizations manned by seasoned personnel to provide that support. But in one meeting with franchisees, I was taken aback when one of them commented: “Yes, my franchiser has a large franchise system. We have more than 100 branches in all, but the fact is that I’m only store number so and so.” And when I probed for the reasons for such a telling comment, this is what I found out: when requests are made by the franchisee, they pass through so many layers in the organization before they are acted upon. This franchisee recalled that at one point, she even had to wait for several months just to get the cost of sales of a new product.

For sure, the support system of large franchisers is definitely an edge, but I believe that the needs of individual franchisees should not be overlooked when the operations of a franchiser grows to a much larger scale. Indeed, at one point or another in their business growth cycle, large franchisers go through this stage of neglecting the individual franchisee by default. Even such as successful large-scale franchiser as McDonald’s went through this stage, but its founder, Ray Kroc, dealt with the situation immediately, greatly improving McDonald’s support system to take care of the needs of even its smallest single-store franchisee.

At the fast-tract MBA on franchise management for the Certified Franchise Executive Program in Las Vegas that I attended in October 2003, one speaker pointed out that the first set of franchisees in a franchise system normally epitomizes the personality of the founding franchiser. And why is this so? The speaker explained that this is because during the initial stages of the development of a franchise system, the franchiser is very much hands on in the selection process and even in the support and assistance provided to franchisees. As the franchise system grows, however, the franchise is seen less and less by the franchisee. The few occasions when they would meet, in fact, will be during yearly or quarterly conference; that’s all.

Indeed, one of the things that a franchisee would miss in a large franchise system is the energizing presence of the franchiser that the first set of franchisees usually enjoys and relishes. It is therefore not surprising that senior franchisees normally imbibe the traits of the founding franchisor and his or her love and of the franchise. This is the advantage enjoyed by early franchisees when the franchise system is still a young, growing system. Even if there are already set criteria for accepting a franchise applicant, middle managers often have a different way of processing and providing service to franchisees than the founding franchiser.

For their long-term success, large franchise systems have to make their rules for the franchise pretty well established and uniformly implemented. This is actually an advantage since these rules have already been proven to work, and have the track records of so many successful franchisees to back them up. However, large, well-established franchise system inevitably take a longer time to review, assess, and test feedback and recommendations from its big and growing number of franchisees. On the other hand, a young, growing franchise system is generally better able to handle those feedback and recommendations. This, of course, is to be expected. In growing systems, after all, the franchiser is comparatively within easier reach of most franchisees, thus speeding up the review, validation, and decision-making process.

Now, in the case of large franchise systems, the number of branches is usually a strong leverage for the franchiser in getting bigger discounts from its suppliers for volume purchases. It is therefore normal to be expected that the franchise would be able to give lower transfer prices to the franchisees or to give them subsidies for promotions and the launching of new products. In practice, however, some franchise systems don’t share these benefits with their franchisees, thus depriving them of what should rightfully be a great built-in advantage of being a part of a large franchise system.

Buying into large franchise systems will definitely have its share of benefits and drawbacks, and pretty much, neither large nor growing franchise systems will have a monopoly of benefits. But whether a franchise applicant is thinking of investing in a large franchise system or in a young, growing one, he or she must make sure or partnering only with a responsible, conscientious franchiser. That franchiser should be one that not only has a proven business model for the franchise but one whose focus is on the mutual benefits of the relationship and who can be expected to continuously look after the success of its franchisees.

EXPANDING VIA RESPONSIBLE FRANCHISING by Erlinda Bartolome, CFE

noreply@blogger.com (The Franchise Guru) — Tue, 01 Apr 2008 10:08:00 +0000

The franchise must be ready to support the franchisee after signing a deal with him

Many franchisers regard expansion through franchising as a good business move because it involves adding branches without investing money: the franchisees carry the burden of putting up the money for the branches themselves. The common wisdom is that the more the branches, the stronger the brand equity of the bigger sales volumes. However, the franchiser must franchise his business responsibly by choosing the right partners.

CHOOSING AND SUPPORTING THE FRANCHISEE

Although a contract binds the franchising partners, franchising is still a personal relationship. The franchiser and franchisee must be comfortable with each other and understand their obligations under their partnership. The franchiser must get to know the franchisee, explain the business concept to him, and give him enough time to read and understand the franchise agreement before deciding. It would be absurd, for example, to tap someone for a laundry franchise if the potential franchisee does not believe in sending his own clothes to the laundry or does not believe in the brand.

The franchiser must be ready to support the franchisee after signing a deal with him. He must provide his partner all the help he needs as stipulated in the contract including site analysis, staff training, pre-opening assistance, financial projections, quality control, marketing, and research and development. A franchiser who neglects his franchisees invites discontent, which could lead to the weakening of his business.

COMMUNICATING EFFECTIVELY

The responsible franchiser is one who is always in touch with his franchisees. One franchise I know makes sure all his franchisees open their e-mail before going to bed, but nothing beats face-to-face meetings that could be done quarterly; some franchisers even arrange bi-yearly work-and-play conferences aside from the usual meetings that take up business strategies.

The responsible franchiser must communicate well and make sure there is a feeling of togetherness and contentment in the partnership. The growth of his business depends on his leadership and the professionalism he brings into his brand.

TERRITORIAL and MASTER FRANCHISING by Erlinda S. Bartolome, CFE

noreply@blogger.com (The Franchise Guru) — Tue, 01 Apr 2008 09:55:00 +0000

“Here’s an arrangement where the franchiser designates a territory, not just an outlet, for which a franchisee can use the trademark and the business system.”

We are all familiar with single-unit franchising, which is the route normally taken by franchises to franchise their business. A single-unit franchise agreement is drawn up for a single location, such that the franchisee can use the franchiser’s trademark and business system only in the location specified in the franchise agreement. If the franchisee wishes to open a second or more locations, separate single-unit franchise agreements for them will have to be drawn up.

Territorial franchising is different from single-unit franchising. As the term indicates, a territorial franchise is not for just a single location but for a particular territory. Another term for territorial franchising that’s used internationally is “master franchising,” is more commonly used in the Philippines. Under this arrangement, the franchiser specifies the territory for which the particular franchisee can use the trademark and the business system. A territory, of course, can be a province, a city, or a group of islands like Visayas or Mindanao.

WHAT’S REQUIRED OF THE FRANCHISER

Processing for territorial franchises normally takes longer than that for a unit franchise. In this case, the franchiser will not only consider the capability of the territorial franchise applicant to manage one branch but also his or her capability to manage multiple branches. And from the usual determination of management capability, the franchiser will also need to look at the competence of the prospective territorial franchisee to build a middle management team that will run the franchised branches within the territory.

The franchiser then has to put up additional monitoring and control systems for the franchised branches within a territorial franchise, since reaching these territories could take hours and the branches would not be within the usual daily route of the franchiser’s service officers. This could mean having to put up state-of-the-art communications technology to effectively monitor the operations of those branches.

For instance, one franchiser had to install remote cameras to check on how customer service is provided and on how the branch is maintained and manned daily. Another franchiser found it necessary to have the branches in a particular franchise territory hooked by POS (point-of-sale system) to its headquarters. This was to enable it to constantly monitor product movement and provide proper inventory forecasting assistance to those branches.

Due to the distance factor, field visits by the franchiser to the branches of a territorial franchise cannot be done as frequently as those to single-unit franchises. For this reason, a territorial franchisee needs to be given additional training on how to effectively provide operational assistance to its various branches.

WHAT’S REQUIRED OF THE FRANCHISEE

Based on the intrinsic differences between single-unit and territorial franchises, it is obvious that territorial franchising will require much more in dedicated resources: people, finances, and, most important, the franchisee’s time.

Usually, the franchiser and the franchisee would agree on a development schedule may result in the termination of the territorial franchise agreement.

Knowledge of the local market and the franchise network are, of course, also requirements even for unit franchisees, but the extent and scope of this market and network knowledge is much greater in the case of an entire territorial franchise. Indeed, the territorial franchisee will not only have to study the market characteristics and potential of the entire territory for his territorial franchise application but also those for every branch that he or she intends to put up within the franchised territory. In short, the franchisee has to do the market study on two levels, not just on one.

Master franchising is generally similar to territorial franchising, but the scope of the former is much wider. While territorial franchising covers only a specific territory in a particular country, master franchising usually involves or covers an entire country.

MASTER FRANCHISING BY HOMEGROWN FRANCHISERS

We will now dwell on master franchising from the point of view of a homegrown franchiser expanding internationally through the master franchising route.

The highest goal that a homegrown franchiser can aspire for is, of course, to go global. This is because going global can add such great and immeasurable value to the brand as well as prestige to the franchiser. More than that, being able to go global is clear proof that Filipino companies can indeed compete in the global community of franchisers.

Master franchising is, in fact, the route that has been taken by most of the successful international franchisers, with which the Philippines has been awash for so many years now. It would therefore be advisable for our homegrown franchisers to learn from these successful international franchisers and use the very same mechanisms they are using to expand internationally.

HOW MASTER FRANCHISING CAN BE DONE

The very first question that needs to be answered by a homegrown company aiming to go into international master franchising is this: How do we go about doing it?

This may sound facetious, but the very first step required of a company wanting to go into international franchising is to decide that it really wants to do so. Due to the complexities involved in master franchising, it will not do for companies to be half-hearted in pursuing it.

THE NEED FOR FULL COMMITMENT

The next step is to prepare to plan for international expansion, one that specifically identifies your goal, how you want to achieve that goal, your action plan, the resources and people required to implement the plan, the responsibilities of the people who will be involved in the undertaking, and the timeline for achieving your goal.

A very important step that needs to be undertaken is to clearly identify the core product or service you would like to franchise internationally, and to clearly state the value proposition that you would like to bring to the international market. This value proposition should be invariable in whatever country you are going with your international franchise, for it is the very “soul” of your franchise model.

In master franchising, moreover, so many ramifications need to be considered from country to country, since each of them will have a different culture and will be a different type of market. Very early in your planning stage, therefore, you need to determine what cannot be changed and what can be adapted to the market in each of your target countries.

Next, the franchiser will have to determine the most important aspects of pre-operating and continuing support and assistant that need to be provided to the master franchisees in a particular target country. On this basis, the franchiser can then establish the initial master franchise fees, the franchise fees for each branch, and the marketing support fees. Even if the franchiser has had experience in determining these fees locally, doing them for the international market will generally be more complicated as there are so many other inputs and costs to consider, like travel to the target country.

A critical requirement for master franchising, of course, is registering your trademark with the country you are targeting. This is usually not a very complicated thing to do because the laws on intellectual property in many companies are international in character, with practically the same or similar procedures for registering a trademark. The important thing, however, is not to overlook the registration of your trademark in each of the countries where you intend to open a master franchise.

The international master franchising process will normally be a much longer and laborious process than that for a purely local franchise, but successfully establishing your franchise in one or more countries other than your own definitely will be well worth the effort.

What You Should Know About Your Franchiser

noreply@blogger.com (The Franchise Guru) — Wed, 20 Feb 2008 04:32:00 +0000

The meetings between franchise and prospective franchisee are set up for each to get to know as much about the other. For the franchiser, evaluating the prospect in key points such as business background, work attitude, available resources and the like are of paramount importance. For the franchisee, often inexperienced in such meetings, the following is a guide to help you make the most of your franchise meetings.

It is a must that you be ready with questions you would like to ask and points you would like to clarify. Here’s a quick rundown of what you, as an aspiring franchisee, should know about the company before signing on the dotted line:

The history of the franchise and its officers and directors (Include what business they previously engaged in, their educational background, other business interests, and how long they have been with the company)
A complete description of the business to be franchised (History, Mission Vision, Business Plan, Store Operations, etc).
All costs and fees that you will be subject to under the agreement (Franchise fees, Royalty fees, Marketing/Advertising fees, Construction fees, Total Package cost).
All obligations of either party to the other during the term of the agreement and thereafter (Very important to have in black and white so there will be no confusion as to what each party expects from the other).
Any relevant litigation history of the company or its officers.
Any business failures, ownership transfers, franchise agreement terminations of other potentially adverse information relating to the success rate of the existing units in the system.
Audited financial statements for the previous three years for the franchise company.
A list of the existing franchisees (including how long they have been franchising, how many stores they own, and contact information).
A complete copy of the actual franchise agreement.

How To Franchise Your Business

noreply@blogger.com (The Franchise Guru) — Wed, 20 Feb 2008 03:58:00 +0000

HOW TO FRANCHISE YOUR BUSINESS

By Armando O. Bartolome

There is no doubt it. Franchising is one of the fastest ways to grow a business. The recent spate of franchises in the country has seen branches of many businesses double, or even triple, in a just couple of years due to their decision to open up the business to franchising.

For one, franchising allows you to build a store you will earn from without using much of your resources, both managerial and financial. The cost of setting up a store, as well as that of running it, will fall on the franchisee’s shoulder. As a franchisor, however, it is your responsibility to supply your franchisees with a working business model and the training and assistance needed to get the business going.

You’re convinced that the franchising system is a good way to expand. What next?

1. Evaluate. A crucial first step in the franchising process is to gauge if your business has franchising potential. Factors like the track record of your existing unit, your actual operations, and management capability to train and transfer concepts are key. If your product easy to replicate? Are your systems easy to absorb?

2. Study your options. Is franchising the right vehicle to grow your business? How about co-branding or distributorship?

Once you are sure that you’re business is ready to undergo franchising, you are ready for the next steps:

1. Consult a franchise specialist. While research and business savvy may give you a general idea of how to handle to franchising of your business, it would be safest and smartest for you to approach a franchise specialist like GMB Franchise Developers, who have the experience and the expertise in these types of business expansions. In fact, aside from helping you evaluate your business viability as a franchise, an expert may even help you with the entire process from creating the operations manual, to the franchise agreement, to the franchising package.

2. Join a franchise group. There is no better way to learn about franchising that from the experiences of those who have already undergone the process. Members of the AFFI will be glad to exchange notes with you on how best to start and run franchise operations.

3. set up a test franchise unit. Coming up with a model/small-scale franchise unit will help you anticipate possible problems you may encounter in operating a franchise. Store operations, delivery, inventory, training etc. should be dealt with hands on to identify possible rough spots.

READY, SET, RECRUIT!

Having gone through the entire process of getting your business ready for franchise, it is now time to get people interested in owning a piece of your enterprise. The best ways to market franchise opportunities are through your company’s website, your franchise association’s website, print advertising in industry publications, and by having a special section on franchising in all your marketing collaterals.

Have a hotline ready and dedicated solely to answering franchise inquiries. Make sure the person answering the phone is competent and has a complete grasp of your franchise offering, as this will be your initial encounter with the prospective franchisee.

A good way to weed out the serious investors from nuisance callers is to require a letter of intent before giving out too many details about your franchise package. Once they have made their intention known formally, that is when meetings can be set up to further discuss the details of the franchising package.

Getting Into Cart and Kiosk Business

noreply@blogger.com (The Franchise Guru) — Thu, 14 Feb 2008 01:45:00 +0000

Getting Into Cart and Kiosk Business

By Armando O. Bartolome

A visit to the malls is not complete without seeing the carts and kiosks. Practically they are spread in every floor and catering to various businesses. They occupy the middle aisle almost serving as an island. The design of the carts and kiosks has become so creative that almost everything is compact. Many entrepreneurs have seen the benefits of resorting into this. For one, the rental is not as exorbitant as the big store spaces or more commonly referred as in line stores. If and when there is a need to relocate, the structure is easy to disassemble. Speaking of manpower, most of these would have a minimum number of 1 to 3 people.

However there are limitations specially when it comes to food. Most mall administrators refuse to allow any tenant to have cooking done specially using the liquefied petroleum gas (lpg). Storage facilities are limited and supplies may have to be on a daily transfer. Malls likewise have a standard height and width including the particular signage. This is to ensure that the kiosks and carts do not block each other. There is a major mall where part of the policy is not to allow employees of any kiosk and cart tenant to sit down. The storage box located behind the cart is according to the specific measurement and the top cover shaped like an apex to primarily discourage employees from sitting.

Meantime it could be recalled that a major mall was restricted by a local government unit to remove carts and kiosks along the pathway and confined to extra spaces. Accordingly the pathway should serve as a greater convenience to the customers strolling.

On the question of getting into business via a cart or kiosk, an entrepreneur would be smart to study. In most of the clients who have consulted me, I often start off with the business concept. Please note that carts or kiosks are not necessarily positioned inside the malls. There are also carts that are for outside use and some are even mobile. One will never forget seeing an ice cream cart on wheels with a sound that will make one remember. Or how about that popular hamburger joint with caricatured characters of dwarfs at work and serving aside from burgers its famous roast beef sandwich?

Thus the design must project what the business is all about. Making consumers recall or even hum the tune of the ice cream cart already makes the concept a success. The other factor is the type of products and services to be offered in the cart and kiosk. With a space limitation, there must ease and convenience of being able to deliver the product with such high quality.

A client who is into popcorn business came and approached me to say that he just couldn’t penetrate into the targeted malls. Every time he files an application, he was always turned down since his preparation involved using open flame. Thinking outside the box, he was advised to look for an outside place where he will be allowed to do cooking. From the site, freshly cooked popcorns packed are then to be delivered to the surrounding malls. Bingo! With such a scheme, his brand is now everywhere and even in gasoline stations.

The point here is for an entrepreneur never to say NO if the business is faced with restrictions. It is a matter of reflecting and thinking of the numerous possibilities to reach the goal.

There is another alternative in getting into a cart and kiosk business. This is none other than via franchising. The growth for food businesses has been on an increasing rate from a handful in the early 70’s to about 300 + franchisors. The concept runs from dimsum, rice topping, pao, ice cream, peanuts, etc. There are also non-food carts and kiosks like selling beauty products, perfume, key duplication, picture frames, etc.

What are the advantages of getting into a franchise? First and foremost is saving one from the trial and error. The franchisor is also an entrepreneur who before franchising his business had to experience numerous experiments. Such may be costly aside from the hit and miss of getting the right product and business concept combination. Another factor is the brand equity. A franchise brand is easily recalled due to the numerous branches it has. A consumer will patronize a brand as compared to an individual business. The primary reason is there is consistency in the product and service. In this connection, franchise always provides consistent support. This may be in the form of product research and development, training of personnel and franchisee as well as promotions.

The investment in a franchise carts and kiosk is affordable. The range is between Php. 150,000 to about 500,000. This includes the equipment, build out cost and franchise fee. Term of a typical franchise is about 5 years and renewable. To provide continuous support, there are service fees like a percentage of gross sales. The average nowadays is 5%, which is paid to the franchisor. As for the supplies, there are franchisors where certain items known as proprietary are bought from the franchisor.

On the pay back, which is a return of the investment, franchisees that invested on cart and kiosk average on a 1 ½ to 2 years. This means that out of 5 years, the franchisee gets his investment within that period and the rest is profit. However, one advice is for the person not to jump and secure a franchise business.

There are proper ways to get and invest on a franchise. Here are the following steps:

What is the reason for getting a franchise business?
Where is the money to invest be coming from?
How much time will the person devote in the day-to-day operation?
Has there been a search for the franchise business?
Of the various businesses, which has a strong appeal?
Has the person tried and tested the product and service?
Has the person compared and checked if the product and service is consistent with the other branches?
Where will the location of the chosen franchise business be situated?
Is the person a residing near or within the community of the location?
Visit the franchisor’s head office and inquire on the franchise offering?
Get all the necessary information including the procedures in applying for a franchise.
Discuss with family about the franchise. Seek the opinion of the members with an open mind.
If getting into business shall involve having partners, do analyze and have written agreement.
Meet and talk with existing franchisees of the franchise business.
Study and consult a legal counsel before signing the franchise agreement.
Make a financial and market study of the location.
Personally meet the franchisor and partners aside from dealing with the employees.
Prepare questions to ask from the franchisor and franchisees.
Who will be involved in the training and preparation?
Watch out for franchisors that make verbal promises and not found written in the franchise agreement.

Getting the right franchise business spells having a healthy business relationship between the franchisor and franchisee. The person is highly advised to watch out for scam franchise business. They do make claims yet on empty promises.

Lastly allow me to share what a wise man once said that when reaching a destination, it is best to be slow rather than stop or be quick.

Franchise Seminars

noreply@blogger.com (The Franchise Guru) — Tue, 05 Feb 2008 11:21:00 +0000

GETTING THE MOST OUT OF FRANCHISE SEMINARS

One important tool for entrepreneurs and those considering starting a business is attending seminars.

By Armando O. Bartolome

Having given over 200 seminars in various parts of the country, Asian Regions Middle East and North America in the past 20 years, I have observed that people who attend seminars – particularly franchise seminars – need to learn how to get the most out of them. So how do you do it? Note the following:

Check on the topics before signing up. Organizers often recommend which seminars are suitable for the particular needs of potential participants. If you feel the topics are vague, contact the organizers to clarify.

Attend a seminar with an open mind. A seminar is meant to impart and share knowledge. However, you won’t learn much from it if you are not ready to process the ideas being shared; hence you would do well to avoid distractions, to focus and to take down notes.

Don’t be shy about asking questions. Seminars are fruitful in and by themselves, but they impart even more to participants when lifted by probing questions. If you feel too shy about asking questions, at least write them down and make sure they reach the intended speakers or resource people.

Get the handouts – but read them later. Every time I conduct a seminar, I advise the organizers to refrain from giving the handouts until they are needed or the session has ended. You see, participants tend to read page after page rather than listen to the speaker – and often miss out on some important details that the speaker has discussed. Remember that handouts are supplemental reading materials that reinforce what the speaker has shared. But they must be read later.

Take notes properly. The technique is to jot down key words that will remind you of the ideas being shared. But taking down notes is less important that listening well and understanding what the speaker is saying.

Mind your mobile phone! If you can’t have someone mind your mobile phone while attending seminar, putting it on silent mode is the least you can do to avoid disturbing the other participants. Answer text messages later. If you are expecting an important call and your phone rings, stand up and leave the room to answer it. Most seminars remind participants to either switch off their phones or put them on silent mode before starting.

Socialize. One cardinal rule when attending seminars is to get to know the other participants. You join a seminar to gain knowledge and to establish a business network. Also, you never know when you’ll meet a potential customer, supplier or business partner when attending one. Participants rarely talk with each other before the start of any of my seminars, so I urge them to get to know at least two fellow joiners minutes before the meeting starts. This never fails to liven things up!

Take stock of what you’ve learned. After the seminar, reflect on the ideas that were taken up, debated, discussed and explained. Then go over your notes and handouts to refresh yourself. You will know if you’ve gained something from the seminar if, based on what you’ve learned, you are ready to draft a business plan or know what kind of business to start.

Breathing New Life To Your Business

noreply@blogger.com (The Franchise Guru) — Fri, 25 Jan 2008 09:28:00 +0000

Breathing New Life to Your Business

By Armando O. Bartolome

You are attending to your business when you noticed that you have been getting inquiries via e-mail or letters from people asking if you are offering a franchise of your business. Upon verification with your staff, you find out there have been people who dropped by the office asking the same. You begin to wonder and ask yourself why you are receiving such inquiries. This scenario is not uncommon nowadays. Oftentimes inquiries like these begin to increase that the businessman or the staff may just give a flat “No” for an answer. Such an answer, however, may spell a loss of opportunity.

So why do you get these inquiries? Simply put, people see a potential in your business and would like to partake in it. This happens to many growing business. In fact, may companies who never thought success in franchising was possible are realizing the business advantages that come with it.

For readers who own businesses, take heed of the following advice for it’s not too late to explore and make franchising work for you.

1. Business Concept

If one takes a look at the central business districts in Makati or Ortigas in the Philippines, one easily notices the proliferation of coffee shops. They are everywhere, and always filled with patrons no matter what time of the day even if they are spitting distance from each other.

Better check out the convenience stores open 24/7. Amazing one need not walk a great distance just to pick up a few grocery items. How about Laundromats? They too can be found in every area to offer dry cleaning facilities. Pre-schools? Hair Salons? Spas? Business Centers? Internet Café? Courier Services? Car Repair? TV Repair?

A lot of businesses offer similar services but notice how each company would differ from the way they project their business. These companies have taken time in studying their business concept and are now successful in establishing numerous branches via franchising. Perhaps it’s about time you as an entrepreneur need to pause, take a piece of paper and pen and review your concept. In analyzing your concept, compare it from the time you first thought of it to the present. Is there any uniqueness to it that will draw your market? Think about why would people patronize your business.

2. Replication

A strong suit of a good business is the ability to expand and put up branches. The latter is an exact copy of the original store. Ever seen a McDonald’s outlet? Upon entering and facing the counter, look at the far left and you will see the French fries maker, at the center will be the pass thru window where food products are displayed, far right will be the soft serve ice cream.

Most of the 32,000 outlets worldwide do carry such layout. In fact even in their façade there will always be the tall pylon sign with the big letter “M” or better known as the Golden Arches. Replication, however, is not just confined in the physical design of the business. It also covers how the services and products are brought to the customers. Many franchisees may have put up a branch or two. Spreading beyond five units may be cumbersome for the owner to manage, as he or she worries if his/her supervisors or managers are doing their jobs or merely waiting for the favorite dates in the calendar: the 15th and 30th. In franchising, it’s actually the franchise who manages the branch. Having invested money for the franchise, they cannot afford to be clock-watchers—they have to immerse themselves with the business, hands-on. Find out if your business can be easily taught and managed.

3. Profitability

For a business to succeed, it needs to be profitable. There are times when a business may not be profitable simply because there are weak spots which need to be plugged. Products, for example, have to be reviewed for its profit margin and contribution to the total sales. One advantage of franchising is seeing a business have a healthy payback. In general, out of five years in a typical franchise set-up, the investment should have been realized within 12 months to a maximum of 24 months. It is a must for the business owner to do pencil pushing and see how profitable his business is. Remember both owner and franchisees are to make money, as opposed to unilateral profits.

Franchising can only succeed if you have fortified the foundation of your business. It is pathetic to see how some business owners’ jump-start the franchise process without even looking at their present status. They immediately grant franchise to parties only to discover there are too many things, which need to be improved. It shatters the brand and dream of the entrepreneur, as well the hard earned money of the poor franchisee wanting to have a business too.

Done right, your business will expand to various places and even beyond the Philippine shores. You will have franchisees who will be proud of having your business. I salute those companies who began micro and have turned into global entrepreneurs.

Franchising as an option indeed breaths a new life to a business.

Owning a Business The Safe Way: Franchising vs. Star-Ups

noreply@blogger.com (The Franchise Guru) — Tue, 22 Jan 2008 00:35:00 +0000

Owning a business the safe way: Franchising vs. Start-ups

by Chit U. Juan

The dream of putting up one’s own business has become more pervasive in recent years. And why not? Considering the hard economic times when monthly paychecks are unbelievably stretched, and retrenchment looms just around the corner, the idea of having one’s own enterprise to rely on has become more appealing, even one of the best options there is.

Beyond the dream however, is the reality that most people do not know how to setp up a business, much less where to begin. What business will I get into? How much capital will I need? How do I attract customers? These are questions that are difficult to answer especially for a first-time entrepreneur. In these times of cutthroat business competition, the uninitiated businessman often loses before he even starts. One solutions to all these? FRANCHISING.

In franchising, the Franchisor, or owner of the business, offers his tried and tested method of doing business, often called “business format or model” for others to use in exchange for franchise fees and royalties. The Franchisee, or the one borrowing the business model, pays these fees in exchange for the right to use the Franchisor’s trademark, operations manuals and the privilege of being trained by the Franchisor himself.

A Franchised business has a better chance at success than an independent business because the Franchisee can learn from the years of experience of the Franchisor. Since there is less trial and error, it is almost like having no learning curve.

Another unique feature of a Franchised business is its support system. Franchisees can have access to Franchisor services such as administrative assistance, bookkeeping, audit, quality assurance inspections, marketing support and even legal counsel. Through some may be charged separately by Franchisor, the extra services are nevertheless available and only at minimal fees.

A Franchised business grows as the brand grows. Since a big part of having chosen the business is its name or trademark, the Franchisee has a better chance of growing together with the brand.

A Franchised business has benchmarks or Standard Operational Expectations (SOE) by which franchisers can measure the performance. This means they can share and compare their experiences with business operators with similar problems or situations.

Especially for those going into business for the first time, a franchise is most recommended for testing the business waters, to check if entrepreneurship is really for them. Some realize that it is not for them only after having invested a lot of time and money. By then it could be too late.

Here’s a checklist for those deciding on whether to start on their own or to get a franchise:

1. Can I follow rules? Or do I want to make my own rules?

If you find it difficult following rules and regulations, be on your own.

2. Can I just assign a manager or do I have to be there myself?

A real entrepreneur is always “hands on”. You should not be afraid to get your hands dirty.

3. What if I change my mind after six months? What if my family asks more time from me?

Do not franchise if you have not asked the family’s consent. Most franchisors want you over the long haul, at least three years, and being fickle will complicate matters.

4. Do I really like the product or I just want it because it is popular?

Do not go into a business you do not enjoy. If you get a franchise, get it because you believe in the product

5. Do you have a really good asset or skill you can capitalize on?

If you do not want to depend only on your skills, get a franchise.

To those who decide to go the franchising route, congratulations! You are about to embark on a safe and steady journey to entrepreneurship. However, choose your franchise business wisely.

Be wary of “fake” franchisors who are after fees but do not have even one successful store to show for their offer. Legitimate franchisors, especially those who have been around for two years or more, can show you their operations and their performance. Check their track record. Visit their stores. Experience their service or prpduct. Talk to existing franchisees. Observe their employees. If you like what you see and believe in the brand, then pursue it.

The Pros and Cons of a Large Franchise System

noreply@blogger.com (The Franchise Guru) — Sun, 20 Jan 2008 09:41:00 +0000

THE PROS AND CONS OF A LARGE FRANCHISE SYSTEM

BY ERLINDA SABIO BARTOLOME, CFE

The first question I ask those who have invested in a large franchise system is this: “Why did you invest in this system in the first place?” Most of their answers center on brand equity, which of course is an innate advantage of large franchise systems. The brand is well established, making it relatively easy to draw in customers and keep the cash registers ringing. The brand is well known in the market and already has a following. It has the resources for tri-media advertising and promotional placements that guarantee its being seen by a large number of potential customers.

Despite this advantage, however, some franchisees say that they don’t feel its effect on their bottom line. For instance, they say that while system-wide discount offered by large franchisers draw in the crowd, they carry such a high cost of sales. Although all franchised branches have to offer the same system-wide discount, they complain, the franchisers don’t always offer subsidies for costs. Yes, the brand is benefited and the customers are brought into the stores, but the franchisees ask: “What about our profitability?” Indeed, the efforts of large franchise systems to retain market leadership sometimes fail to consider their adverse effect on individual franchisees.

Franchisees understandably expect systematized support and assistance from their franchisers and large systems invariably have big organizations manned by seasoned personnel to provide that support. But in one meeting with franchisees, I was taken aback when one of them commented: “Yes, my franchiser has a large franchise system. We are more than 100 branches in all, but the fact is that I’m only store number so and so.” And when I probed for the reasons for such a telling comment, this is what I found out: When requests are made by the franchisee, they pass through so many layers in the organization before they are acted upon. This franchisee recalled that at one point, she even had to wait for several months just to get the cost of sales of a new product.

For sure, the support system of large franchisers is definitely an edge, but I believe that the needs of individual franchisees should not be overlooked when the operations of a franchiser grows to a much larger scale. Indeed, at one point or another in their business growth cycle, large franchisers go through this stage of neglecting the individual franchisee by default. Even such a successful large-scale franchiser as McDonald’s went through this stage, but its founder, Ray Kroc, dealt with the situation immediately, greatly improving McDonald’s support system to take care of the needs of even its smallest single-store franchisee.

At the fast- track MBA on franchise management for the Certified Franchise Executive Program in Las Vegas that I attended in October 2003, one speaker pointed out that the first set of franchisees in a franchise system normally epitomizes the personality of the founding franchiser. And why is this so? The speaker explained that this is because during the initial stages of the development of a franchise system, the franchiser is very much hands on in the selection process and even in the support and assistance provided to franchisees. As the franchise system grows, however, the franchiser is seen less and less by the franchisee. The few occasions when they would meet, in fact, will be during yearly or quarterly conference; that’s all.

Indeed, one of the things that a franchisee would miss in a large franchise system is the energizing presence of the franchiser that the first set of franchisees usually enjoys and relishes. It is therefore not surprising that senior franchisees normally imbibe the traits of the founding franchiser and his or her love and commitment to the business concept of the franchise. This is the advantage enjoyed by early franchisees when the franchise system is still a young, growing system. Even if there are already set criteria for accepting a franchise applicant, middle managers often have a different way of processing and providing service to franchisees than the founding franchiser.

For their long-term success, large franchise systems have to make their rules for the franchise pretty well established and uniformly implemented. This is actually an advantage since these rules have already been proven to work, and have the track records of so many successful franchisees to back them up. However, large, well-established franchise systems inevitably take a longer time to review, assess, and test feedback and recommendations from its big and growing number of franchisees. On the other hand, a young, growing franchise system is generally better able to handle those feedback and recommendations. This, of course, is to be expected. In growing systems, after all, the franchiser is comparatively within easier reach of most franchisees, thus speeding up the review, validation, and decision-making process.

Now, in the case of large franchise systems, the number of branches is usually a strong leverage for the franchiser in getting bigger discounts from its suppliers for volume purchases. It is therefore normally to be expected that the franchiser would be able to give lower transfer prices to the franchisees or to give them subsidies for promotions and the launching of new products. In practice, however, some franchise systems don’t share these benefits with their franchisees, thus depriving them of what should rightfully be a great built-in advantage of being a part of a large franchise system.

Buying into large franchise systems will definitely have its share of benefits and drawbacks, and pretty much, neither large nor growing franchise systems will have a monopoly of benefits. But whether a franchise applicant is thinking of investing in a large franchise system or in a young, growing one, he or she must make sure of partnering only with a responsible, conscientious franchiser. That franchiser should be one that not only has a proven business model for the franchise but one whose focus is on the mutual benefits of the relationship and who can be expected to continuously look after the success of its franchisees.

Erlinda Sabio Bartolome is a Certified Franchise Executive through the International Franchise Association in Washington D.C., USA. She is also the Managing Director of GMB Franchise Developers. She can be reached by e-mail at esb@gmbfranservice.biz.

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Fri, 18 Jan 2008 00:00:00 PST

Learn Franchising In The Philippines

Franchising Best Practices

noreply@blogger.com (The Franchise Guru) — Tue, 15 Jan 2008 10:41:00 +0000

as published in ENTREPRENEUER MAGAZINE ARTICLE

FRANCHISING BEST PRACTICES
By
ERLINDA SABIO BARTOLOME
Managing Director, GMB Franchise Developers

This second of this series takes us to the franchising world of McDonalds, the world’s most recognized retail trademark in the world but still one of America’s least understood
corporations.

McDonalds Brothers

Contrary to popular notion, Dick and Mac McDonald started the concept of McDonalds in l937 and not Ray Kroc. They licensed the concept to other entrepreneurs in l952 but was a dismal failure since the brothers only saw it as a way of making money without building the proper organization and most of the franchisees were absentee owners. Ray Kroc was only introduced to McDonalds in 1955 when he saw the vast potential of the concept thus became the licensing agent of McDonalds. Differences in management led Kroc to finally buyout the brothers for US$ 2.7 M.

RAY KROC, THE VISIONARY

His first experience as a franchisor was similar to the McDonalds brothers. His initial 18 franchisees were his golf buddies who had the funds but did not have time to be hands-on franchisees. Only five were given a second store. Considering this was McDonald’s second failure at franchising, what and how did Kroc transform these past realities into the McDonalds now that presides over 31,000 branches world wide.

• Key ingredient to his management formula is a willingness to risk failure and admit mistakes. He has been successful at inculcating this value. Everybody in McDonalds accepts that mistakes make their success. Thus, from the failure with his golf buddies, Kroc was uncompromising in awarding franchisees only to those who can be hand-on operators. That same experience strengthened his resolve to run contrary to the status quo of franchising at that time, granting territorial franchise. This practice while advantageous to the franchisor due to higher franchise fees since they pay for entire territories was unacceptable to Kroc. No doubt, he could collect higher fees but he was giving the franchisees heavier financial burden even before they could operate their stores and an exclusive territorial right to him would hamper the growth of the franchise system. He therefore started the single store franchise practice and franchise fee was paid only for single stores. This system also gave Kroc the right and the option to grant other store franchises only to performing franchisees. His first rags to riches franchisee was a Jewish couple selling Bibles door-to-door. He prepared an elaborate sales pitch that convinced the couple to become the first hands-on operator of McDonalds. Their store in Waukegan delivered the sales no one, not even Kroc dreamed of. Sales far exceeded the company store of McDonald’s. The couple even moved residence and occupied a house right behind their McDonalds store to make sure they could manage their store 24 hours a day.

• The fundamental secret of McDonald’s success is the way it achieves uniformity and allegiance to an operating system. With Kroc, uniformity of the system was over and above all else. His first rags to riches franchisee – the Agate couple while became the root from which the McDonald’s tree grew, was only given two stores. Their contribution to the system was shaded by their insistence in serving Pepsi instead of Coke that the system used. This non conformance resulted in Kroc not giving them more than two stores while the other franchisees that followed were given and had 10 or more McDonald’s stores.

• Kroc lived by the system he preached and wanted his franchisees to follow. Despite his position, his staff would be embarrassed on occasions he would get down his car and would gather and dispose of trash in McDonald’s parking lots. Fred Turner his assistant personally witnessed how Kroc cleaned the holes of a mop wringer with a toothbrush for hours so the store could be cleaned again according to system standards. He personally showed his operators that nothing is beneath anyone in the being hands-on at implementing and adhering to the system. Thus, McDonalds implemented a system whereby everyone in the head office would literally man the stores once a year.

• He had the wisdom and the courage to rely on hundreds of other entrepreneurs like him. His franchising principle was to furnish the operators a successful operating system to follow and allowed them to do their marketing efforts in the most creative and best way possible. This is the rationalization of a franchise tenet where the franchisor grants the franchise with the assumption that the franchisee knows the local market and this is the franchisee’s competitive advantage so he can market the franchise concept most effectively.

• Kroc introduced a level of supervision unknown to the fast food franchising industry in 1957. He hired Turner who was simply instructed to ‘visit the stores’. Thus, the first field service report form was used to evaluate a franchisee’s performance based on cleanliness of the store, quality of its food, the time and temperatures followed in cooking and the time it took to serve the customers. This evaluation system of franchisees performance has been effectively used by McDonald’s and other franchise systems followed suit. Its field support mechanism expanded to over a thousand field consultants visiting 18 stores, four times a year and in each visit, the consultant and store manger would accomplish 75 pages of report to evaluate the store on 500 items from the cleanliness of the comfort room to the quality of its food. This was Kroc’s commitment to his franchisees that he would support and assist them in their operations so they could join the ranks of rags to riches McDonald’s franchisees.

• McDonalds has a formidable franchise organization. Kroc by design wanted a well-rounded organization with personnel skilled in operations, marketing, finance, real estate, equipment and building design, food and paper purchasing. At its essence he built the first fast-food franchising system that provided a full range of services to its franchisees. McDonald’s corporate executives only commonality is their loyalty to McDonalds. They are a diverse group that do not think and act alike. Kroc once said in an interview “ If a corporation has two executives who think alike, one of them is unnecessary.” He hired people who were extremist of sort – intensely interested in a certain phase of the business and extremely capable of handling their specific area. He hired and judged people according to the way they performed their job. He accommodated their eccentricities because he respects their performance. He tolerated one of the most diverse collection of individuals ever to occupy the top management of an American corporation . Kroc was a genius at surrounding himself with individuals whose talents were absolutely necessary to make McDonalds a success even if these personalities conflict with his own. He gave his corporate executives enormous freedom. This is contrary to what people think that McDonalds was a one-man show, that of Ray Kroc.

• Facing demands of an organized group of franchisees. In 1975, the McDonalds Operators Association was formed. Some members were the oldest and largest operators of McDonalds and their demands were unreasonable and contrary to basic franchising practices such as: automatic renewal, major store improvement to be paid by the franchisor and all new units to be awarded to franchisees of the area. How did McDonald’s handle this situation? Kroc’s directive for Turner was to interview each officer and director of the Association and from all the interviews, McDonalds implemented sweeping changes in its franchise system. It restored balance of power between head office executives and franchisees by giving the later formal avenues for communication with McDonalds head office, zone manager level was added to oversee the performance of the regional managers, training of field consultants was upgraded, job of field consultants returned to Primarily Consultation not Inspection, reorganization of the National Operations Advisory Board composed of franchisees and creation of an Ombudsman to handle grievances of franchisees.

• Kroc’s genius lies in the way he created a web of mutual interrelatedness of the franchisees, suppliers and the franchisor’s managers and executives. Each one was entrepreneurial and was fully aware that the success of each is the success of all. No one held an upper hand over the other. This synergy is what made Mc Donald’s what it is now. Kroc’s greatest legacy in fact his admired and inflexible notion of fair and balance franchise partnership.

• In all these, we would be misled to think that Kroc is McDonalds and it would cease to exist without him. Ray Kroc finally succumbed to two strokes in 1984. That was 20 years ago and McDonalds is still the top fast food franchise chain the world over. His vision, his commitment to the concept and his franchise principles have been transferred to legions of followers who still work at pursuing his dream of making rags to riches franchisees. To go back to Build To Last book, the core ideology has been set in motion by Kroc and it will continue on to surpass the 100 years that great companies have achieved.

ERLINDA SABIO BARTOLOME
Managing Director, GMB Franchise Developers

Franchise Guru's 15 Golden Words of Wisdom

noreply@blogger.com (The Franchise Guru) — Tue, 15 Jan 2008 10:29:00 +0000

A Franchise Guru’s 15 Golden Words of Wisdom

My over 25 years experience in the franchising industry has led some people to baptize me “The Philippine’s Franchise Guru”. For me, more than the status such title provides, it is the responsibility of teaching the franchise concept correctly to those I mentor that allows me to accept such a title. It is also accountability to people to continually espouse and share responsible franchising. After all, the burden I have is not only to assist companies expand their business via the franchise route but to make sure franchisees indeed become successful in their chosen franchise concept. As such, I would like to share with those who are planning to get into the franchise business some words of wisdom I have culled through years in the business:

1. NOT TOO FAST YET TOO SLOW: Timing is important when looking for a franchise business. Franchise opportunities need to be well thought of, yet an entrepreneur should not be too slow as opportunities may fade away. Getting into a franchise business cannot eliminate all business risks, they will always be there. So, when analyzing franchise opportunities check where you can minimize these risks. Risk should not hamper you to slow down and let the opportunities pass you by.

2. SHOP AROUND WITH ALL YOUR SENSES: Selecting a franchise is a matter of keeping your senses open to opportunities. Be open to what you will hear or read. Be conscious of your mental baggage and the biases they could create. More importantly, be very sensitive to your feelings. I stand by the basic franchise principle that a franchise relationship is more than a contractual one it is a personal relationship. Check your feelings when you first meet with the franchisor. These initial feelings are critical for you to decide whether you will pursue the franchise or not.

3. FRANCHISE IS NOT JUST ABOUT FOOD: There are good service franchise businesses available in the market. Gone were the days when franchise equals food concepts. Now there are franchises available in almost all sectors of our economy. Shop around and be excited with the tremendous franchise concepts in the market. Collect and select so to speak.

4. ATTEND FRANCHISE SHOWS AND SEMINARS: These will help you understand how franchising works. Even if franchising is world renowned as the most successful way of expanding a business, it is still important that one acquires a working knowledge of what it is, its pros and cons and experiences of franchisees and franchisors. All of these will enable you to make a proper decision. These seminars will also show you that investing in a franchise is not a bed of roses and not a sure guarantee to success.

5. STOP LOOK LISTEN AND INVESTIGATE: Before signing and paying for a franchise, it is best to talk to existing franchisees of that particular business. Listen to what they have to say. Some will be positive about their business but be ready for some who will talk to you about their concerns and problems. After listening to them, analyze and weigh what you heard, then make a decision. Do not just bank on what you hear during the franchise sales presentation.

6. PREPARE A LIST: Make a short list of businesses you would like to get involved in. Be prepared to answer the question, can you be committed to the franchise concept now and in the future. Will you love to do what is required of you? Will you be proud of the business?

7. HONOR THE WORD “T –I- M- E”: Come to meetings on time and submit your requirements to the franchisor according to schedule. Some franchisors will look at this as criteria for accepting you into their franchise family, how well you handle time and deadlines. Make sure you can commit your time to managing the business. Most franchisors will require this.

8. LOVE AND RESPECT THY FAMILY: Seek and have a dialogue with members for their views about the particular franchise being considered; will the members be willing to assist and be a part of it? A common decision to invest in the franchise gives the business a good and auspicious start.

9. WHO ART THOU?: Personality, just exactly what kind of personality traits does one have; the best way to evaluate is aside from doing a self evaluation is to ask best friends; what kind of people are you comfortable dealing with? Does the franchise concept allow you to deal with people you like? If the concept require you to be in an atmosphere full of children and parents, can you withstand the endless noise of children?

10. PEOPLE WHO NEED PEOPLE: How good are you in managing people? A successful franchise never happens in a vacuum or in a solo flight. The action is with people and for people. Are you ready to smile and be sociable to a customer even if you just had a shouting bout with somebody else?

11. SHOW ME THE MONEY: Will you have the resources/money for the entire investment needed by the franchise? Is there an additional budget for the family needs over and above the funds for the franchise? It is important to identify these since as I have said earlier, there will be risks. The first few months will be crucial since you will most definitely not be able get substantial income from the franchise.

12. DOING A TIGHT ROPE WALK: Franchising does not necessarily mean a guaranteed success. What the franchisors say is that they have had their success in their concept and they show you the path so you too will have the same success. However, please take note franchisors’ success was a result of hard work and sleepless nights they devoted to their concept. Are you willing to do the same?

13. PATIENCE: This is a factor to consider in getting a franchise. Franchise business or any business for that matter is very much like a plant. You need the patience to take care of it daily. You would need to cultivate it properly if you want the beautiful flower and the fruit to harvest in the end.

14. HARD TO BELIEVE: If a franchise business seems too good to be, the more you have to evaluate its viability. Veer away from franchisors, who tell you their franchise is a guaranteed success or that you will recover your investment in 3 months time even without any effort from you. If it’s too good to be true and hard to believe then it is not reality.

15. RESPECT THE WORD “T-R-U-S-T”: Once you sign in with your franchisor, build a relationship based on trust with them, and show them that you are trustworthy. Franchisors trust you enough for them to share their business system with you and you have to make sure you take care of this trust.

Franchising has created countless millions worldwide and in the Philippines. While this is a very attractive proposition, this should not blind us and invest right away in a franchise. These millionaires did their share of investigation and hard work. They had responsible franchisors and thus they too became responsible franchisees.

Some Pearls of Wisdom For Franchisers

noreply@blogger.com (The Franchise Guru) — Tue, 15 Jan 2008 10:19:00 +0000

SOME PEARLS OF WISDOM FOR FRANCHISERS
By Armando O. Bartolome

I am sharing some advice on franchising operations which I have given to franchisers who have sought tips from me through the years. It is always an honor for me to be of help to these prominent franchisers. However, I also want to pay tribute to the start-up franchisers who have joined the ranks. These tips are a result of my reflections on the industry, and is dedicated to both old and new franchisers.

1. WALK DON’T RUN: Launching too many branches within a short period is risky. A franchiser can easily attain the desired number of branches, yet this will also mean facing many concerns both within the company and with franchisees. Protect your business and your brand by going at a steady pace. Do not be reckless by trying to grow too fast.

2. QUALITY SPEAKS LOUDER THAN QUANTITY: It is much better to branch out with a few, well chosen franchisees. Selecting franchisees carefully and keeping their numbers to a manageable one will mean giving them the quality support they deserve. Satisfied franchisees will only be too happy to convey their satisfaction to the customers.

3. BY YOUR FRUITS, YOU WILL BE KNOWN: Franchisers who persevere and maintain focus on their products and services specially providing superb and consistent customer service will go a long way.

4. WIN THE MIGHTY W-O-M : How many times in our lives, do we often catch ourselves talking about a brand, product or a person? An individual may not directly complain to the store manager for the inferior treatment. However may speak and more so starts to send SMS to all people in the directory. W-O-M stands for WORD OF MOUTH + TEXT (or shall I coin the acronym as W-O-M-T). Franchisers ought to exert all efforts in communicating with franchisees and the rest of the people in the company on the importance of giving customers the wonderful experience in all aspects. It may even be starting with the way telephones are answered.

5. AN APPLE A DAY KEEPS THE DOCTOR AWAY: Bing on top of day-today operations will prevent small concerns from becoming full-bown problems. Constantly check on your managers and franchisees to know what isgoing on. Provide a hotline for important concerns. It is pathetic, not to mention dangerous, for franchisers to lose touch with their franchisees.

6. SEEK AND YE YOU SHALL FIND: Finding the right franchisee is difficult especially if you keep looking in the same places. Participating in provincial trade shows may prove fruitful. In my experience there are many passionate and qualified franchisee applicants in the provinces. Settling for people with minimal qualifications may spell danger especially if the franchisee applicant is just merely investing.

7. DO UNTO OTHERS WHAT YOU WANT OTHERS TO DO UNTO YOU: The Golden Rule is applicable to all life situations, including business. A franchiser who wants business to flourish should practice this rule. Treat everyone customers, employees, franchisees and suppliers, honestly and with respect. One franchiser I admire addresses everybody regardless of rank and stature with either a “SIR” or “MAM” before their first name, which make the person being addressed feel important. Of course, you have to be sincere when you do this, otherwise it will show.

8. KISS AND MAKE UP: In a Franchiser and Franchisee relationship, there will always be moments of misunderstanding. It is best that the Franchiser takes the first move in correcting and patching up. Waiting and avoiding the issue may just create a mole into a mountain.

MAY ALL FRANCHISERS BE TRULY BLESSED!

Franchising Good News In The Philippines

noreply@blogger.com (The Franchise Guru) — Mon, 14 Jan 2008 03:18:00 +0000

GOOD NEWS 1. More businesses in the country are expanding through Franchising. In the early 80’s these were just a handful. While these include both foreign and home-grown businesses, the number of local companies has substantially increased through the years and these outnumber foreign franchise systems.

GOOD NEWS 2. Home-grown companies have recognized the many advantages of expansion through franchising over internal growth and company-owned branches. More than just growing nation wide , number of homegrown companies have taken bold steps into the global arena. The stream of Filipino Franchisors staking the Philippine flag in countries like Middle East, Asia , Europe and North America continues to grow. To witness home grown franchisors open their branches globally is indeed a treasured moment and makes one proud to be a Filipino. Yes, we can! The international potential is vast and is there for the taking.

GOOD NEWS 3. Years ago, Franchising was primarily perceived as a food business. Franchising in the service sector is fast emerging. Now, one sees the proliferation of hair salons, beauty bars, spas, preschools and courier services. This has widened the scope of franchising by broad strokes and has enabled more franchisors and franchisees to experience growth and expansion.

GOOD NEWS 4. Franchising has also offered a better alternative to our modern day heroes – our Overseas Filipino Workers. Years ago, a "kabayan" would dream of getting into business such as tricycles, a sari-sari store or buy and sell. Nowadays we see them becoming franchisees. They have grown tired of enjoying the sweet life for a few months then living like paupers while waiting for their new overseas contracts. Franchising has provided them a route to invest hard earned money in proven business systems with the guidance of a big brother – the Franchisor. We have seen how their life has changed by adding their signature to a Franchise Agreement. Besides, by contributing to the Philippine Economy, they know in their hearts that their future is secure.

GOOD NEWS 5. More family businesses are turning to franchising to expand. Franchising has forced entrepreneurs to hire professional managers and standardize their operations. These are issues they have to face if they want to successfully franchise their business. With franchises now involved, the usual quirks of family businesses will have to be unlearned. For family businesses that have taken the bold decision to franchise, we can only admire the success levels they have achieved.

GOOD NEWS 6. The buzz word in franchising nowadays is Responsible Franchising. Franchise Associations and franchise seminars all promote Responsible Franchising. This is a way the proponents of franchising can block if not completely eliminate “pseudo franchisors” from the market. Responsible Franchisors are committed to the success of their franchisees in contrast to pseudo franchisors that are out to just collect the franchise fees. Authentic franchisors are fully aware of the responsibilities they take when they franchise their business. They are ready to provide professional support and technical assistance to their franchisees. This movement for Responsible Franchising has generated success since franchise applicants are now educated on franchising and can ask relevant and important questions even at the application phase. Responsible franchising is the only way for franchising growth to be sustained and can go to higher levels.

GOOD NEWS 7.Franchising creates business synergy . Franchising pools together people from different experiences and business background. The colorful interplay of these differences brings about betterment and growth of the franchise system. Several of McDonald’s products like the Big Mac were the idea of a franchisee. McSpaghetti and Burger McDo was the idea of the Philippine Master Franchisee. These are just a few results of the business synergy created in a franchise system. While the Franchisor starts with a proven business system, franchising continually improves the system thus making it relevant to changing market environments and capable of growth despite its distance from the Franchisor.

GOOD NEWS 8. Franchising is here to grow and will last. With the business synergy it has created in the economy and the many benefits it has brought not only to Franchisors but more so to countless franchisees, franchising will always be a route to expansion entrepreneurs will take. But I think more that all these benefits, it is the personal relationship established. Franchising strengthens these relationships among people involved. Very much like a marriage, it is not void of problems and difficulties but facing them and using them to move forward, has made franchise systems grow from one or two branches on to hundreds and even thousands internationally.

GOOD NEWS 9. Franchise Investments are now affordable. Present franchise investment levels are much lower now than the early years when investments were in the million brackets. From a study we conducted in GMB Franchise Developers, 60 percent of franchise investments fall below the P1-million mark. This, however, does not mean these franchises are not credible investments. They are affordable to more individuals willing to become franchisees. Regardless of investment required, here are steps to ensure you choose a responsible and credible franchisor.

“IFBI” -Investigate First Before Investing One needs to understand how franchising works. There are several alternatives. Look for franchise materials and read them. One can attend franchise seminars which are usually published ahead of time in the major dailies; or for a modest investment, get hold of a copy of “Learn Franchising”. It is in DVD format and can be played and repeated right at one’s convenience. The first of its kind in the country, the “ Learn Franchising ” DVD is available by logging www.gmbfranservice.biz. This was recently launched by this writer as a way of helping those who want to know about franchising.

People looking for a franchise business often wonder where to get a directory. There is in DVD entitled “Franchise Listings”. It is also available by logging on to www.gmbfranservice.biz. It is a compilation of the latest franchise businesses. This DVD will enable you to search for a franchise concept instead of calling each franchisor’s office one by one.

Get to Know and Believe in the Franchise Concept. Successful franchisees are convinced about the products and services and they are positive about its potentials. There is no point in getting a coffee shop franchise if you do not drink coffee at all, nor getting a skin care franchise is not for you if you really don’t care about how you look. Franchisees exude the same commitment to the franchise concept as the franchisor. Visit the shops and ask yourself the question, will I be happy managing this shop and will I want to talk to customers about our products and services? Meet the franchisor. Since franchising is a personal relationship, have a meeting with the Franchisor. Ask yourself the question , can I work with the Franchisor for five (5) years or for the duration of the Franchise Agreement? Match your personality with the Franchisor since not all personalities can work together. Obtain Family Support and Feedback. Make sure you involve your family members in the decision making process. Be open and have a dialogue as there may be pros and cons. Listen and be open. After all, the reason one invests in a franchise business is for the future of the family.

Be Clear About the Investment Package and The Location Requirements. Ask all the questions on the Investment Package. Clarify coverage of fees and extent of the build out investments. Check who will construct and who the accredited suppliers are. Find out when the payments are due. Check if the Investment Package is all you need to enable you to open your franchised branch. Be sensitive to some hidden costs.

Speak With Existing Franchisees. Assess how the franchisees feel about the franchise. The Franchisor is not in the business of popularity. There will always be problems in any franchise system. A vibrant and growing franchise system will have its share of unhappy franchisees. It is up to the individual wanting to get a franchise to discern and make the final decision to pursue. What is important is the validation of these concerns versus the over all growth pattern of the franchise system.

Choose Your Partners If you will need partners, make sure you are on the same page when it comes to business. Friendships and even families break up due to business. Communication among and between partners are extremely necessary. There is no short cut to this. Clarify and put to writing agreements. Be very clear as to who will communicate with the Franchisor. Normally, Franchisors will want to relate to only one person who will represent all the partners.

Study your location Take time to know the local culture and buying habits of the population. Franchisors franchise their business with one basic assumption; the Franchisee knows the local market and will undertake local networking and marketing of products and services. Be able to convince yourself that indeed there is a market for the franchise concept in your proposed location and be able to identify where the market will come from.

Study The Franchise Agreement. In the United States, part of the Franchise Regulation is to allow a franchise applicant to study the agreement for no less than 10 days. A Franchisor cannot call the applicant within this period. The rationale of this Regulation is to give applicants uninterrupted time for review. Even if the Franchise Agreement is voluminous, take time to read each section and put notes on sections that are not clear. Only after you have read all the pages will you seek Legal counsel to explain sections which you have noted. The Franchise Agreement is a vital document which will be the basis of your relationship with the Franchisor.

Investing in a Franchise or becoming a Franchisor is indeed not easy but the engaging and difficult processes make its goal more endearing to the beholders.

Pick and Mix

noreply@blogger.com (The Franchise Guru) — Mon, 14 Jan 2008 03:06:00 +0000

Pick and Mix   as published in SME Community Philippines Magazine

We’re very particular with the taste. It has to be something marketable, something that will be easily accepted by our customers.

Banking on the Filipinos’ sweet tooth, husband and wife team Edison and Tina Mariano went with their gut feel and introduced the first “pick and mix” candy store in the country.  That was in 1996. Today, the couple behind Pick and Mix has successfully established a regional network in Luzon and Visayas consisting 51 candy stores—including 17 franchises and 10 consignor outlets in SM Malls and Supermarkets.

  “We started as a home-based company on only P50,000,” Tina recalls. “Edison and I literally ran the show with a staff of two to mind the store.”  The route to success for the Marianos was hardly a leisurely stroll in the park. They barely made even when their first outlet opened in Metropolis Alabang in February 1996. The idea of customers selecting, mixing and purchasing candy by the gram was uncomfortably new to the public.  

Despite this setback, the Marianos remained steadfast in their belief that the business would experience a turn around. It just took a little more time before naturally inquisitive Filipino consumers overcame the initial shyness for the novelty concept.  

The Right Moment  “When we started in 1996, Filipino consumers were just beginning to imbibe international cuisine, fashion and shopping practices,” explains Tina. “We sensed it was time to open a new kind of store.” And how right they were! Word quickly spread and the new candy store drew customers like bees to honey. Sales at the Metropolis store started picking up when SM, the country’s largest retailer and mall operator invited the Marianos to introduce their concept to management.  “We faced a panel of SM senior executives and Harley Sy told us that a similar concept had been tried and failed only a few years before,” Tina remembers. “Edison and I were really determined and we said the Filipino consumers are ready for something new and the time was right to reintroduce the concept.”  It didn’t take long until the first Pick & Mix store opened for business in SM City North Edsa.

The new concept was an instant hit with mall goers, who stocked up on candy to their hearts’ delight. “Business was so brisk we were clean out of candy by day’s end,” according to Edison.  Filipinos took to the idea of choosing and combining their favorite sweets. The array of sweets was overwhelming, especially first-time buyers. The store offered a host of rainbow-colored gummy bears, mints, jelly beans, hard and soft candy, chocolate and a host of other confectionery.  The variety of candies and sweets are sourced from all over the world. Germany produces the best gummy candies in the market, according to Edison, whose company assignment is to scout far and wide for the best confections available. He said the Philippine candy industry still has some considerable investment to make before it can catch up.  

While European sweets are definitely among the finest in quality, a volatile currency exchange rate can easily spell doom for any business that is unable to manage risks. For this reason, Pick & Mix stocks up from local confectioners and candy makers in the United States, Turkey, China and Thailand.  In Candy Heaven  From an initial 24 varieties, Pick & Mix now carries 36 different kinds of candy, nuts and chocolate and is expanding its product line to include candy toys, candy bubbles, candy jewelry and candy bouquets. Pick & Mix also offers party packages featuring candy carts, cotton candy and chocolate fountains and appearances by the company mascot Gummy Bear. The lovable mascot which debuted in 2001 is a regular fixture at Pick & Mix store openings, promo activities and company events.  “The concept behind Pick & Mix candy stores is nothing new,” says Edison.

The couple stumbled upon the theme in 1995 during a vacation to the United States with the kids. Every time they were in a mall, Nico and EJ, who were two and three year olds at the time, would race to the candy store and load up their goody bags with all kinds of sweets.  “We saw how happy it made them,” Tina recalls fondly. “The candy store was like heaven for the kids.” She and Edison realized they wanted Filipinos to experience the same excitement and delight that their kids shared on those trips to the candy store.  They decided it was a terrific business idea but discovered the foreign franchise fee was prohibitive.

Unfazed, the Marianos decided to put up their own company.  Having spent some years as employees, Edison and Tina always dreamed of going into business for themselves. They were already managing two at the time—the printing press inherited from Tina’s family and their trading company, supplying garments for the SM department stores—when they fell in love with the idea of a “pick and mix” candy store. It didn’t take too long for them to take on one more.  All in the Family  Their instinct to set up Pick & Mix paid off. Eventually, they opted to let go of the printing press and the trading company and concentrate their energies in building Pick & Mix into the country’s fastest growing candy store chain.  The Marianos never expected their candy store concept to enjoy widespread popularity. Tina said when they started they would be happy if they had two stores. Now, the Mariano family which added three kids is very much into the business.

The couple shares the responsibility of managing Pick and Mix. Edison oversees product sourcing, supply and store facilities management, while Tina handles day-to-day operations and finance.  And with the kids exposed to the business at an early age the two eldest kids—whose sweet tooth inspired the Pick & Mix idea— are already helping out. Nico their eldest, works in the office during school breaks while 14-year old EJ lends his computer skills to designing sales presentations for his parents.  Not to be outdone, the three younger siblings—JR, Angelic and Eric do their share with the pleasant chore of company taste testers. Whenever Edison and Tina discover new sweets and flavors they want to introduce, they always make it a point to ask their children’s opinions.  Everyone in the company is involved in choosing the new product line.

Once the children make their choices, the employees are asked to evaluate the new candies and sweets. It’s more than just flavor, other things to consider about candy are appearance, texture, aroma, color and consistency.  Tina and Edison also make it their point to taste what they sell. “We’re very particular with taste,” Edison points out. “The candy has to be marketable and acceptable to Filipino customers.”  Candy Connoisseurs  Having been in the business for a decade, Edison and Tina are now candy connoisseurs. “Some varieties and flavors simply won’t catch on in the Philippine market,” Edison observes.

For this reason, the company tests out the new varieties in small amounts at their outlets before introducing the product full-scale.  He explained that shelf life and storage are factors a candy seller has to consider when stocking up. “Proper storage, temperature control and handling are crucial in the candy business,” says Edison. “A product like chocolate can be a tricky item to handle.”  Tina pointed out that Filipinos love sweets, but they are not the adventurous types when it comes to desserts. “Filipinos tend to stick with what’s familiar,” she remarks.

“Part of our work is to educate the customers about the different confectionery in the market.”  Now that they’re 10 years into the business, Edison and Tina continue to find innovative ways to offer customers novel experiences with each visit to their stores. The couple is now looking into an all-inone gift shop to complement the Pick & Mix concept.  As part of its expansion program, the company recently put up its website www.pickandmix.com.ph with the help of Plantersbank’s affiliate SME.com.ph.  The couple hopes the website will become a powerful marketing tool for their business—tapping new markets through e-commerce and providing a 24-hour point of contact for prospective franchisees.

The company is expected to introduce the Pick & Mix stores to more provincial sites. Edison and Tina have their eyes open for franchising prospects in Dagupan, Cabanatuan, Legaspi, Iloilo, Cebu, Davao and other key cities, where the concept is still a novelty. “Our ultimate dream is to set up branches overseas,” according to Tina.  Determined to Grow  Although Pick & Mix is growing as a result of their franchising strategy, it took some time before the Marianos warmed up to the idea. “At first we didn’t entertain the thought,” Tina says. “But we were even then receiving many inquiries from people who liked the concept of our stores it just came to a point that I felt I was being selfish not wanting to share our success.”  At first, Tina admits she was hesitant to “let go” and franchise the business. “I was afraid that if something unfortunate happens in one of the franchises, the reputation that we built for the company would be destroyed overnight” Tina admits.  The couple had reached a crossroads. They could either choose to grow at a slower organic pace, or take advantage of their early lead and tap new markets through franchise operations.  

After consulting with franchise expert Armando Bartolome, the Marianos realized the risks far out weighted the business opportunities. The couple was on their way to a new phase in their business. They set the process in motion by securing a franchise development loan from the state-run Small Business Corporation. “That was our first loan and we’re very pleased with the assistance from the SBCorp,” Tina recalls.  “If you have the systems of your franchise model already in place, you shouldn’t have to worry too much,” Edison says. “All you need to do is ensure the quality standards are strictly maintained.

”  Having perfected the craft of franchising, Pick & Mix was recently elevated to the Entrepreneur Philippines 2006 Top 29 Franchise and cited for Best Franchising Support for providing superb assistance in training, marketing, pre-opening and operations to franchisees.  “We consider our franchisees as partners in business that is why support is very important in building the foundation of our franchise system which will help us expand our market faster,” Edison adds.  

Looking back on this experience, Tina realized that you can look at money being spent as an expense or an investment for the future.  “We want to give our patrons their money’s worth and at the same time, we want to make the business grow to provide for our employees and contribute to uplift our society in the best we can,” she says.  Armed with determination, creativity and faith in their concept, Edison and Tina Mariano are bound to turn all their dreams and aspirations into sweet reality. And for those who believe in their endeavors, success is inevitable.

Philippines' Franchise Expert Shares Tips

noreply@blogger.com (The Franchise Guru) — Mon, 14 Jan 2008 02:54:00 +0000

Franchising Expert Shares Tips on Expanding Business to the Provinces

A local franchising expert will offer advice to those seriously contemplating to extend a Metro Manila franchise business concept in the provinces. Mr. Armando “Butz” Bartolome, the country’s franchising guru and president of GMB Franchise Developers, which has 55 years of cumulative experience in franchising, shares important guideposts before expanding to, or operating an autonomous franchise business unit in the province.

He said the runaway successes of various franchised products or services in the metropolis continue to inspire many aspiring entrepreneurs to seek a legitimate franchising business as the viable economic alternative forms of entrepreneurship.
Bartolome added, among the main considerations in expanding the franchise to the provinces are as follows:

• Understand and observe the culture of the local area you wish to venture into, it because a franchise concept has succeeded in Metro Manila does not ensure that it will take off in any other locality. Determine if the business concept is new, and if there has been similar businesses (or competitors) operating in your desired locality. Failure to understand the values and dynamics of the residents or those frequenting the place, their behavioral patterns and purchasing power will most likely have a negative impact on your provincial franchise venture.
Aside from issues on accessibility and visibility of the business location, extensive market knowledge is also crucial. Study the marketplace and try to look for one bold stroke that will produce substantial results, or investigate if it will bring in enough business. Prepare a feasibility study if the location will suit the kind of market that the particular franchise is appropriate with. You can then determine how you can appeal to certain segments of the population, say, retirees or overseas Filipino workers who abound in a certain provincial area. Along with this, be sure to detail what nearby businesses, its type of traffic (foot and automobile) that passes by the spot, rent arrangements, future development plans for the area, and more.
It can be a good idea to turn to the franchiser for invaluable inputs on selecting a good location. In most cases, the franchisers experience and knowledge about the market being targeted will help identify the perfect spot for the venture.

• Ensure that you will be able to devote time for the provincial franchised outlet. This comes with knowing the nature of the business. For example, a food franchise will particularly require constant attention-to-detail and continuous inventory control. Some franchisers require hands-on management. This means that the franchisee will be required to be in the branch for most of its operating hours, or at least 3 to 4 hours a day.

Franchisers seek franchisees that can turn out to be aggressive and enduring partners and can successfully transplant the business in certain localities.

Going the franchising route, more than business acumen requires long-term commitment and a responsible, systematic approach – preferably learned from the experts.

Franchise Trivia In the Philippines

noreply@blogger.com (The Franchise Guru) — Mon, 14 Jan 2008 02:46:00 +0000

Franchise Trivia
Did you know ………
• From 34% growth rate of local franchise businesses in 1997, it has reached to a total of 178%
• In 1910, Singer Sewing Machine, followed by A&W Rootbeer and KFC in 1965 were the first franchise companies in the Philippines
• 76 % of franchise fees in the Philippines is Php 500K or less
• There some home grown franchisors that established international branches in USA, HK, Shanghai, and Singapore
• When one gets a franchise, he or she has to read and understand the franchise agreement at least thrice and consult a lawyer
• When getting a franchise it is best to talk with franchisees of franchisor
• A franchise fee serves as payment of the use of the franchisor’s name, while a franchise investment includes franchise fee and other items e.g. build-out cost, equipment, fixtures and furnishing materials
• It is best to know and meet the owner or franchisor aside from the franchise officer, after all franchising is all about establishing partnership with the franchisor
• Getting a franchise, first analyze what one really wants and what type of company personality suits him or her best
• Most successful franchisors do franchise their business after 12 months of operations, the very least
• A franchisor loans a franchisee copy of its operations manual and keeps it updated
• A responsible franchisor chooses franchisees well and not just on the basis of funds available, rather capitalizes more on commitment and character
• A responsible franchisor provides a thorough and continuous training for its franchisee before proceeding in its operations or running the venture
• A responsible franchisor explains the franchise agreement before sealing it
• Most franchisors require franchisee to really do hands-on in managing its franchised operations

Why Some Franchisees Fail

noreply@blogger.com (The Franchise Guru) — Mon, 14 Jan 2008 02:34:00 +0000

WHY SOME FRANCHISEES FAIL
By Armando Bartolome as published in
The  Manila Times

It could happen to anyone. You see an ad for a franchise, contact the company and, soon you are a franchisee! All goes well, then one day you realize your franchise business is failing and there is little you know to save it. What could be going wrong?

First of all, examine the business: How is it failing? Knowing what the problem is will help you find the solution. Assess your team’s strengths and weaknesses. Is everyone doing well at his or her role? What could be done differently or better? Once you’ve tried to solve the problem internally but cannot conquer it, ask the help of your franchisor. For example, if the store sales are affected by construction work nearby or new competition, ask if you could move your store to a more viable location. If you planning to be a franchisee, here are some tips that you do well to heed:
Know your strengths and weaknesses. Franchisees need to have skills in handling people, handling money and handling the business. Of course, you can hire people to do these things but you have to possess some level of business acumen to be successful.
Know your reasons. It is not enough to want to make money. You have to believe in the product and the brand, and have a passion for the type of business you are getting into.
Be ready to follow. Franchising is applying a proven system developed by the franchisor. Thus, this system must be followed to a tee for a franchisee to replicate the success of the original business. There is little room for innovation in a franchise system.
Be ready to work. Businesses that are regularly visited, even managed hands on by the franchisee have proven to be more successful. Owners can decide then and there how to adjust rules to make the customer have a better experience.
Choose carefully. Do not get blinded by sales gimmicks. Does the product or service have staying power? Does it fill a need? Also, be suspicious of franchises that can be bought for a song. If the franchisor does not value his brand and system that much, could there be much to it?
Pay attention to numbers. Have an accountant go over the franchise’s numbers with you. Be wary of those who promise a fast ROI. Make sure the experience of the company can back it up. Also, expenses do not stop at the franchise and investment fee – consider how much it costs to run the store as well as emergency expenses.
Observe the industry. Is the franchise you intend to buy in a growth industry or a sunset industry? Is the brand you intend to franchise a major player? How do you think the industry will develop in the next decade? Remember you are in this for at least five years!
Avoid culture shock. Examine the franchisors’ company culture. Do you have the same values as the company? Remember that you will deal with them on a regular basis. Strained relations will certainly affect how your franchise will perform.

Philippines' Franchise Guru To Be Honored

noreply@blogger.com (The Franchise Guru) — Mon, 14 Jan 2008 02:09:00 +0000

Franchise Guru to be Honored

Armando Bartolome is known as the Philippines’ “franchise guru.” As one of the pioneers of the Association of Filipino Franchisers Inc., he has conducted over 200 franchise’ seminars in the country and parts of Asia, North American Countries and the Middle East.
He also mentored over 150 franchising companies in the Philippines as head of GMB Franchise Developers.

He carries with him 24 years of extensive experience in the field—both international and local scene.

Bartolome is acknowledged as the franchise guru, primarily after assisting small and medium enterprises which became successful.

He said “irrational franchising” is a surefire way for a business to fail.
“The common mistake of some is that they take the franchising route as a shortcut to expansion. If you want to go franchising, you have to re-investigate the concept and study how to duplicate it and see if it can be managed by another party,” he said.
Bartolome said the franchisor and the franchisee should be the perfect match.

“It’s not all about money. They have to work well together and be on the same page,” he added.
GMB Franchise Developers’ services include franchisor consulting solutions, franchise lead assistance and franchise clinics. The company can assess an existing franchise program; develop and install a franchise organization and provide processing assistance from applications to branch openings.

The company’s clients, past and present, include Fiorgelato, ACT Electronic Center, Maldita, Binalot, Gingersnaps, Gloria Maris, Kodak Phils., Godiva, Freeway and Figarò Coffee Co.
“Hiring a professional to develop the franchise system of ‘Pick & Mix by Candy Mix’ was never an expense but an investment for the company’s growth and expansion. GMB is such a professional and competent franchise developer, which makes them highly recommended for homegrown businesses that are thinking of franchising their business,” said Tina Mariano, Pick & Mix vice president.Leni Adriano, chief executive of Tacomio, said GMB helped her cut costs and made the company’s operations more efficient in preparation for franchising. “The company goes the extra mile,” said Binalot managing director Rommel Juan.

Singer Sewing Machine was the first franchise introduced in the Philippines in 1910 but it was only in the late 1980s that Filipino entrepreneurs started to seriously get into franchising.
Technically, the first local franchise in the Philippines was Pancake House, a family-run restaurant chain.

“Franchising is the secret behind the growth of many popular brands. It is also responsible for the success of many new entrepreneurs. For franchisors, it is a viable way to expand one’s network; for franchisees, it is a safe entry into business, using a tried and tested system,” said Bartolome.

Bartolome will be honored by the Association of Filipino Franchisers Inc. for his contribution to the sector. The award is in recognition of his being a trailblazer and pioneer in franchising.
The citation for Bartolome will be given during AFFI Franchise@10 on July 6 to 8 at the Megatrade Hall, SM Megamall. The event, which will be participated in by over 175 franchise exhibitors.

AFFI is open to companies that are wholly Filipino-owned, capitalized at below P50 million and have operated successfully for at least six months. by Dinna Chan Vasquez