Introduction to

FRANCHISING
Joey Kenth Parba Dionaldo
Senior Franchise Manager
 01 02 03
About PFA Industry What is
Overview franchising

Program 04 05 06
Why Challenges in
Benefits of
Flow franchising franchise? franchising

07 07 07
Signs of a Do your due Signs of a
franchise scam diligence franchise scam
ABOUT PFA
• Founded in 1995. The Voice of the
Philippine Franchise Sector
• The country’s pioneer franchise
association
• Members include the country's biggest
franchises - both local and foreign
• A voluntary self-regulating governing
body
• The only internationally - recognized
franchise association in the country of
the APFC and WFC
INDUSTRY OVERVIEW

Franchising has a
90% success rate
versus 25% startups.
DATA: USAID STUDY
WHAT IS FRANCHISING?

Duplicating the success of a

successful business.

You’re in a business for yourself,

but NOT BY YOURSELF.
WHAT IS FRANCHISING?
PRODUCT DISTRIBUTION
FRANCHISING
• Supplier/ dealer relationship
• Franchise merely sells the
franchisor’s products
BUSINESS FORMAT
FRANCHISING
• Full integration of the business
• Franchisee not only distributes
the franchisor’s products and
services under the franchisor’s
trade mark, but also implements
the franchisor’s format and
procedure of conducting the
business
WHAT IS FRANCHISING?
PRODUCT DISTRIBUTION
FRANCHISOR FRANCHISEE
FRANCHISING
• Parent company • “Active” investor/operator
• Owner of the brand and operating • Freedom to own a business
system • Be your own boss!
• Systematizing a successful business
• An expansion strategy
• Brand building activity
BENEFITS OF FRANCHISING
PRODUCT DISTRIBUTION
FOUNDATION
FRANCHISING
Strong brand name, brand recall

PROOF OF CONCEPT
Proven systems and procedures

DEDICATED TEAM OF EXPERTS

Solid Marketing, Operations and R&D

PROFIT POTENTIAL
Predictable through control systems
FRANCHISE ADVANTGE
USE OF NAME
PRODUCT DISTRIBUTION
FRANCHISING

USE OF SYSTEM
✔ System and Procedures
✔ Operations Manual Products
WHAT YOU BRING TO THE TABLE

MONEY TIME PEOPLE

• Franchise Fee • Active management • Skills and abilities

• Unit Capital • Financial & Operational • Compliance to the
• Royalties responsibility system
• Advertising Fee • Longevity/long term • Your employees
• Proprietary products plan • Your network
• Risks
WHY BUY A FRANCHISE?
BRAND
NAME/BRAND
RECALL

BUYING AND ADVERTISING

POWER (Consolidated Vol.)

WHY BUY A TRAINING

(Methods of the Franchise System)
FRANCHISE?
LOWER RISKS
(Experience of the Franchisor)

TURNKEY/
ESTABLISHED
TOTAL CONCEPT
WHY BUY A FRANCHISE?
QUALITY CONTROL
(Ongoing R&D)

PROFIT POTENTIAL
(Predictable through control
systems)

WHY BUY A
FRANCHISE? BUSINESS SYNERGY (Strategy
for better business operations)

LONG-TERM (Ongoing
advise)
TRAINING AND SUPPORT
CHALLENGES IN FRANCHISING

Territorial
restrictions

False • Conformity is critical,

expectations cannot reinvent the
Consistently wheel
follow the • Working with the
company franchise system
Not an instant success (legally-binding)
standards &
• One price policy
system
QUICK ASSESSMENT
YOUR INVESTMENT

YOUR ABILITIES / SKILLS

YOUR GOALS / PASSION

BUSINESS DEMAND & GROWTH POTENTIAL

BUSINESS VS. COMPETITION

BRAND RECOGNITION

FRANCHISORS EXPERIENCE
ELEMENTS OF A FRANCHISE AGREEMENT
• Parties
• Appointment and Franchise Fee
• Term and Renewal
• Designated Location, Relocation
Requirements
• Supplies and Services
• Training
• Proprietary Marks
• Confidentiality
• Modification of the System
• Advertising
• Royalties, Continuing Services fee, etc.
• Accounting of Records
• Standards of Quality and Performance
• Operations Assistance
• Operations Assistance
• Insurance Requirements
• Franchisee Covenants
• Default and Termination
• Transfer of Ownership
• Absence, Death, or Incapacity of
Franchisee
• Franchisee as an Independent
Contractor
• Applicable Law
• Arbitration
• Force Majeure
• Caveat
HOW TO BE A SUCCESSFUL FRANCHISEE
PRODUCT DISTRIBUTION
FRANCHISING
DO YOUR DUE DILIGENCE

VISIT THE TRAINING STUDY CHECK IPO CHECK REVIEW

FRANCHISOR AND FINANCIAL REGISTRATION LITIGATION FRANCHISE
•No. of years SUPPORT PROJECTION •Do they own the HISTORY AGREEMENT
operating and •How long and S brand? •Obligations of
stores extensive •Projected franchisor/franchisee
•Talk to the Cash-flow •Territorial
franchisee and •Profitability rights/relocation
suppliers analysis •Renewal, Termination,
•Break-even point Repurchase
•Return on
Investment vs.
Term
SIGNS OF A FRANCHISE SCAM
PRODUCT DISTRIBUTION
Too good to be true claims of profitability
FRANCHISING

Pressure Tactics when selling their franchises

Absence of list of franchisees

Absence of list of outlets

Vague company profile (list of officers not

specified)
THANK
YOU!!!