Group 3 Franchising

Philippines Franchise Market

The Philippines is a popular market for U.S. Franchises.
The market is extremely fond of American brands, where more than
90% of all foreign franchises are of U.S. origin.
Eating at a brand name establishment or purchasing brand name items
signal societal status in one of Asia`s most social media savvy populations.
As local businesses have experienced success and continued expansion,
there are more local franchises now than there were 10 years ago. There are
about 55% local franchises vis-à-vis 45% foreign ones.
The younger generation Filipino consumer now choose between Japanese,
Korean, Chinese, and European options, and enjoy Korean cosmetics and
makeup brands more than American ones. Price is also a major consideration.
 Current Situation of Franchising
in the Philippines
Filipinos follow trends via social and other advertising media.

Filipino franchisees tend to invest in brands that are already popular in the
Philippines – one with name recall and also popular with consumers.

The highly saturated market will also present stiff competition, and new
brands must prepare to spend 2 years before being able to determine if their
business model is sustainable.
There are 9 local firms with experience in
franchises and they tend to dominate all the
American brands
Max`s Group (Krispy Kreme, Jamba Juice)
RamcarFoods (KFC. Also Mister Donut, which used to be American)

Philippine Pizza Corp (Pizza Hut, Dairy Queen, Taco Bell)

Jollibee Food Corp (Burger King, with investments in U.S.-based Smash Burger)

Rustan’sGroup (Shake Shack, GAP, Old Navy, DKNY, etc.)

Am-Phil Ventures, Inc. (Chili’s)
Foodee Global Concepts/Food Link
The Bistro Group* (Buffalo Wild Wings, Denny’s, Texas Roadhouse, Italianni’s, Fridays,
etc.)
Udenna/Eight-8-Ate Holdings (Wendy’s)
 Philippine Franchise Association
(PFA)
Reported that franchise investors are now also looking at new opportunities in
wellness (spa, gym, anti-aging centers), health (dental, optical, primary care), and
retirement (retirement homes and travel/tourism opportunities).

The key to success would be identifying a capable local partner and bringing a
unique concept that can be priced according to Philippine standards.

Consumers are willing to pay more than expected but there is a realistic ceiling
given income level.
 How Franchisor Makes
Profit
Buy-in Fee
•When franchising a brand, the business owner will usually charge an
initial buy-in fee which the franchisee must pay when signing the
franchise contract.

•This fee will vary from brand to brand: buy-in fees can range from a
couple of hundred thousands to several millions.
 Start-up Fee
Aside from the rights to use the logo and branding, the franchisor will
often provide several start-up services, which might include:
Training – This helps a franchisee understand a business offering for
the franchisee to sell the business’s products or services effectively.
Products – A franchisor can sell its products to the franchisee to
purchase and use.
Equipment – Depending on the industry of the franchise opportunity,
it may require the use of specialized equipment.
Uniforms – Depending on the brand, uniforms may be required and
part of the start-up fee.
Support – One of the benefits for a franchisee is the ability to utilize
an existing brand and business model to start a new business
venture.
Royalty Fees
•Once a franchisee is up and running, they will be required to pay royalty fees to the
franchisor.

•A royalty fee is an ongoing fee that a franchisee pays the franchisor.

•This fee could be paid weekly, monthly, or quarterly, depending on the agreement
between the two involved.

•These fees are commonly paid monthly and, in most cases, will be calculated
based on a percentage of takings from the franchisee’s business.
Add on Fees
•Advertising – This is where a business or organization communicates their products or
services to potential customers through paid opportunities. It is one of the most
effective ways to promote brand awareness.

•Manufacturing – The process of creating a product. This involves costs for which a
franchisor may require a franchisee to pay additional fees.

•Ingredients – Certain industries, such as catering and food franchises, may require
ingredients as part of their business which sometimes is charged by a franchisor.

•A franchisor only makes money when the franchisee does. As such, it’s imperative to
offer comprehensive training and support to ensure that the franchisee is successful.
How Franchisee
Makes Profit
•An entrepreneur has a lot to consider before buying
a franchise.

•There’s no doubt that a franchisee will often be

required to make a significant investment when
purchasing into a franchise.

•The franchisee must pay this investment back to a

bank or financial organization.
Making Sales
•Once a franchisee has their business up and running, they can
take advantage of the brand’s established reputation and
ongoing promotion, advertising, and support.

•The franchisee will make money through profits gained through

sales. Although the franchisee will pay a percentage of this to
the franchisor through royalty fees, the successful franchisee
can make significant money by selling the brand’s products or
services.

•The more sales the franchisee makes the more income. A

franchisee can expect to work with the franchisor to ensure
adequate investment in promotion and advertising.
Adding Franchises
•When a franchisee has achieved success with their
business and has proven their commitment to the brand,
the franchisor will often encourage them to expand by
buying other franchises.

•Franchisors will always value hard-working, successful

franchisees and offer incentives such as discounts to
make it easier for the franchisee to expand.

•This expansion gives the franchisee additional financial

freedom and the chance to build wealth for retirement.