Presented by:JESICA P. CUANICO

Master in Business AdministrationOur Lady of Fatima University – Graduate School

Learning Objectives

• Understanding the franchise option• Structure of franchise industry• Advantages of franchising• Disadvantages of franchising

What is franchising?

Franchising refers to the method of practicing and using another’s perfected business concept. In a franchise relationship, the franchisee is granted the right to market a product or a service under a marketing plan or a system that uses the trademark, name, logo and advertising owned by the franchisor.

History of FranchisingIsaac Merritt SingerAmerican inventor, actor, and entrepreneur

After the US Civil War in the 1860s Singer had achieved the ability to mass-produce his famous sewing machines, but had no economically viable way of repairing and maintaining them across a country as geographically vast as the USA.

He began to license out servicing and repairs to local merchants around the country, who were later permitted to become regional salesmen for the machines too. Singer’s use of a contract for this arrangement introduced the earliest form of franchise agreements, and the first modern franchise system was born.

What are the different types of franchising?

1. Product franchising2. Business format franchising

Product Franchising

• Also known as trade name franchising.

• Type of franchising wherein a manufacturer grants a franchisee the right to sell its products, but with no method of doing business.

• Examples of this type of franchising are car dealerships and service stations.

Business Format Franchising

• Also identified as a name and process franchise.• Aside from granting the right to use the name and

market the products and services of the franchisor, the franchisee is also provided a complete plan for managing and operating the business – a transfer of the proven way of doing business that has been developed by the franchisor

• This plan often includes a full range of services, including site selection, training, product supply, marketing plans and even assistance in obtaining financing.

Business Format Franchising

• All of the franchisor’s operating systems, technical expertise, marketing systems, training systems, management methods and essentially all relevant information, are transferred to the franchisee.

• Modern day franchising is primarily in the business format mode, accounting for around 90% of franchise businesses worldwide

Top 10 Global FranchisesRank Franchise Name Country Industry

1 SUBWAY® U.S.A. Sandwich & Bagel Franchises

2 McDonald's U.S.A. Fast Food Franchises

3 KFC U.S.A. Chicken Franchises

4 Burger King U.S.A. Fast Food Franchises

5 7 Eleven U.S.A. Convenience Store Franchises

6 Hertz U.S.A. Car Rental & Dealer Franchises

7 Pizza Hut U.S.A. Pizza Franchises

8 Ace Hardware Corporation

U.S.A. Home Improvement Retail Franchises

9 Wyndham Hotels and Resorts

U.S.A. Hotel Franchises

10 Groupe Casino France Food & Grocery Retail Franchises

Advantages of Franchising

1. High success rate.2. Recognized brand and trademark.3. You are not alone.4. Ease in financing / Re-saleability of

the franchise5. Huge profit6. The experience of the franchisor.7. Training8. Buying and advertising9. Ongoing advise, research and

development.10. Business Synergy

Challenges

1. Working with the franchise system.2. The risk.3. False expectations.4. Managing the business.

What is a good franchise business?

1. Unique2. Profitability3. Systematized4. Training5. Excellent margins

Jollibee Franchise

• What Jollibee is Looking for as franchisors?• How much is needed to invest in a Jollibee Franchise?• What comprises the said investment?• Does the Corporation provide financing for the franchise?• How much will be the Return on Investment?• How long is the Training Program?• Are they also the ones who would look for the crew?• What are the requirements to apply for a Jollibee

Franchise?

Are you a franchisee material?

A good franchisee is an important part of a successful franchise chain. Evaluate your ability to be a good franchisee with these qualities:– Avid learner– Effective communicator– Ample experience– Financially capable– Awareness of the brand– Open to new ideas– Ready to follow– Original thinkers

What should I consider before buying a franchise?

1. Ask yourself why you want to own a franchise.

2. Begin the search.3. Do your own research.4. Concept.5. Location.

The Franchise Agreement

The Franchise Agreement (FA) is the legal document which details the rights and obligations of the franchisor and the franchisee, including the length of term, the start and end periods of the agreement, the renewal provisions and the end of the contract.

What is included in the Franchise Agreement?

• Terms of Agreement• Renewal• Investment amount and fees• Training and support• Territory• Termination

Agencies to go for help in franchise

• Philippine Franchise Association (PFA)• Bureau of Trade Regulation and Consumer

Protection (BTRCP)• Securities and Exchange Commission (SEC)

TRAP # 1 – Franchising is easy.TIP: Do a self-assessment.

TRAP # 2 – Franchising means instant success.TIP: Study the concept.

TRAP # 3 – I can operate my franchise anywhere.TIP: Do a market study.

TRAP # 4 – I have to sign up right away. TIP: Take your time and review, review, review

TIPS AND TRAPS

The Benefits And Responsibilities of Franchise Ownership

1. The cost Initial Franchise Fee and Other Expenses Continuing Royalty Payments Advertising Fees

2. Controls Site approval Design or appearance standards Restrictions on goods and services offered for sale Restrictions on method of operations Restriction of sales area

3. Termination and Renewal

3. Before selecting a franchise system Demand Competition Your ability to operate a business Name recognition Training and support Franchisors experience Shopping at a franchise exposition Know how much you can invest Know what type of business is right for you Comparison shop Get substantiation for any earnings representations Avoid high pressure sales tactics Investigating franchise offerings Business background Litigation history