All About Franchising 2012

ALL ABOUT FRANCHISING 2012
LEARN EVERYTHING YOU EVER WANTED TO KNOW ABOUT FRANCHISING. WRITTEN BY A MULTI-AWARDED EXPERT WITH MORE THAN 30 YEARS OF FRANCHISE MANAGEMENT EXPERIENCE IN 3 CONTINENTS.
BY RUDOLF A. KOTIK
BY RUDOLF A. KOTIK
RK FRANCHISE CONSULTANCY G/F MINNESOTA MANSION 267 ERMIN GARCIA STREET, CUBAO 1109 QUEZON CITY TEL. / FAX (02) 912-2946, 912-2973, 911-1966 EMAIL: rk@rkfranchise.com VISMIN OFFICE: UNIT 11 ST. PATRICK SQUARE DON RAMON ABOITIZ STREET 6000 CEBU CITY TEL./FAX (032) 253.5010, 254.0473 EMAIL: rkcebu@gmail.com
WEBSITES: Franchise Development: Franchise Webportal: FranchisingPH Magazine: FIFA Franchise Association: Cebu Franchise Expo: Mindanao Franchise Expo: Franchise Schedules: http://www.rkfranchise.com http://www.franchise.ph http://www.franchising.ph http://www.fifa.ph http://www.cebufranchise.com http://www.mindanaofranchise.com http://www.filfranchise.com
BY RUDOLF A. KOTIK
Content
PAGE What is Franchising History of Franchising Franchising 101 What does a Franchise provide Franchising Questions Benefits of buying a Franchise How to select a Franchise Defining Franchising Advantages and Demands Mistakes by Franchise Buyers Area and Multiple Units Buying a Master Franchise Franchising your business Fees Franchise Legal Requirements Franchise Relations DTI Bureau Order 10-24 regulating Franchising The Future of Franchising RK Franchise Consultancy FIFA Filipino International Franchise Association 5 8 10 26 33 40 44 47 50 58 60 64 71 83 86 89 93 98 100 106
All rights reserved. No part of this publication may be reproduced without the written permission of the copyright owner.
BY RUDOLF A. KOTIK
ABOUT THE AUTHOR
RUDOLF A. KOTIK
Born in Vienna, Austria, a graduate of HRM and Marketing. Got into Franchising 1978 by joining the Franchise Division of McDonald's Europe and stayed with the fast food giant for 6 years, prior to joining a Hotel franchise chain. Developed in the USA Franchises for an International Franchise Consultancy prior to settling in the Philippines. From 1995 to 1998 he operated RAK Franchise Consultancy in Cebu and transferred 1999 to Manila to open RK Franchise Consultancy, Inc. with Company offices in Quezon City and Cebu City, and seasoned Franchise Agents in Tacloban City, Butuan City, General Santos City and Zamboanga City, as well as two international representations in Vienna, Austria and in California, USA to promote Philippine Franchises abroad.
BY RUDOLF A. KOTIK
I. WHAT IS FRANCHISING
Franchising is the most successful business system in the world. Yet the vast majority of people, including many who are involved in this segment of free enterprise, don't have a true understanding of what franchising really is. Whenever you hear the word "franchise" you think of fast food restaurants like "Jollibee" or "McDonald's", but there is more to franchising than the two giants. Franchising is simply a special type of licensing arrangement for the distribution of services and products. Franchisors allow another entity - the Franchisee - to use their business system, trademarks and corporate identity for a certain period of time. It is based on an interdependent relationship between the two parties. Both must work as a team and accept responsibility and accountability for the success of the system and business. In other words, it's like a marriage - it should last forever or at least 5-10 years. The job of the Franchisor is not to make a Franchisee successful, as the Franchisee must take an active role in marketing the brand, working the operating system, etc.
BY RUDOLF A. KOTIK
Being part of the system does not guarantee for personal success. The Franchisee has to work hard as well, enduring long hours and sacrifice sometimes. Franchisors must provide the best operating system possible and assist Franchisees in getting efficient, effective and profitable by providing support services throughout the relationship. Business format franchises offer the Franchisee not only a logo and trademark, but also a complete system of doing business. The word "system" is the key concept to franchising. A Franchisee receives assistance with site selection of the business, personnel training, business set-up, advertising and product supply. For that, the Franchisee pays at the start of his franchise an up-front payment called the "franchise fee", and on-going "royalty" which enables the Franchisor to provide more research and development, training, and support for the entire business. In a few words, the Franchisee purchases someone else's expertise, experience and method of doing business and does not have to go through the "labor pain" of a new start-up company. The basics:
Franchising is a method of distributing goods and services A Franchise is a privilege granted to an individual or a Corporation A franchise is a legal agreement between two parties The owner who agrees to grant the privilege is called the Franchisor The individual or group to whom the privileges are granted by the Franchisor are called the Franchisees The system under which Franchisor and Franchisee operate is known as Franchising.
Companies choose to grow by granting a license to others to sell their product or service and this has advantages for Franchisees too: A Franchisee does not have to come up with a new idea - the Franchisor had it and tested it and continues working on new ones.
BY RUDOLF A. KOTIK
If properly executed, franchising is a win-win situation. There are significant advantages to Franchisor, Franchisee and the consumer. For a prospective Franchisee, it represents an opportunity to own and operate a business involving a proven concept, product, or business format with a minimum of financial risk. For potential consumers, franchising provides a way to receive goods and services in a reliable and predictable manner. A Franchisee also benefits from consumer recognition of the Franchisors Trademark and products. The big advantage of franchising shows this statistic: 75% of all independent owned businesses don't survive the first five years, in franchising only 5% have the same faith.
BY RUDOLF A. KOTIK
II. HISTORY OF FRANCHISING

The word Franchise comes from the Old French meaning freedom or privilege. In the middle ages of Europe, the local lord would grant rights to hold markets or fairs. In essence, the monarch gave someone the right for a certain type of activity. They were the first Franchisors - and did not know it. In 1851, Isaac Singer accepted fees from independent salesmen to acquire territorial rights to sell his recently invented sewing Machine. The Singer Company began granting distribution franchises and was the first Company to write franchise contracts. In the late 1880's Cities began giving franchises to newly established electricity companies. Around the turn of the Century oil companies and automobile manufacturer began to grant rights to sell their new inventions. White Castle was the first fast food hamburger franchise chain in America, opening 1921 and sold since then over 12 billion hamburgers. A&W started franchising their root beer stands in 1921.
BY RUDOLF A. KOTIK
Business format franchising, which is the dominant mode of franchising today, started after the Second World War. In the 1950's all kind of services and products started to franchise in the USA. In 1955, a certain Ray Kroc came to the idea of franchising a then little known fast food place named "McDonald's" - and in the meantime they sold more than a 100 billion of hamburgers worldwide! Many well-known restaurant franchises started during this time. Colonel Harlan Sanders initiated his first KFC franchise, so did Dairy Queen and Dunkin Donuts. Franchising has powerfully transformed the entire perception of business culture and practice. In the USA over a trillion $ in revenues is generated by more than 5,000 Franchisors and their Franchisee yearly. The "American Dream" is becoming a dynamic reality for hundreds of thousands of additional entrepreneur around the world. In the Philippines, where Business Format Franchising started in the 1970's (except A&W, who was earlier here), one of the first was again was "McDo", who opened its first outlet in 1981. To that time, a small chain of ice cream joints began selling burgers "Jollibee", which is today our number one Franchise Company in the Country. The success of Jollibee is a mystery to the top guys of McDonald's in Chicago, since they are the number one in fast food in every Country they operate - except the Philippines. Today, more than 1,100 Franchisors, 200+ foreign and 800+ local, operate in the Country and the number keeps growing to the advantage for the consumer - more competition, more choice, more bargains. Almost all of them in the food business offer some kind of value meal combinations. Some of them are exporting their Franchise System to other Countries. As example, 25 of the more than 400 Franchisor clients of RK Franchise Consultancy are already franchising in foreign Countries throughout Asia, the Middle East, Europe and America.
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III. FRANCHISING 101

In a world in which business strategies and techniques are continually improving, superior customer relations and outstanding supplier relationships are critical. In many ways the franchise relationship is the definitive expression of this principle. A Franchisor and its Franchisees jointly contribute to a supply system for products or services focused on the customer. They obligate themselves to each other under an agreement and endeavor to establish a durable, long-term relationship that will impact virtually every aspect of their respective business and protect that supply system. Few other business arrangements are so all encompassing. Unless a Franchisor and its Franchisee deliver to each other what they have promised, the supply system to the customer will be compromised. The mutual commitment of the Franchisor and Franchisee to their network and resulting consistently high level of customer approval of their products or services easily recognize good franchise systems.
A Franchise Relationship must have an effective Structure Franchising is a contractual relationship. The Franchisor and the Franchisee each make commitments and agree to operate under certain
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constraints. In the aggregate, these commitments and constraints constitute the structure of a franchise relationship. That structure must protect the Franchisor and all Franchisees of the franchise network and afford opportunity and security of the Franchisee. There are a number of elements of the structure of a franchise relationship that are critical to its effectiveness as the foundation for an expanding franchise network.
Control of products and services that Franchisees are permitted to sell Franchisors control the products and services that their Franchisees are permitted to sell in order to control quality of the goods and services sold by Franchisees. Limiting the scope of the franchised business to those products and services that are within the scope of the Franchisors expertise and to preserve a uniform image. It is common for Franchisors to permit some Franchisee experimentation and variation because Franchisees are an excellent source of innovation, regional variations may be necessary and different customer bases may require variations in product or service mix or different emphasis.
Control of operating assets, goods and services utilized and sold by Franchisees Franchisors controls the sources from which their Franchisees purchase operating assets (equipment, fixtures, furnishings and signs) and goods and services required to operate the franchised business for one or more of four basic reasons: to control the quality and uniformity of the goods and services sold by the Franchisee, to assure sources of high and uniform quality goods at prices that are competitive with or lower than those available from other sources, to protect confidential information, to be a profit center for Franchisor.
These are legitimate reasons for controlling the sources of supply utilized by Franchisees, provided that the restrictions do not cause the costs incurred by Franchisees to exceed what such costs would be for
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comparable products without such restrictions. Ideally, and in many franchise networks, supply restrictions are part of supply programs that lower costs to Franchisee. As a general proposition, Franchisors should limit source restrictions to those products and services that are important to the development and operation of the franchised business and cannot be simply specified by brand, model and/or grade. A Franchisor also can derive revenue from supply programs. Franchisors evaluate the total revenue produced by a franchised business from: - Royalties and Continuation fees - Advertising contributions or National Advertisement funds - Sales of goods to the Franchisee - Commissions paid by suppliers Some Franchisors rely primarily on fee revenue and other Franchisors rely primarily on the sale of goods to their Franchisees. The aggregate revenue received from a franchised business must be sufficient to support essential Franchisor services that maintain the system, standards and keep the network competitive, and to produce a profit for the Franchisor. The aggregate of the revenue a Franchisor derives from a franchised business must allow the Franchisee to realize a sufficient rate of return on its investment. Several franchised networks have reduces or eliminated royalties and advertising contributions. Such networks rely on sale of products to their Franchisees and the sale of services at the Franchisees option. If Franchisees elect not to buy such services, the networks competitiveness could be jeopardized. When a Franchisor relies primarily on product sales to its Franchisees, its revenue base may be less secure and competitors may target its franchised network, but it is less dependent on monitoring its Franchisees to insure proper royalty calculation and payment or may not charge any royalties at all.
Control of the Franchisees business premises Franchisors sometimes control the Franchisees business premises by leasing or subleasing the premises to the Franchisee or requiring the Franchisee to sign a collateral assignment to the Franchisor of the lease
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for his business premises. Control of the Franchisees business premises gives the Franchisor more effective control of the Franchisee and his business. The premises continue to be part of the Franchisor's network even if the Franchisee does not. However, such control increases the capital requirements of the Franchisor or involves contingent liability and administrative effort and cost, unless control is implemented by means of collateral lease assignments. This practice is common in the Philippines mostly with the 3 leading Petroleum Companies only. In the USA, most franchise location are leased by the Franchisor and sub-leased to the Franchisee. In the Philippines Franchisee have to find their own location and sign up direct lease agreements. Another way to secure the location for the Franchisor in any eventuality is to let Franchisee and Landlord sign a three party agreement called the Agreement with Landlord, which secures the location for the Franchisor in the event Franchisee defaults on Landlord or Franchisor. It is generally difficult to secure consent to such assignments from malls and it may be difficult to secure consent from any landlord without at least some guaranty. Mall chains such as SM even require Franchisor to sign a 3-party agreement guaranteeing the payment of rent in the event Franchisee fails to pay for it.
Grant of exclusive or protected territories Franchisors grant exclusive or protected territories to their Franchisees to facilitate sales of franchises and to motivate effective market development by the Franchisee that, theoretically, will be more inclined to invest in the development of his business if he has no competition of the same brand in his area. Many Franchisors have discovered that they made to large initial estimates of the population required for a successful franchised business (once their network trademark became more widely recognized) and that large spaces between franchises only invited competitors. Large
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territories also may interfere with adjustment to changing markets and inhibit the offering of additional franchises to productive Franchisees. Structuring the franchise to enable the Franchisor to achieve greater market penetration by granting limited territorial protection and reserving rights to sell to some customers within the Franchisee's territory will tend to result in more system expansion conflicts with existing Franchisees.
Control of the geographic area The corollary of the exclusive or protected territory, a right granted to the Franchisee, is a restriction on the area within which the Franchisee may conduct his business. If Franchisees have the ability to sell outside their immediate markets and are able to market and sell in the territories of adjacent Franchisees, restrictions on such marketing may be necessary to make exclusive or protected territories meaningful. Franchisors also impose such restrictions to force a Franchisee to fully exploit his assigned territory and to maintain the quality of the product or the service sold by the Franchisee. Confining Franchisees to their specific markets can result in troublesome enforcement problems for the Franchisor. The Franchisor will be expected to enforce the restriction against the invading Franchisee and may have a legal obligation to do so. The invading Franchisee may be highly productive, have effectively penetrated his own market and invades the territory of the adjacent Franchisee primarily because that territory has not been effectively penetrated. Disciplining a productive Franchisee to aid a lazy or ineffective Franchisee is not an enviable task. Some competition among Franchisees may be beneficial to the network.
Exclusive relationship Franchisors typically prohibit their franchises from having investments in or performing services for a competitive business. This prohibition is intended to protect confidential information, maintain the Franchisors
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revenue, prevent the use by competitors of the Franchisors know-how and focus the Franchisees efforts on his franchised business. Such prohibitions are sometimes limited to the Franchisees territory or a larger territory, but frequently have no geographic limitation. Prohibited competitive business may be defined broadly, including related types of business. Such prohibitions are a deterrent to the Franchisee and a risk to termination of his franchise if he does not comply. We call that the COVENANCE clause in the Franchise Agreement.
Transfer of the franchise Franchisors restrict transfers of their Franchisees in order to maintain control over the persons who operate them. Such restrictions should apply to the franchise agreement, ownership of Franchisee and the assets of the Franchisees business. Typically the Franchisor reserves the right to approve the transferee and the terms of transfer. The right to approve the terms of transfer is important to insure that the buyer of the Franchisees business does not substantially overpay for it, or accept burdensome payment terms, which could jeopardize his ability to operate the business in compliance with the terms of the franchise. Some franchise agreements merely provide that the Franchisor will not unreasonably withhold approval of a transfer. Others specify in considerable details the criteria for approval relating to the proposed transferee and the terms of the transfer. It is common for Franchisors to reserve a right of first refusal to buy the Franchisees business on the same terms as are offered by a bona fide purchaser. Franchisors exercise this right to acquire franchised businesses as company-owned outlets and, occasionally, in lieu of denying approval of a proposed transfer when the Franchisor is unsure that it has sufficient grounds to disapprove a prospective transferee.
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Expiration Franchises are granted for a definite term, usually between 5 to 10 years for local franchises and up to 99 years for master franchises and therefore will expire at the end of such term. Franchise agreement should deal with this significant element of the franchise relationship, providing for the preconditions for the grant of a successor and the terms on which it will be granted. If a franchise is not renewed, the restrictions on the business activities of the Franchisee and its owners and members of their immediate families are an issue. Some franchise agreements provide for a post-expiration covenant not to compete. If the Franchisee is prohibited from operating the same type of business in the same market under a different trademark subsequent to expiration he will lose whatever going concern value his business has apart from value of the expired franchise. Such value may consist of location value and the personal goodwill of the Franchisee in his market. A good Franchise Agreement contains a renewal provision, which gives the Franchisee the right to renew if he followed the rules of Franchisor during the original term of the Franchise Agreement and he may have to pay a small renewal Fee upon renewal of the Franchise Agreement. Some Franchisors reserve an option to buy the Franchisees business upon termination or expiration of the franchise. The purchase price may be determined by a formula or may be the fair market value of the business, without any value attributed to the expired franchise.
A Franchisors Management Philosophy and Culture must be consistent with the Franchise Relationship. The management philosophy and culture of a Franchisor is manifest in a variety of attitudes and interfaces between Franchisor's management personnel and franchise owners. Though the franchise relationship is governed by a contract, a contract cannot anticipate all contingencies or problems. It is essential for a successful franchise relationship that mutual
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trust and respect develops between Franchisor and Franchisee to supplement the contract. Initially, management must develop criteria for identification of high potential Franchisees and the patience to select qualified candidates. Management must include good motivators with the commitment and patience to develop and cultivate sound, durable and positive franchise relationships. Such franchise relationships require real two-way and regular communications with Franchisees. A Franchisee must believe that his opinion is respected and management must be sensitive and responsive to Franchisee concerns and problems. Management must have a flexible approach to Franchisee problems and willingness to assist Franchisees in solving them. A franchise network should have impartial internal dispute resolution procedures and genuine efforts should always be made by the Franchisor to resolve disputes amicably. Franchise networks also need systems for obtaining, evaluating and sharing ideas developed by Franchisees scope for creativity and decisionmaking and permit some degree of innovation by Franchisees who, may be the networks best source of ideas and productive innovation. Management must have a commitment to Franchisee profitability and equity growth and the creativity to maintain the value of the franchise. A Franchisors management must sometimes be willing to sacrifice shortterm profitability of the Franchisor to ensure Franchisee success. A Franchisor and its Franchisee each assume a responsibility to support a network of business that operates under a common trade identity as the performance of one reflects on all of the others. In the most successful franchise networks, the Franchisor and the great majority of the Franchisees do not view their responsibility and commitment as limited by their contract. They think of it as being whatever level of effort is required to assure that the network continues to be a leader in its industry.
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A Franchisor must expand its network at a manageable rate Initially, a Franchisor must determine the markets in which the franchised business is most likely to be established successfully. These usually will be markets that meet of the following criteria and markets in which: Franchisees can be effectively monitored, Franchisees can be effectively supported, Which good sites are available at affordable costs, Areas that are not saturated with competitive business, One or more large competitor does not dominate that area, In which suppliers can effectively and economically deliver essential products and materials, In which the network trademark is recognized.
It is generally advisable to concentrate expansion in one or a few markets where critical mass can be achieved quickly in order that the network have in such markets effective advertising, support and assistance and effective monitoring of Franchisee performance. A Franchisors ability to expand is limited by its financial, management, supplier and field service resources. Franchisors who fail to understand the limitations on their ability to effectively expand are more likely to fail in improvidently selected expansion markets. In mature franchise systems, decisions by the Franchisor to establish additional outlets in proximity to existing Franchisees is seen by those Franchisees as encroachment on their business. Franchisees resent and resist such perceived encroachment and the Franchisor is confronted with a choice between fully penetrating the market and preempting competition, at the cost of impairing existing relationships, and accepting a lower level of market development. Encroachment problems also arise when a Franchisor attempts to penetrate franchised markets through nontraditional outlets or distribution channels in department, grocery, convenience or general merchandise stores, on school campuses, through mobile carts and kiosk facilities and in combination or dual branding arrangements.
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Achieving the optimal balance between effective market penetration and good franchise relationships is difficult. Even the best-managed franchise networks have difficulty resolving the problem of balancing the imperatives of network expansion and competition with perceived interests of existing Franchisees.
A Franchisor must develop and implement effective Systems to secure high quality and consistent operations at Franchised Outlets A Franchisor generally has less control over franchised outlets than it would have over company-owned outlets. Maintenance of high and relatively uniform standards throughout a network is of significant value to those Franchisees that voluntarily maintain system standards and perceive system standard as a valuable element of their franchise. If a Franchisor fails to establish and maintain system standards, its competitive position and the value of its franchise will decline. The most productive and successful Franchisees may break away and the ability of the Franchisor to sell franchises and to expand will be impaired. The franchise relationship can be inflexible. Franchisees may resist changes needed to adapt their businesses to changing markets by upgrading their business facilities, changing the products/service mix, modifying operating procedures, adopting different marketing strategies and modifying the standards at company-operated outlets. A Franchisor must implement policies, systems and procedures that help maintain standards by rewarding compliance and enforcing system standards where positive motivation proves to be insufficient. Many Franchisors make effective use of peer pressure by other Franchisees to achieve compliance with system standards. Inspection reports should be reviewed with Franchisees and realistic timetables should be determined and agreed upon for correcting appearance and operating deficiencies. Follow-up inspections should be timely conducted and a Franchisor should be prepared to offer assistance to a Franchisee who is making a bona fide attempt to bring the appearance and operation of his business into compliance with system standards.
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The tension between a Franchisors need to control the appearance and operation of the Franchisees business and the heavily promoted independence of the Franchisee is not always satisfactory resolved. Independent business ownership is promoted as a positive aspect of the franchise relationship, but the requirements of quality control and uniform image impose limits on such independence. If a Franchisor fails to secure voluntary compliance from the great majority of its Franchisees, it faces potentially difficult and costly enforcement obligations. Longstanding neglect of system standards can results in loss of ability to effectively implement those standards. Non-complying Franchisees may damage the reputation of a franchised network. Termination of franchise relationships can be difficult and expensive. In some instances, a Franchisor may have to buy a noncomplying outlet to achieve a quick end to substandard appearance and operations.
Maintain the Value of a Franchise The benefits and services furnished by a Franchisor must have continuing value to Franchisees relative to the cost of the franchise. Franchisor faces several obstacles in achieving a general perception among its Franchisees that the value of the services furnished by the Franchisor, are equal to the fees they pay. Fees payable to a Franchisor typically increase with increases in franchise revenue. The scope and frequency of the services furnished to maturing Franchisees may remain level or decrease and Franchisees may perceive a declining need for and value of the services furnished by their Franchisor. This problem can be compounded by the tension inherent in a fee based on gross revenues. The Franchisors interest is perceived to be to maximize profits. Services designed to increase sales may not be perceived by Franchisees as likely to increase profits, especially when the sales enhancement program involves a capital investment by the Franchisee or higher operating costs.
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Even a high level of benefits and services will not always overcome disaffection of some Franchisees with the franchise network. Over time, some Franchisees are likely to lose interest in the franchised business or be satisfied with a low level of market penetration. The profits of a franchised business may be invested in other businesses, leaving the franchised business with insufficient capital, and the attention of a Franchisee may be diverted to other business interests. Though no level of service or benefit may entirely prevent such problems, the Franchisor that fails to maintain valuable services and benefits will encounter Franchisee disaffection including breakaway Franchisees on a greater scale. A franchise network is at some risk when it loses an effective Franchisee. Each Franchisee is a potential competitor when the relationship ends. The Franchisees know the Franchisors business. It is difficult and expensive to enforce covenants not to compete. Confidential information of the franchise network are difficult to protect and vulnerable to disclosure and use by competitors.
Dispute Resolution A franchise relationship has high potential for disputes. A Franchisor has business relationships with sources, in some networks hundreds of Franchisees of a network entered into their relationships with the Franchisor at different times and with differing expectations and goals. The Franchisor must operate its business for the benefit of its owners and its Franchisees and steer its network in what it determines to be the right direction. Some Franchisees are likely to disagree with the balance the Franchisor chooses between its owners and its Franchisees or with the direction that the Franchisor charts for the network. Therefore, it is essential that a franchise network develop effective dispute resolution procedures may include any combination; an ombudsman; internal dispute resolution procedures involving participation by neutral
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Franchisees and members of the Franchisors management; and third party, non-binding mediation. These are all non-binding methods used to resolve a dispute without resort to some form of binding dispute resolution like litigation or arbitration. Non-binding dispute resolution methods are generally effective in resolving disputes, but will not always produce a mutually satisfactory resolution. A Franchisor should consider arbitration as the method of binding dispute resolution instead of relying on litigation. Though arbitration is not without problems and costs, it is, on balance, a faster and less costly method than litigation of resolving a dispute that cannot be otherwise resolved. Cases in Philippine Courts can easily take five years or longer. The accelerated resolution and lower cost of arbitrated dispute results from the elimination of most discoveries and various techniques commonly used in litigation to narrow the issues to be resolved. Cost is further reduced and a final result achieved more quickly because an arbitrators decision may only be appealed in limited circumstances. However, inability to narrow the issues in dispute and learn by pretrial discovery the other sides theories and factual support, and the limited scope for appeal of an arbitrators decision, is viewed by some as a significant disadvantage of arbitration. Nevertheless, if a franchised networks formally decided disputes are projected over an extended period, and assuming that the Franchisors management has the good sense to informally resolve disputes in which the Franchisees claims or position is reasonable or the facts do not strongly support the Franchisors claims or position, arbitration is likely to prove an effective dispute resolution method from the respective of cost and minimizing the strain of disputes on the franchise relationships. To assist Franchisors or Franchisees in disputes, FIFA Filipino International Franchise Association offers arbitration services at very affordable rate.
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The 4 P of Product Marketing Four elements play a role in a customers decision to buy a product: the product itself, the price of the product, the place and the promotion of the product. Product:
What is the physical product? What additional features are needed? What are the functions or uses of the product? What services need to be provided? Does the customer expect guarantees or warranties? How should the product be packaged for shipment? How should it be packaged for the consumer? What images should the product project? What brand name should be used?
Price: What price is needed to make a profit? What price will customer be willing to pay? Who determines the price customers will pay? Should discounts and allowances be provided? Should coupons, rebates, markdowns or sales be used? Should credit be extended to customers? How should the business respond to competitors prices?
Place: How will the product reach the customer? How will products be handled, stored, displayed and controlled? How will orders be processed? Who will be responsible for products that are damaged or not sold? What kind of traffic pattern fit the buying patterns of target customers?
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Promotion:
What information do customers need? Should promotions be informational or persuasive, or merely reminder messages? Do all customers need the same information? What combination of advertising, personal selling, sales promotion, and publicity is needed? Will mass or individual promotion be most effective? What media should be used? How often must information be communicated to franchisees and customers?
Finding and developing good employees Some Franchisors do offer some assistance in recruiting employees, at least you find job descriptions in the Operations Manual, however in most cases the Franchisee has to hire his own employees, and Franchisor provides initial training for them. As a rule, the Franchisor expects you to bring appropriate human resource skills to the business along with your business management skills. If you need a lot of semi-skilled or unskilled employees, a Temporary Employment Agency can be of help providing you with the employees, then you need to hire directly only the key personnel, who shall be especially good trained so they can help also in training the people provided by the agency. In the job description section of the Operations Manual shall be listed the knowledge an applicant shall have, together with the interpersonal skills required. Once you select the employees, a detailed interview is necessary to determine weather the applicant possesses those attributes you are looking for. Use a mix of close-ended and open-ended questions. A closeended question can be answered with yes or no while in a open ended question the applicant have to give the details.
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Finding the right employees is just the beginning. Your long-term success will depend on your ability to manage and motivate your staff. The type of work your business offers will also impact how you manage and motivate employees. In a restaurant or service business most employees will not be in career positions. You may often be the first employment experience for many of your employees. Having complete, detailed instructions and clear, straightforward rules will be important. The most important part of managing your employees is to remember you are the leader. The buck stops with you. Just as the coach is a role model for players on the team, you are the role model for how things get done in your business. You set the example for how things get done how the business operates.
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IV. WHAT DOES A FRANCHISE PROVIDE

The advantages of a franchise over an independent business are aplenty. A Franchisor must furnish valuable services to its Franchisees.
Business Name Franchisee will have his own corporate name as Incorporation or individual business owner but the franchised business operates under the Trade Name of the Franchisor.
Market Studies Franchisors should knows where franchised businesses should be opened, which locations are good for a Franchisee and which not, which may be determined generally by location, most important with food franchises or other aspects, like purchase power of a certain area, etc.
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System Standards Sensible and complete specifications, standards and operating procedures, the so-called system standards, effectively communicated to Franchisees and readily understandable.
Operational Manual The "How To" documentation of the business operation and the implementation of the system.
Proprietary Marks The right to use the logos, signage, slogans and Trade Marks of Franchisor. It is not enough that a Franchisor has a DTI Business Name registration or a SEC registration, he has to obtain a Trademark from the Intellectual Property Office, which is located at Sen. Gil Puyat Avenue in Makati.
Experience Transfer of business experience is transferred from Franchisor to Franchisee
Wisdom of Franchisor The Franchisor went through the "labor pain" of opening the business by himself some time ago. For a new Franchisee that trial and error period is eliminated.
Training Effective initial training is critical to achieve positive Franchisee attitudes regarding system standards, the operation, the Franchisor and the value of the franchise and depending on the business can take from 5 days up to 6 month.
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Inadequate training is a common cause of poor Franchisee performance. Good Franchisors provide ongoing training on a regular basis.
The Franchisor is able to explain the concept, philosophy and operation of the Franchise to the Franchisee The Franchisee management gets hands-on experience in operation and
Indicates the capability or lack thereof of the Franchisee to successfully operate the business of Franchisor Motivates Franchisees to perform at their best level once they understand all aspects of the franchise business Increases satisfaction of the Franchisee as well as the employee working for the franchised facility Reduces complaints from consumers and employees Helps maintain quality of products and services based on the standards set by the Franchisor Promotes adherence to sanitation standards in all functional areas of the business Reduces breakage and spoilage within the Franchised facility Reduces number of accidents Creates an identity for the Franchisee within the franchised system and fosters development of Franchisee loyalty Improves operational skills of the Franchisee and employees Establishes the Franchisor and the Franchisee as a team rather than two separate partners
Site Selection Assistance and Approval Franchisors in the Philippine usually do not provide locations and prospective Franchisees have to find them by themselves. However, Franchisors will know where a franchised business shall be located within a certain area and will inspect the site prior to the start of construction or operation, if the location is suitable for the franchised business. Franchisors will require Franchisee to conduct preliminary research on potential sites. In most cases, property owners, real estate brokers or shopping mall managers provide the demographics and other commercial
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information pertaining to a potential site. Franchisee or his employees might have to spend some time at a location to do traffic or pedestrian count and to study flow of people and traffic. Franchisors should approve only suitable locations, those locations that they would approve also for Company owned outlets. Plenty of Franchisors approve also not suited locations just for the sake of getting the Franchise Fee from Franchise applicants. Good Franchisors turn down up to 90% of location applications to make sure the location is profitable for Franchisee. How to evaluate a location:
Accessibility and traffic patterns: Is it easy to exit and enter into traffic? Are difficult intersections, major road construction or other impediments? What time of the day is traffic heavy? Where is the traffic going? Are people shopping or merely commuting to neighborhoods where they can purchase your product or service from a more convenient store? Zoning: does your municipality or City allow that kind of business at a certain location? Visibility: Is visibility important to the success of your business? If your product is an impulse item or geared towards mass markets, then you need to be where customers can see your business. Hours of operation: Do the hour of operation match the needs of your customer? Parking layout: Determine how much parking you need and select a location that offers it. Public transportation: Extremely important if it is a product for the masses that your outlet is in front of public transportation. Also if you have a lot of employee in the Franchised business who have to commute to work. Neighborhood development: Is the neighborhood stable or declining? What kind of subdivisions or living conditions are in the neighborhood of the outlet? Competing outlets: Are competing businesses located in the immediate vicinity? If so, the good news is that your location is attractive; the bad news is that youll have competition.
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Size: Do you require space for selling, storage, production, or maintenance of equipment? The larger the space the higher the rent, electricity and maintenance. The Franchisor shall recommend or require certain square meters as minimum space. Dont rent more than you need. Lease term: Look for a lease whose term matches your franchise contract but can be renewed. Utilities: Water supply, electricity, sewage, telephone lines play an essential role in determining the suitability of a location.
Store lay out Franchisors will provide lay out assistance and supervise the construction of a new franchised store. Interiors, color schemes and other identifiable marks of the Franchisor have to be followed in putting up the business. The same goes with indoor and outdoor signage, lightning and decoration. The entire construction cost is at the expense of the Franchisee, and has to be paid as due to either the Contractor or Franchisor, depending on the arrangement.
Exclusive Territory Most Franchisor will award new franchises with an exclusive Territory, which depends on the kind of business can be a certain radius in meters or a floor in a mall, a whole City or a whole province or City or several of them as Area franchise or even a whole Country as Master franchise.
Procurement Programs Franchisor will provide a listing of authorized suppliers for equipment's, goods, materials and services.
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Pre-opening Assistance Franchisor assistance in hiring personnel for the Franchisee by giving the guidelines for needed staffing and training them, and set-up of the franchised outlet.
Grand Opening Assistance Franchisor's management and staff assist new Franchisee upon grand opening of the franchised outlet to operate it smoothly from day one onwards. Franchisors representative will remain in the Franchised Facility for a period of time as determined by Franchisor to assist Franchisee in the initial operation phase.
Marketing Strategies Franchisor may provide advertising and marketing programs to maximize the advantage of the common trade identity of the network with nationwide advertisements, radio and TV commercials, etc. through a National Advertisement fund, to which each and every single Company outlet and Franchised Facility have to pay a certain percentage of gross sales. Franchisee will be required to spend a certain amount for the initial month of operation, so called Grand Opening Marketing. Those amounts are spent directly by the Franchisee and not collected by Franchisor. Franchisees have to take their part in implementing the so-called LSM (Local Store Marketing) within their territory. If there are several Franchisees operating in a certain area, they might be required to operate a Co-Operative Marketing Fund, wherein they advertise the business as a group (e.g. billboards).
Effective Field Service Operational support is needed by Franchisees for occasional questions and problems. Knowledgeable and well-trained personnel with positive attitudes and a willingness to help Franchisees are provided by
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Franchisors. Franchisors shall also be available to Franchisee via phone, email, fax or text for urgent problems arising from the operation of the franchised business. Important is also that Franchisor and his representative regularly visit the franchised outlets.
Research and Development Businesses face tough competition and new products are constantly to be tested and introduced in the market. The job is with the Franchisor in development of new products and service, improvements of equipment's, formats, operating efficiency and trying to beat competitors.
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V. FRANCHISING QUESTIONS
How does a franchise chain start? Imagine a store owned by an individual with a particular concept. If the business is successful, the owner may develop a second store and hire employees for the day-to-day operation. At that point, if the entrepreneur still wants to expand but prefers not to own and operate additional stores, he/she may decide to franchise the store name and business system to an independent business person - the Franchisee. In return, the Franchisor may ask for an initial fee and continuing royalty payment based on a percentage of that Franchisee's sale. The business is now franchised. When I visit a store how can I know whether that store is owned by the Franchisor or a Franchisee? It's difficult to tell just by visiting the store. Many companies have stores that are owned and operated by Franchisees but also have stores that are company-operated.
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It's entirely possible that of two stores with the same name, one may be owned by a Franchisee and the other owned by the Franchisor Company. In both cases, the products, services and quality should be identical.
How wide spread is franchising? There are more than 10,000 Franchisors around the globe, and alone 1,100 in the Philippines, operating revenues of more then 100 Trillion Pesos yearly worldwide.
Where does franchise sale comes from? Most franchised sales are still by product and trade name franchise chains - food, automobile services, general retail, courier services, real estate brokerage, building services and improvements, and domestic, business and maintenance services.
What is BUSINESS FORMAT FRANCHISING? In business format franchising, the Franchisor prescribes for the Franchisee a complete plan or format for managing and operating the establishment, not just product, service and trademark. The plan provides step-by-step procedures for every aspect of the business and, anticipating most management problems, provides a complete matrix for management decisions confronted by the Franchisee. It comes with marketing strategy and plan, operating manual and standards, quality control, research and development and a continuous process of training, assistance and guidance. The Franchisee is required to comply with the Franchisors guidelines pertaining to all aspects of the business, including operating procedures, the quality of products and services, and the physical appearance of the business facility.
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What are the major growth sectors in "business format franchising"? As we become a more service oriented economy, as more women enter the workforce, and as larger percentage of the population grows older, growth areas in franchising are responding to these changes. While it is important to consider industry growth before investing in a franchise, it is more important to analyze an individual franchise company's track record, keeping in mind that quick growth does not always spell success. A franchise organization that grows too quickly might not have a service team in place to support all of the units properly. Overall, long range trends indicate a steady, solid growth in business format franchising. Some will fall by the wayside, as is natural with any business, but others may well be the "household name" franchise success stories of tomorrow.
What kind of business to franchise? Virtually every business form you can imagine lends itself to franchising. The International Franchise Association (IFA) lists more than 60 categories to describe its members.
Is the look-alike characteristic of franchises a disadvantage? Don't consumers want variety? The increasingly mobile consumer has come to depend on and appreciate the consistent quality of franchised products and services. Today, no matter where they go, people expect and want the same quality, which is why consumers so often shop at franchised establishments. The ability to easily recognize an establishment from the outside guarantees there will be no surprises or disappointments on the inside.
What kind of investment is necessary to buy a franchise? Investment requirements differ tremendously. It all depends on the industry and the type of business. Discuss this with the individual
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companies or with RK Franchise Consultancy. Franchises might be purchased for a starting price of 100,000 Pesos and range right up to 27 Million Pesos for a single unit store and anything from US$ 20,000 to US$ 5 Million for a master franchise.
Would I make a successful Franchisee? A successful Franchisee should be suited to the industry, which he or she intends to join, suited to the particular Franchise Company and suited to the franchise system generally. Important questions to ask you include:
Am I suited to the industry physically and be experienced, education, learning capacity, temperament and financial ability? What type of work is most appealing to me? For example, do I enjoy working with food? Mechanical things? People? Property? Books? Computers? Sporting Goods? Etc. Am I prepared to work hard and take a financial risk? How do I react to controls? Do my advisers, family and friends think I am adaptable and trainable? Am I a loner, resisting authority and restraints, or can I accept guidance and directions happily? How do I personally feel about the company's image, products and services?
The right answers to these questions help determine your potential success as a Franchisee.
How do you explain the success rate for franchised businesses? The franchising system is designed to provide a pre-tested formula for success, plus ongoing advice and training.
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The unavoidable business mistakes have been worked out of the system through experience. Most independent businesses fail because of lack of management skills. With a franchised business, your Franchisor should be eager to help you overcome problems. Your hard work and the Franchisor's expertise spell a long partnership. No one can be 100% sure of success. Although the majority of franchise owners are satisfied, successful business people - some do suffer financial loss. Regardless of earning claims made by Franchisors, recognize that success or failure ultimately depends on you.
What are some of the drawbacks of owning a franchise? In exchange for the security, training and marketing power of the franchise trademark, you must be able and willing to give up some of your independence. If you are a person who likes to make most decision on your own or to chart the course of your business alone, a franchise may not be right for you. As a Franchisee, you will be required to comply with the various controls and procedures established by the Franchisor. Then too, all successful businesses require a lot of dedication and plain hard work. You must be prepared to make that commitment.
Are there special franchise advisers and consultants to assist? Franchising is a mature sector, which over the years has developed quite a number of consultants who specialize in advising to the sector, among them yours truly who assist in transacting the purchase or to develop a new franchise.
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For a good understanding of what you are getting into, you need to make full use of a range of expertise a Franchise Consultant is the right answer or you may contact FIFA Filipino International Franchise Association or the other two Franchise Associations. Otherwise it's do-it-yourself, which is cheap - in every sense of the word and can become expensive if done wrong and a Consultant has to be called in to straighten out the mess.
What is the best advantage that franchising has over independent businesses? Franchisees are never alone, which is one of the best benefits that one could hope for in this tough business world. On one hand they have the Franchisor to support them and on the other they have Franchisees, which are having parallel business experience. Furthermore, as franchise matures, the brand name and trademark becomes more valuable. So as Franchisees consolidate in the market place they are actually adding value to the group as a whole. Similarly, as a franchise grows in numbers, the multiplication of sites creates a stronger market presence, which benefits all Franchisees.
Buying an existing Franchise Outlet Just like any business, existing Franchisee can sell in many Franchise systems their franchised outlets if they no longer want to operate it. The Franchise Agreement has provisions when, how and to whom a Franchised Facility can be sold. However you can only purchase the remaining term of the Franchise Agreement. In purchasing an existing franchise, make sure there is an assumable lease and the landlord will consent to the transfer.
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Questions regarding to Franchisors obligations from a Franchise Applicant
What is the total investment we are talking about, beside of Franchise Fee, rental deposit and utility deposits, such as renovation, equipments, initial investment in merchandise, grand opening marketing, etc. What products have to be purchased from Franchisor? What kind of training do you provide? If so, when, where and for how long? Do we have to pay for the training? In most cases training fee is included in the Franchise Fee except Lodging, transportation and allowances for Trainees. Are we entitled to continuous training throughout the term of the Franchise Agreement? Will you provide us an Operational Manual? Will the Franchisor provide advertisement or does have any advertisement schemes, such as National Advertisement Fund, Local Store Marketing or Co-op advertisements? What continuing service do you provide after starting the operation? What are the terms for renewal and is there any renewal fee to be paid? Payment of initial franchise fee? Usually to be paid upon signing of the Franchise agreement. When do we pay royalties? Most franchise systems have monthly royalty payments. Shipment of goods, who pays for it? Can I sell my franchise if I want to migrate or lost my interest in the business?
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VI. BENEFITS OF BUYING A FRANCHISE

Earn what you are worth Thousand of franchise owner report they were handicapped in their corporate careers by Company policies and Superiors that put a cap on their earning. When you own your own Company, your efforts are rewarded and your personal income shows it!
Build equity Financial strength comes to those who succeed in running a business. Approximately 95% of all millionaires in the Philippines own their own business. If great wealth is one of your goals, entrepreneurship is the answer.
Satisfaction of achievement Much business owner report that seeing their actions turned into realty without stagnating for month in committee meetings as so oft happens in big companies is a major reward of owning their business.
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Choose your own job description When you're the owner, you can delegate certain aspects of the business to others and create a job description that suits your personality, skills and interests. Naturally, the industry you choose and the size of your operation will affect your flexibility in this area.
Control your future Business owners live the scripture "you reap what you sow". You can manage your work schedule against family needs and recreation - if you're willing to share some profits with additional employees.
Never transferred, laid off or fired Major companies are notorious for relocating their employees and downsizing their staff at the most inopportune times! When you run your company, you'll decide when and where to operate.
Why a franchise? There are many reasons why franchising is the best type of operation for the majority of first time business owners. Most revolve around the increased probability that the business will succeed and provide profits to the owner in a shorter time frame than an independent business. This allows the owner to address her/his personal goals both financially and personally.
Lower costs than an existing business When buying an existing Company, you often don't know what you are buying or if the price is right or the existing business profitable. Starting a franchise is almost always less expensive.
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Less risk than an independent start-up One spends up to 5 years as an apprentice in an industry before considering owning a venture in that field. Buying a franchise eliminates this need and puts you on the road to success quickly. Gain advice on site selection, design, operation, capitalization and marketing. A good Franchisor provides instruction and support on all aspects of running a business in its industry. It's as though you are hired and trained to open a branch for a major national company - except that you own the "branch"
Receive a proven profitable system for doing business When you've had a chance to talk to other Franchisees, you'll recognize how important it is to have a system to follow for your venture. This plan is easily worth a few hundred of thousands of Pesos or more.
Benefit from quality research and development Most small business owner are just too busy making money to research the future trends in the industry and develop new products or services to meet the needs of their customers. A Franchisor will always be searching for ways to make its network more successful.
Access to trained support personnel Your royalties and advertising fees provide regular improvements in the Franchisor's systems and these are provided to you for implementation in your venture.
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Quicker start-up than independents A proper plan outpaces an independents hit and miss operation almost every time. Looking at just independents that succeed - you'll find that franchises grow quicker, reach break-even sooner and succeed more regularly than others in the same industry as depicted in the accompanying chart.
Survey A recent Gallup poll in the USA of 994 franchise owners produced the following snap shots of the field: 94% consider their franchise successful. 75% said they'd "do it all again" and only 6% reported unhappiness with their Franchisor. The Philippine Franchise Association reports a 95% success rate.
Buyer Beware More and more relatively unknown Franchisors with little or no know-how about Franchising offer their business system as a Franchise. Make sure these Franchisees are properly developed. Ask the Franchisor who developed the Franchise for him. If they had a professional Franchise Developer, it might be good to proceed, if they did the entire Franchise work by themselves without professional help, you are bound to fail due to the complexity Franchising has which only professionals can understand. There are only three successful Franchise Developers in the Philippines in business since 1995, with RK Franchise Consultancy having the largest network and the most clients. Take a look at www.franchise.ph on available franchises and www.franchising.ph for Franchise stories and Franchise Advertisements. Beware of SCAMS in Franchising. Insist on reading the Franchise Agreement first, talk to Franchisees, do not pay the Franchise Fee prior to getting a Contract, thats the first rule of the scammers, get the money and thats it.
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VII. HOW TO SELECT A FRANCHISE

Since Franchising is the most successful method of doing business, we shall look at how to select and choose the right franchise. Since all franchises require money, the first and foremost consideration is which franchise you can afford. At least P 200,000 can buy a small franchise outlet. Then think if the preference is a food or non-food franchise. If you venture in the food business, it is not necessary you have any experience as restaurateur, since you receive a full training from your Franchisor. The more critical factor in a food-franchise is the location of the business, as the accessibility to a great number of people as well as parking space for dine-in clients is most important, unless it is for delivery only, but still then parking is needed for take-out orders and your own delivery vehicles. Your active role in the management of the food franchise is more important than if you chose a non-food franchise. Most Franchisors require hand on Franchisees and do not allow absentee owners. Provided you have a certain amount to invest in a franchise, let's say 20 Million Pesos, to put this money into a local franchise or in a master franchise.
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The advantage of a unit franchise is you can concentrate on that specific location, however, at the same time you are limited to that single outlet. By a master franchise we speak about the grant given by a foreign Franchisor to operate that trademark and system anywhere in the Country and are not limited to one outlet only. Since a master Franchisee is factually the Franchisor in the Philippines, most likely can resell franchises to third parties. Some International Master Franchises cost less than a single local franchise from a popular fast food chain. Non-food franchises are available in almost all business directions and again, one may chose between being a single unit Franchisee or to get a master franchise from a foreign Franchisor. Franchises with an excellent future are those in the business-to-business segment, in the Internet or education business, and specialty retailing. Before purchasing any franchise, investigate the franchise first. Some franchise fees are priced much too high, others don't offer any support, and some give you a short contract period, which should be at least five years. There are also some Master Franchisees, which have a very high development program in the master franchise agreement with their foreign Franchisor and if they will not be able to fulfill this target, their unit Franchisees future is in limbo. If you buy a single unit franchise from a local master Franchisee, ask him about his development program to find out, if the local Franchisee will be able to retain his master franchise grant in the future. A good franchise in the eye of a Franchisee is one with an ROI of less than three years. There are three professional franchise consultants in the Philippines, which can help find the right franchise; one of them is yours truly. We advise not only on the available franchises, but also to which franchise type you fit most from your financial standing, background and interest.
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In assessing a franchise opportunity, consider the Franchisor's financial position, how thoroughly has the business been market tested here or abroad, asses how well the system works in practice, are existing Franchisees pleased with their business and does the business have staying power or is it based on something which is temporarily fashionable. When finding the franchise of choice, visit as may units as possible and talk to Franchisees and closely examine the franchise agreement, which is always biased in favor of the Franchisor, that's just the way it is. Local Franchisors usually charge a higher royalty fee compared to international master franchises, which are limited to a maximum of 5% of the gross revenue. Ask the Franchisor upon proper application with them for a Copy of a Franchise Disclosure Information, which every Franchisor has to provide to applicants in accordance to DTI Bureau Order 10-24 series of 2010. Pay the Franchise Fee upon signing of the Franchise Agreement only and not earlier. Scammers want the money from you without signing any contract. Scammers are mostly in the Cart and Kiosks businesses.
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VIII. DEFINING FRANCHISING

Some companies are selling an opportunity to investors under the misguided notion that because they dont charge a franchise fees that they are not a franchise. These companies are business opportunities. Some even boasts No franchise fees or royalties, -no territory or expansion restrictions. Worse yet, they make unsubstantiated earnings claims. These Companies also forget to mention what else they dont have: No ongoing support or buying power for you, no credible image or identity of company products or services, no consumer awareness building power, no ongoing research and development for you, no protected territory for you, no substantial demographic or geographic considerations studies for you, no proven and documented marketing plan for you, and much more. General, whether or not a business opportunity is a franchise, can be summarized s follows: If you sell a business opportunity to any person and you; -Allow the buyer to use your company name or logo; -Charge a fee to the buyer; -Provide any significant assistance or maintain any significant control over any part of the business; -Train the buyer; -Include him in the system of the business; Certainly then it is a Franchise.
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Franchising, under a business microscope, has more meanings. There are two types of franchising: Product franchising, like Pepsi Cola or Toyota, and, business format franchising, like McDonalds. Product franchising is very big business, but it is not an investment consideration for all but a very few. The true fame of franchise investments has come as a result of business format franchising, which, from this point forward I will be referring to as I speak of franchising. Retail franchises require retail space, a store, a building or an office, service franchise generally do not. Customers come to retail locations to purchase franchise products or services. Virtually any product or service that is sold to the public can be purchased through a retail franchise store or mobile franchise service. A generic use of the word business opportunity may be applied to describe a franchise, but generic or otherwise the definition of the word franchise cannot be applied to describe a business opportunity. There are success stories in non-franchised opportunities as well. The limited non-franchise businesses that succeed are owned by types that I have classified into just two groups. The first group consists of genius inventors of excellent and unique products or services that hire first class salesmen. The second group consists of extraordinary hard-working people willing and able to do everything by themselves. The word success has two basic meanings: one; satisfactory completion of something, and two; the gaining of wealth and fame. People are attracted to franchising primarily because of the published fail-safe of franchising. They were not foolish enough to trade their savings and their ego just to open their own business. The glowing reports of franchise success, being in business for yourself, but not by yourself offers a chance to financial success. In contrast, there are many people who have the same objectives and expectations of owning their own business, but shun franchising. This is the group who takes a dim view of accepting, needing or wanting anyones help to succeed. They are not familiar with the infrastructure of franchising and they usually dont care to learn. They perceive franchise fees, royalties, control and restrictions to be unreasonable, costly impositions.
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According to them, they can and do succeed, by both meanings, totally on their own without the benefits of franchising. They exist in extremely small numbers, as noted in the high failure rate of non-franchising business. Generally, the prospective, in his enthusiasm, has been open to the glowing reports of franchise success as reported by the media. He sees the advertising of hundreds of well-known franchises and assumes that all of these costly promotions are free. These self-preconceived notions, along with many other misinterpretations, often lead him to assume amenities that simply do not exist even though they were never offered by the Franchisor. And, these expectations are the root of the problem that breeds bad feelings between a few Franchisors and Franchisees. Ambitious reporters and attorneys who are unfamiliar with the franchise selling process fuel the distorted allegations that evolve from this dilemma. The real confusion arises when the franchise is not a real franchise but actually a business opportunity. The business opportunity is often mistaken for a franchise because the difference is not known or understood. Investors, who desire to be in business for themselves, usually perceive themselves as entrepreneurs. No Franchisee is an entrepreneur, but most fancy themselves as such. Entrepreneur is another word that needs further illustration, particularly in the world of franchise investments. Entrepreneurs engage in high-risk venture. Franchisees do not have these high-risks because Franchisors have provided a fail-soft opportunity. But, this cushion is a fail-soft against business failure, not a fail-safe. Franchisors have no such business failure cushion. There are companies that enter the franchise format to form a franchise system and fail. But once a company has properly formed a franchise system, then all the benefits of franchising fall into place, for the Company and the Franchisees of the system. Important is the development of the Franchise system by a competent Franchise Consultant. Franchisors which fail usually did their Franchise system without professional development assistance from a Consultant, sometimes to save money; in the end it cost them dearly. The initial investment in a professional Franchise Developer is easily recovered with the sale of some Franchises.
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IX. ADVANTAGES, DRAWBACKS AND DEMANDS

FOR THE FRANCHISOR
Advantages Franchising provides the Franchisors company with a package of commercial and financial means: An increased global financial capacity to support the commercial network; A reduced capacity to react for the competitors of: -a most rapid conquest of the market -the overall financial power of the economic coalition of the network (buying capacity) -the coverage of the territory with prime quality sites. A trademark considerably valorized and easily identified and an enhanced fidelity of the customers thanks to the concerted actions in advertising at the regional and national levels. Control of the distribution
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Business expansion as more people will be aware of the brand name, making it more valuable Buying power if the chain purchases centralized Operational convenience since the day-to-day operation is delegated to Franchisee Franchisee contribute valuable information on the operation, on development of new products and pricing Motivation and Cooperation by good Franchisee can be very inspiring to Franchisors doing better and growing bigger
Drawbacks
Financial demands The array of means and steps to take when a Franchisor exceeds the immediate needs of this single company. From the very beginning, the Franchisor must take the demands of his network into account before he has even launched it, when launching it and when the network has reached its maturity stage. Strategic demands: The Franchisor ought to develop a strategy of differentiation towards his competitors. The Franchisor gives up the exploitation of a part of the territory to the Franchisee(s). Lack of Freedom: Franchisors have to consider now in all their decision the operation of franchised facilities not only their own outlets. Franchisee selection and recruitment can become a difficult task and Franchisors have to be extremely careful in their selection. The glamour of franchising may attract several absentee investors who
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are not interested in the operations. Those people should invest in the Stock Exchange!
Many Franchisor-Franchisee relationship problems can be traced to the communications between them. One common problem is the misunderstanding of quality standards of the reasoning behind them. Franchisees may not appreciate the methods used to maintain those standards or the inspection procedures used by the Franchisor. Franchisee may also develop a sense of independence and may not take advice of the Franchisors. They may feel that they are better qualified than staff the main office. Franchisees may be reluctant to disclose gross sales on which royalty fees are dependent or may not report accurately. Noncooperation from Franchisees may require adequate policing or may end up in legal battles that may adversely affect an otherwise healthy business.
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FOR THE FRANCHISEE Advantages
The Franchisee owns his own company and is legally independent. The Franchisee profits by the brand image and the reputation of the trademark with regard to the consumer. Established Concept: The Franchisees gain by a system of commercial management devised by the Franchisor in the first place and already tested, so he saves time in using this existing know-how and faces a minor financial risk. The Franchisee takes advantage of the overall competitive advantage of the economic coalition of the network and of the capacity of innovation of the Franchisor. The Franchisee comes to a better professional control, far superior to its initial position, because of regular training and support offered by the Franchisor. The Franchisee gets a higher profitability on the capital invested than the sole trader, because of the scale economies achieved through the standardization of operations and the overall optimization of the capital. Major advantages of Franchising include the technical and managerial assistance provided by Franchisor and the continuation of assistance to Franchisee. Standards of quality control. Minimal risk, as it is tested and proven profitable. Less Operating capital compared to independent businesses.
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Benefits from Research and Development. Access to credit from suppliers of Franchisor.
Drawbacks
The Franchisee has to put the commercial strategy of the Franchisor into operation. The Franchisee ought to respect the norms attached to the concept, especially the quality standards. The Franchisee has an obligation to follow the evolution of the concept and know-how. The Franchisee often has to buy directly from the Franchisor or any other referenced supplier. The Franchisee needs to pay the Franchisor in exchange for his contribution at all levels, for instance under the form of: -an initial development payment or franchise fee; -royalties in return for: the trademark license, the permanent assistance, the training, research and innovation. Overdependence on the advice of Franchisors in areas such as operations and pricing strategy. Monotony and lack of challenge Franchise Termination is an important issue for franchisees due to the power of Franchisors to terminate, to decline to renew or to deny the Franchisee the right to sell or transfer a Franchise.
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Do you have what it takes to be a Franchisee?
Motivation It is commonly found in people who have worked hard on the job before but never quite fulfilled. Maturity Motivation gets you going; maturity helps you persist as you work long hours without complaining, get along with your personnel, handle money responsibly and handle crises with patience and good judgment. A Franchisee must be a dreamer and realist at the same time. You need to set goals and plans to achieve your dreams while being realistic and planning the attainable. You need to accept your limitations as short term handicaps and hunt for ways to grow beyond them. Thats maturity. Money Starting a business takes money. You must be willing to look honestly at your financial situation and determine how much you can put into your business. You also need to determine whether the business you are considering can provide enough income especially if you are accustomed to a high income. Knowledge and Experience To gain the confidence and loyalty of staff and customers, you must provide a quality product or service at a competitive price. That means knowing your business well, which you will learn how to during the training program, which every Franchisee should take just like the employees of a Franchisee. For Franchisees, Franchisor training is the source of knowledge. Because Franchisors know that how well the new owner applies their system depends on how well the new owner is trained. Even Temper A Franchisee must be able to make decisions logically and with good judgment. That means handling pressure, conflicts and crises calmly and thoughtfully. If you are impulsive, you may make poor decisions. If you are hotheaded or have a quick temper, you may
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alienate customers and employees alike, putting your business at risk.
Tenacity Stick to the business is a must for every Franchisee. When a job needs to be done, an employee needs feedback, or a customer needs special attention, you will need to see that it gets done. When faced with setbacks, you must draw on experience and maturity to make the best possible business decisions. It takes tenacity and determination to weather the bumps on the road to success. Family Support Strong family support is invaluable to a Franchisee. Your family must understand that business will come first. Franchisors Game Plan A happy Franchisee wants to follow the game plan that is in place and doesnt mind taking directions. When he or she sees room for improvement, the Franchisee speaks up but isnt disappointed when the suggestions are not implemented. A Franchisee needs to be able to accept things as they are. Tolerant As Franchisee you have to have the ability to tolerate different point of views with Franchisor and accept consensus. You can express your opening but it takes patience and tolerance to hear all sides and to live with a consensus decision that, while maybe the best for the franchise group as a whole, isnt the one you would make on your own. Graceful It is in the Franchisors main interest to make sure everybody is following the game plan and staying in line. If the Franchisor thinks you need to implement the system more diligently or believes you are ignoring certain practices or even taking your franchise in another direction, youll hear about it. If you have a hard time accepting suggestions or criticism, franchising may not be for you.
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Trust To succeed in franchising, you must believe in and support your Franchisors system and policies. After all, Franchisors make money from royalties, so its in their interest to help Franchisee build the largest possible business. Your Franchisor will search constantly for ways to help you achieve that potential, often developing new approaches or policies for you to implement. As a good Franchisee, you will accept policy changes in the spirit they are intended even if react negative to the new policy. Communication Franchisees communicate often and openly with the Franchisor. The more Franchisees share their experience, the better the Franchisors operation can offer assistance and ideas. You will need to work closely with supervisors who can share their broad knowledge of how other outlets are operated and provide solid information from trusted and valued associates. Operational Systems All Franchisees in a system follow their Franchise Agreement and operations manual as they conduct their business. Living by the same rules means you and your colleagues are building the system using the same blueprint. But now and then, some franchisees feel a little stifled by always going by the book, especially when it appears to prevent a Franchisee from implementing a great new idea.
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X. MISTAKES BY FRANCHISE BUYERS

A great industry assures your success Some Franchisors point out how large an industry segment they address. While it's generally important that you are addressing a growing market, this alone will not make succeed. The Franchisors training, marketing plan, site selection, how you implement their plans and many others factors will be more important to your success than just the size and growth trend of the industry served.
I open my franchise for less Dont mislead your Franchisor. If you are overly optimistic and undercapitalized you may be doomed to failurethrough no fault of your Franchisor.
Bigger is Better The more franchises exist in a chain, the more successful they all must be. Great marketing aggressive salesmen and an attractive industry can cause a franchise system to grow even though there are better
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Franchisors in the same industry. Call many Franchisees and ask them how much TLC they receive. Then check in other systems to evaluate the satisfaction level of their Franchisees. Sometimes, in their eagerness to grow, a system will overpopulate an area with many units causing each to steal business from others.
Never be the First Franchise in a System Who could get more care and attention than the first Franchisee to join? If the Franchisor has good experience in its industry and you are confident that they will be able to help you replicate their success, being the first should be excellent.
Ill use about 80% of the Franchisors business plan, but Ill modify it enough to fit my style of management and my town. If you buy a franchise, use their system. If you insist on doing it your way, you may violate your agreement and be terminated. Believe me, stick to the whole planor don't buy a franchise.
All franchise systems are about the same. Therefore, the biggest with the lowest price should be my choice. Each system has a culture of its own. Meet with the Franchisor and meet or talk to several Franchisees to see how youll fit in. Some Franchisors now offer lower royalties, minimal renewal fees and other features to show their commitment to your success.
When you buy a franchise, your success is assured. Any new business venture involves risk. You must be ready to work long hard hours to implement the Franchisors business plan in order to succeed. The advantage isyou have a plan. The unknown ishow well youll implement it.
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XI. AREA AND MULTIPLE UNITS

So youre thinking about buying a franchise. Well, if operating one facility looks like a good idea, might not running two or more facilities be better? The answer isnt a simple yes or no.
Overview Multiple units franchising offers a number of advantages, economies of scale and diversification among the most important. With more locations, you reduce the general and administrative per-unit overhead. You also minimize the adverse possibility of placing all your eggs in a solitary location or unresponsive market. Three successful units can greatly outweigh the impact of a single low-producing unit. Another plus: the more units you operate, the more influence you are likely to have in advertising decisions and expenditures.
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Multiple units franchising benefits the Franchisor as well. The company that licenses you can use your financial resources to grow faster, spread risks and deal with fewer Franchisees. Multiple units franchising is a twoway street, with potential benefits accruing to both Franchisees and Franchisors.
How It Works You can get involved in multiple units franchising in several ways. You may be asked to sign a single franchise agreement, which provides for the opening of more than one site, usually with a specific territory. More likely, you will be required to enter into an area development agreement and pay a development fee to open a number of units within a designated marketing region, usually according to a time schedule. Another form of multiple units franchising is a hybrid between a Franchisor and a developer. In an area franchise arrangement, the Franchisor grants you the right to act as a Franchisor within specific area, typically for a substantial fee. With rare exceptions, the master Franchisee is required to pay the Franchisor a portion of the initial and ongoing franchise fees he or she collects. Area Franchisees also incur sizable expenses for personnel, advertising and office costs. A very common way to become a multiple unit Franchisee is to purchase operating multiple outlets from the Franchisor or from one or more existing Franchisees. This method provides the normal advantages of buying an ongoing enterprise rather than starting a new business from scratch, in addition to gaining the usual support in training and continuing existence.
On the other hand As with all business strategies, area or multiple units franchising has some negatives. Consider these points. Unless you are purchasing existing facilities, you will need to commit to unit growth development by specific deadlines. Almost all Franchisors retain the right to revoke your future development rights if you dont meet the schedule.
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While you may enjoy reduced overhead on a per-unit basis, your overall administrative burden will be greater. Youll probably have to hire additional management and supervisory personnel. The lack of an on-site owner/operator at each site can be a disadvantage, especially in the cases of those franchised business that require personal and close attention to customers needs. Such business may not lend themselves well to multiple units franchising.
Decision-Making Guidelines Consider area or multiple units franchising only if you have strong financial resources. If you do have those resources, choose a business field in which you are knowledgeable. This quality will make you more attractive to a Franchisor and will help you attain a successful future. Select a financially strong Franchisor with a proven commitment of support to Franchisees. Determine the experience of the Franchisor and/or other Franchisees in operating units in the kinds of locations you want. Inquire, too, about the advertising assistance you will receive. Investigate all areas of the entire franchise system, with the same concern you would exercise in selecting a single unit franchise. How long has the franchise system been in business? Has the management bounced around from franchise system to system, or has it been dedicated consistently to the franchise operation that interests you? Be sure you know exactly which rights are being granted to you and which are retained by the Franchisor. Can the Franchisor open company-owned units in your territory and thus be your competitor? Most Franchisors meet expected standards of integrity, but failing to ask critical questions could prove to be a costly error. Check the facts. Examine whether an area development schedule is reasonable and can be met, and understand what happens if you should fail to meet that
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schedule. You should also understand your right to develop additional franchise sites outside that territory. Buying a franchise, and particularly an area or multiple unit franchise, is potentially the largest personal investment decision youll ever make. Dont be impulsive. Take you time, and enlist the assistance of franchiseexperienced professional like yours truly.
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XII. BUYING A MASTER FRANCHISE

Over the past several years there has been a marked increase in the number of Franchisors from the USA, Canada, Europe, Australia and other Countries expanding internationally. As a consequence, there is an ever-increasing chance developer will encounter Franchisors with great sales pitch, lots of enthusiasm and, perhaps, the best of intentions, but not the necessary experience and resources to effectively support the developer. An area development franchise is an agreement that authorizes an area developer to open multiple franchise units within a Country in accordance with an agreed-upon development schedule. A master franchise differs in that the agreement allows the so-called master franchise to open franchise units itself and sub-franchise to others within its territory. A franchise system that has not taken local consumer preferences into account be doomed from the start.
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One of the best tools for discerning a franchise systems potential for success in any country is to evaluate the concept at a prototype unit or through other market testing methodologies. More often than not, international Franchisors want the full territory development fee before a pilot can be established. If the Franchisor has conducted market studies in the Philippines, the developers certainly should request to see the results. If the Franchisor has not, but has conducted studies in neighboring countries, the developer should request to see those results. This may offer some insight into what the developer may expect to encounter in the Philippines though, depending on the degree of cultural and economic similarity between the countries, the results may not be conclusive. Even if timing makes it impractical to conduct market testing before a development agreement is signed, the Franchisor may assist in test marketing after the deal is signed. The Philippines laws may prevent a Franchisor itself from opening and operating retail business, thus effectively precluding it from conducting market testing prior to entering and into a development deal.
U.S. Offering Circular In the USA, law requires every Franchisor to deliver a Uniform Franchise Disclosure Documentation (FDD) to its prospective Franchisees in the United States before they pay any money or sign any binding agreement. The FDD is divided into 23 Items which contain detailed information falling within three broad: Facts about the Franchisor and its history, details about the terms of the deal and Information about the Franchisors system. In some cases, the Franchisor internationalizes its FDD so that it specifically is relevant to the proposed international development transaction. Other Franchisors simply provide the FDD they use for domestic franchising in the USA without modification. Still others provide
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no FDD to developers at all; some companies who franchise in international markets do not franchise in the USA and may have prepared a FDD, while others have a domestic FDD but choose not to provide it unless asked. If the Franchisor has not internationalized the FDD, typically it will reflect contract provisions and operating practices relating to franchising activities in the USA, which may be substantially different from the terms of the proposed development agreement. For example, many U.S. Franchisors engage in master franchising and area developments franchising only in international transaction, so the FDD may not accurately describe the deal terms that apply to the developer. So, the Franchisor may resist delivering a copy of its standard U.S. FDD. Nonetheless, even if the FDD has not been customized specifically for the developer or generally modified to discuss international transactions, the FDD is worth examination by the developer. It still contains detailed and valuable information, about the Franchisor, its history and its system. Even though the information describing the deal may not provide directly relevant information, it may provide a benchmark against which the developer can compare the deal terms being offered. There are highly technical legal requirements for preparing a FDD and unless the reviewer has had considerable experience in preparing or reviewing them, it may be difficult or impossible to perform a comprehensive and penetrating analysis of the document. It is as important to understand what the FDD is supposed to disclose as it is to examine what it actually discloses. Without an in-depth knowledge of USA disclosure laws, the developer may overlook danger signals an expert might spot. For this reason, among others, it is becoming increasingly common for non-US developers to retain an International experienced Consultant - like RK Franchise Consultancy - to assist in reviewing the FDD and offer advice regarding key provisions in development agreements.
Trademarks What steps, if any, has the Franchisor taken to protect its trademarks and service marks in the Philippines, and to investigate whether any third party
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already has begun to use those marks locally. If there are such third party uses, what will the Franchisor do to stop such use?
Product Sourcing It is essential for the developer to determine as soon as possible whether it is likely to encounter difficulties in sourcing any necessary products, equipment or ingredients locally. For example, in a food franchise, are all key ingredients available locally in the same grade and quality as used in the Franchisors US operations? If not, what is the cost of importing them from the US or other countries? How many international deals has the Franchisor completed? What countries were involved? What is the history and current status of those other international deals in terms of the developers success in meeting development goals and profitability? Have disputes risen between the Franchisor and developers or international Franchisees, and how were they resolved? Potentially, the most informative source of information and insight into the Franchisor, its experience, practices and capabilities may be found by contacting a Franchisors existing international developers, and its US and foreign Franchisees. In the USA, it is extremely common for prospective Franchisees to contact a Franchisors existing Franchisees. Surprisingly, in the international context, few developers make the effort to contact them.
Whats the franchise name worth? There are few franchise systems whose names are commonly known worldwide. A prospective international entrepreneur who is well traveled may be familiar with a specific brand. The main question, though, is whether most consumers in a selected country recognize the brand name. In many instances, the creation of brand recognition so vital to franchising success will have to be established by Master Franchisee.
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Of course, the Franchisor will provide basic marketing materials, but the core effort must be made inside the territory itself. This will require a substantial commitment of time and financial resources to build momentum, which is relevant not only to the sale of franchised products and services, but also to the expansion of the franchise system in the new country. Does the Franchisor know anything about the world? If the Company you are interested in has never franchised outside its home country, then you both may well be in for an interesting joint learning experience. Its usually easier for a Developer to work with Franchisor already experienced in the international arena. Such a company will have encountered and dealt with the cultural, legal, financial and economic differences involved in developing franchises in new countries and will recognize the need for sensitivity and flexibility. The Staff will have been trained to think global. You would be wise to ask, How many people in your organization are dedicated to supporting international franchise growth? An international franchise agreement typically will remain in effect for many years. Although there are no guarantees of success you must be confident your Franchisor is going to be around for some time. An important question to ask is, What portion of your franchise companys income is derived from royalty fees and what proportion comes from franchise licensing fees? The answer will give you a sense of how dependent a Franchisor is on the scale of new franchises and how much the Franchisees contribute through royalty payments. Its is critical to your success in international franchising that the Franchisor have a plan for transferring the accumulated system know-how clearly and completely and provide you with the necessary support resources to help put that proven expertise to work. The basic requirements are: The training of your staff to become skilled in daily operations including how to franchise if you intend to sub-franchise. This instruction usually will be provided at the Franchisors corporate headquarters.
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A set of procedures manuals that describe in detail the operation of the business. Marketing programs that can be used in their present from adapted for use in the Philippines. Active marketing support for the opening of the first and possibly subsequent units in the Philippines Many large franchise systems can pass on their Franchisees substantial savings, made possible by purchasing-power relationships established with suppliers of equipment's and raw materials. Youll want to know what purchasing opportunities and restrictions exist for expansion in the Philippines. The international Franchisee should expect fairness and consistency in the level of fees (perhaps related to demographic and consumer income statistics) and in the amount of the royalty percentage. It is essential to make a realistic financial projection based on the Franchisors experience for both the proposed individual units and for the master franchise operation itself. The Franchisor should provide you with information that will enable you to prepare budgets for both of those levels. Adjustments will have to be made to take account of local conditions. For example, rent maybe higher and wages lower in the Philippines than in the Franchisors home country. However, youll need to make a best-guess of the overall cost of getting started, the pace at which sales of product or service will build in each unit and the rate at which youll be able to open additional units, whether subfranchised or corporately owned. Beware of being too ambitious when you agree to the number of units you can open within specified time frame. Be sure to add in the overhead cost of being, in effect, a Franchisor, and include the cost of training and supporting your Franchisees. Finally, dont forget to include the cost of the master franchise fee, royalties and any other payments to the Franchisors.
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In summary, international franchising is arguably the largest world of business potential entrepreneurs around the globe have ever seen. Venturing forth into this expanding universe is well worth the time and effort it takes to explore its almost limitless possibilities. Like undertaking any journey, knowing your destination is only the first step. The main idea is to follow the map and read the road signs. Get assistance from an International acclaimed Franchise Consultant like RK Franchise Consultancy, who was involved in many Master Franchise arrangements in the Philippines with foreign Franchise Companies.
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XIII. FRANCHISING YOUR BUSINESS

Before implementing a franchise program, a company should evaluate itself on several criteria. An important consideration is the success of the initial or pilot operation. If the products or services offered have found reasonable acceptability and if these products or services are readily adapted to other areas, then the market potential for the franchise may be good. Does the company have a marketing niche that can be used to its advantage? It the business similar to many others in a crowded business segment and, if so, is there a targeted customer bases so that advertising and selling can be focused effectively? It is important to note that to be successful, a Franchisor must have some degree of distinctiveness, or the potential to achieve distinctiveness, in its business segment. If it does not, it will have difficulty attracting high caliber Franchisees in an increasing competitive market for such persons. A franchise may be distinctive in terms of its products, services, operating and delivery systems or marketing. If a business is to be successfully expanded by franchising its success must be attributable to its products or services, business format, operating or management systems or
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marketing. It cannot be attributable merely to the unique character of its founder or its location. The elements of the success of the business must be teachable to persons with capabilities that exist among prospective franchise buyers and must be replicable by such persons. To be successful, a franchised business must appeal to high caliber franchise buyers and compare favorably with other franchises. The investment requirements of the business must be realistic and the potential for a return on the investment should be appropriate to the risk inherent in the type of business. Any operating, marketing and financial problems should be addressed and solved, for the Franchisee must receive a tested and refined business format.
Is Your Business Franchisable? The franchise method is now used successfully by all sorts of business in all sorts of markets; but not all businesses are franchisable. If your business has one or more of the following characteristics, franchising may not be suitable: A product or service, which is only likely to have a market for a short time. Gross margins which are too low to offer a return on investment to both as the Franchisor and Franchisees Skill levels for each operating unit that require very long training periods (more than 6 months) Predominantly repeat business customers whose loyalty relates to the individual providing the service and which would be difficult to transfer to a brand. A geographically defined market that doesnt have the potential to be repeated in many places.
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A business with audit and control requirements, which are too critical to involve Franchisees operating as separate legal entities. A business which is failing. Dont franchise as a means of getting yourself out of trouble Dont franchise unless you have a prototype, you cant franchise an idea only. Dont franchise if youre doing it on the cheap
Your business is franchiseable if: "every City needs one" can be said for your business you can handle sharing your ideas with many you can handle your role becoming increasingly administrative you are people oriented you can afford to weather a likely difficult start your success rests largely on your product or service you can create an ongoing long-term relationship with a team of people.
Before evaluating your business as a potential franchise, evaluate yourself as a potential franchisor. Are you ready to share your success, your system and your profit with other people? Consider your qualities and remember that franchising is more than the business of selling services and products to consumer. In addition, as a Franchisor you will be an educator, Trainor and hand-holder to your Franchisee. If you think your business might be franchisable then you will need to offer Franchisees a business format which includes you brand business system, training, opening assistance, marketing and support services
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under the contractual terms of a franchise agreement which will, amongst many other things, set out the financial arrangement. Considerable development work is required before you will be in a position to draw up offer documents and begin recruiting Franchisees. As a Franchisor you will be building a brand with a reputation that other people will want to buy and invest money into. You will therefore need a brand, which is distinctive and appropriate for all the places you would want to have Franchisees in operation. It will also be your responsibility, and your obligation to Franchisees paying for the benefit of using your brand, to protect it against abuse, both by outsiders and by ex-Franchisees.
The System The principal benefit, which Franchisors hold out to prospective Franchisees, is the opportunity to run a business which has already proved its capacity to deliver products or services profitably to an identified market. You cannot sell an idea as a franchise. You must have proven in practice that the idea works and that you can successfully transfer the know how to another person operating at arms length from you. You will need to draw up and prove a comprehensive operations manual that details what a franchise does, how to do it, and to what performance and quality standards. The manual will need to cover the setting up phase as well as continuing operation. You will also need to develop and prove an initial and continuing training program that ensures that the know how contained in the operations manual can be transferred successfully to a third party within the time available. The work involved in proving and documenting your operating and training systems is extensive and ordinarily calls for highly skilled and experienced advice.
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A critical phase of the development of a franchise program is the first operation or the creation of prototype business to test and refine the concept of the business to be franchised. In its prototype businesses, a prospective Franchisor can test operational systems, controls, dcor, designs, layouts, equipment, training methods, advertising and marketing programs, products and services, job requirements and descriptions, financial models, etc. The prototype is a laboratory at which problem areas can be identified, enabling the company to develop solutions and truly see if the business can be franchised. Before franchising, a company should have been operating outlets successfully at least at one, and preferably several, locations to verify the viability of the business and its profitability. A minimum period of time to test the pilot outlet would be one year to take into consideration seasonal factors and to ensure that the business is producing attractive results. Two or three years of actual experience gained from the operation of exiting outlets are ideal. The business to be franchised must be capable of producing a reasonable return on the Franchisees investment, after deducting the value of the Franchisees labor. If Franchisee is merely buying a job, his motivation and loyalty to the network may be short lived. The business must also be able to generate sufficient revenue to the Franchisor. A Franchisor can capture only a portion of the gross revenue of a franchise outlet through continuing fees or royalties and the gross profit realized on sales of goods and services to the Franchisee. If a business cannot generate a sufficient rate of return on the Franchisees investment and sufficient revenue to support essential Franchisor services and a sufficient profit to the Franchisor, the business is a poor candidate for successful franchising.
The Trademark If you have a product or service that is unique or in demand, you must capture the trademark for your Company. It is not enough that you have a DTI Business name registration or a SEC registration, in order to license
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out your trademark to your Franchisee, you have to own it therefore every Franchisor has to have a TRADEMARK! To get a Trademark, you have to apply at the Intellectual Property Office in Taguig City or let FIFA Filipino International Franchise Association do it for you. Trademark is a component of Franchising Right to use proprietary marks of others Protection of the Franchisor Protection of the Franchisee Protection of the Public
The Initial Training Each Franchisor has to make a training program for his Franchisee so they will be able to learn the trade as they have to. Length of training always depends on the complexity of the operational procedures of a particular Company.
The Operations Manual As part of the operational function in a well-developed franchise system, you should prepare and provide an effective operations manual that documents the functions of the franchise business in a written, chronological, step-by-step format, so that the franchisee can easily follow them after completing the initial franchise training program. The Operations manual can easily reach up to 2,000 pages for Restaurant Franchises and 300 pages for simple cart or retail franchises. Your Franchise Consultant will provide you with your tailored manual as part of the Franchise Development service. Each Franchisors operations manual is unique, because in a given industry, each successful Franchisor has a quality that distinguishes the business from its competitors. A sample layout of an operations manual of a franchised business: Essential Characteristics Pre Opening Activities Payment to Franchisor Insurance Advertising
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Recruiting Personnel Payroll Personnel Policies Non-Competition Agreement Job Descriptions General Operation Procedures Initial Preparation of product Product Preparation Service Procedures Customer Handling Cashier Flow Daily Store Opening & Closing Procedures Cleaning Procedures Procurement Supply Delivery Procedures Recipes (for Restaurants) Forms & Reports Inventory
The Support Service One of the biggest practical differences between a simple distribution scheme and a fully-fledged business format franchise is the extent of the initial and continuing support services offered by Franchisors to Franchisees. Franchisors take on responsibility for product and service development, for national promotion and PR, for purchasing financial and administrative services, for quality control and national accounts for network communications and discipline. You will also need to make sure that your franchised business is structured so that your Franchisees need your services on a continuing basis and in consequence will want to go on paying you to belong to the network.
Well-trained Personnel Your success lies in your ability to recognize the business insight necessary to operate a smooth-running franchise. To help you do this, review carefully your current management and supervisors. You must
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have a person or a team who is able to train the incoming Franchisees on the same levels as your Company owned outlets. One of the biggest practical differences between a simple distribution scheme and a fully-fledged business format franchise is the extent of the initial and continuing support services offered by Franchisors to Franchisees. Franchisors take on responsibility for product and service development, for national promotion and PR, for purchasing financial and administrative services, for quality control and national accounts for network communications and discipline. You will also need to make sure that your franchised business is structured so that your Franchisees need your services on a continuing basis and in consequence will want to go on paying you to belong to the network.
Well-trained Personnel Your success lies in your ability to recognize the business insight necessary to operate a smooth-running franchise. To help you do this, review carefully your current management and supervisors. You must have a person or a team who is able to train the incoming Franchisees on the same levels as your Company owned outlets.
The Financial Arrangements Youre in business to make money and theres no point choosing a growth strategy, which doesnt maximize your profit potential. Some Franchisors would be more profitable if they owned their own outlets themselves. On the other hand they would never have grown to a fifty or two hundred unit chain without franchising. As with any business planning process the financials have two different approaches: What will it cost me, so how much must I charge to make a sensible return?
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What price will the market bear, so what can I afford to spend to make the business profitable? In franchising you have to address these questions both from your point of view as the Franchisor, and from the point of view of your Franchisees. In constructing a viable financial plan for franchising a business, dont:
Underestimate your initial costs and the associated financial prospects; Overestimated the early growth rates when youre just learning how to attract the right prospects
Assume you can make any real profit element on the initial fees. Profit comes later from the on-going charges to Franchisees based on their trading success. A good approach is to keep initial fees to Franchisees as low as possible to maximize their chances of a successful business entry, and then to make sure that Franchisees can see a value for money return on the royalty fees they pay. Royalty fees calculated as a percentage on turnover are preferable, but some product distribution franchises inevitably rely on a mark up on goods supplied.
Franchise Marketing If you are selling Franchises to use your brand and your business system, with the benefit of the support systems you offer, within the framework of a franchise agreement and initial and continuing feed, you will need a brochure. Potential Franchisees will want to know what business they can expect to do and how profitable it can be. Since your business is already up and running, and since you will have already run a pilot scheme discrete from your own operation, you will have some facts on which to base your projections. Good Franchisors have to draw a fine balance between generating expectations which can be met, and giving Franchisees targets which are
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so low that they do not need to fully exploit their business opportunities. You shouldnt oversell or undersell, but thats also a matter of matching the presentation of your offer to the norms of the franchises recruitment market, so experienced advice can be helpful. Many Franchisors provide a Franchise Marketing Kit with an attached application form to serious Franchisees. These confidential questionnaires help Franchisors in selecting their Franchisees.
Recruiting Franchisees Recruiting Franchisees is probably the hardest and most expensive job for Franchisors. Franchisors have conversion ratios of serious inquiries to appointment of round 30:1 sometimes higher than 100:1. The recruitment mechanisms available are Franchise Shows and Expos, newspaper advertising, referrals, websites such as http://www.franchise.ph and the seminar series of RK Franchise Consultancy.
International Franchising Franchising of Philippine Companies in the International market is expanding rapidly. Increased population and available disposable income has created a worldwide expanded market, plus the fact that Filipinos can be found in any corner of this world, a certain home advantage helps also bringing Philippine Franchisors to other Countries. Most Franchisors head overseas after an unsolicited query gets their adrenalin pumping. Others pursue international markets out of ego. Still others simply like the appeal of international travel. Before entertaining international proposals, Franchisors should have a strong and profitable base at home. To do otherwise is like serving dessert before the main course. We cant pinpoint an exact number of Facilities you should need in the Philippines, but your domestic operation should have a significant number of franchises in various regions. A saturated domestic market is a clear green light.
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Considered in bringing your Franchise to other shores has to be:
Political climate between Manila and the Country you like to award a Franchise. Are there agreements on trademarks or bilateral agreements existing? Regulations on imports or operational procedures in the Country of the Franchisee. Language barriers, cultural differences and traditions in taste of food or products. Religion can be a factor particular in the food business or the internet business.
Points to consider in International Franchising your business:
Include local business people in decision making, planning, and the operation of the franchise. Base the concept on the local population preferences, habits and cultural features. Be sensitive to the needs of the local population and be respectful of their beliefs and practices, both political and religious. Be patient and tolerant and follow the legal steps with as little challenge to rules and regulations as possible. Conduct a good environmental scan, taking into consideration social, political, and economic circumstances of the country. Examine the per capita gross product and the population of the country Carefully examine the demographic data of a country, with emphasis on the emerging population that can be classified in the middle income group and relatively young.
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If it is a food franchise, select menu choices carefully and be flexible and prepared for menu adaptations and modifications.
METHODS AND MODE OF ENTRY
Direct Franchising, also referred to as licensing, allows a Franchise to set up a Franchise using the system, products and to function as does a Franchisee in the Philippines. Developer Agreement, wherein the developer agrees to develop the area and own all outlets. Master Franchisees act like mini-franchisors in other Countries. Master Franchisees may open their own outlets or grant Franchises to others. Joint Venture, wherein the Franchisor has more control than in the case of a master franchise.
In addition, no training is universal. You need to weave adaptations for international operations into your standard training. If you offer subfranchising to master franchisees which will select franchisees in their markets and also provide franchisees with support, you need to prepare them and train them on how to be a Franchisor. After all, they will e performing the same tasks as you do as a Franchisor.
Hiring a Franchise Consultant To do all the works for you in developing a Franchise, you might consider professional help. There are only three Franchise Consultants in the Philippines with a long list of experience and successful clients. It is not that the most expensive Consultant is also the best, consider the long term offers those Consultants offer you. As this writer is in this business for a very long time, we dont stop serving our clients once we finished our development work, but assist our friends and clients even long after and actively market the franchise opportunities in behalf of our Franchisors. While we charge for that service, it is in most cases lesser than the initial Franchise fee you collect from your first Franchisee and therefore you pay the services off with your first franchise sale, which can be fast.
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XIV. FEES
FRANCHISE FEE Many Franchisors fail because they expect to immediately profit by charging high initial franchise fees, high royalty fees or high advertisement fees. However if you look at the Philippine Franchise market, you will find quite plenty affordable Franchise systems. Your Franchise Consultant will assist you in formulating the right Franchise Fee and Royalty structure. You have to be also sensitive with your fees to be competitive with other Franchisors in the same industry so you wont overprice yourself or shortchange your Company. The Franchise Fee is primarily to compensate the Franchisor for the use of its trademark as well as to defray cost incurred in setting up a system to sell and market franchises. It includes also usually the initial training and the pre-, grand- and post-opening assistance provided by Franchisor. Franchise Fees are always collected upon signing of the Franchise Agreement. Usually the first Franchise is sold at a certain discounted rate. To pay the Initial Franchise Fee in installment is not common; however if a Franchisor accommodates a request, dont expect a long term payment program, maximum until the outlet is ready to open.
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ROYALTY FEE The royalty Fee, as the name indicates, is the royalty payable to the Franchisor on a regular basis for securing rights of franchising. Royalties are usually a percentage of the gross sales (= collected money less VAT) and to be paid monthly within 5 days for the previous month. It is common in retail business if the product line is to be purchased from Franchisor that no royalty is charged. The highest royalty fees are collected by education Franchisors, since they have to work steadily on new curriculums which are to be provided to Franchisees. Common charged Royalties Retail Franchises: NONE if all merchandise comes from the Franchisor
Drug Store and Bakeshop have the lowest royalties from 0 4% of gross sales Food Franchises and Restaurants from 3 10% with most common rates of 4 5 %. Education Franchises have 6 to 40 % of gross tuition and they have to provide in exchange a new curriculum every year. Many service franchises work with a Continuation Fee instead of a Royalty and charge a fixed monthly amount instead of a percentage of royalty.
RENEWAL FEE A renewal fee is usually charged for the renewal of the contract and is usually 25 to 50 percent based on the current franchise fee.
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TRANSFER FEE This fee is charged by the Franchisor when a transfer of ownership is desired by the Franchisee. This transfer requires prior approval by the Franchisor. The transfer fee is paid by the new Franchisee or voluntarily by the outgoing Franchisee. It can be as high as 50% of the original Franchise Fee paid or is a fix amount prescribed by Franchisor in the Franchise Agreement. This Fee is for the administrative change, the legal requirements and training needs of the incoming Franchisee.
ADVERTISEMENT FEES:
GRAND OPENING MARKETING Upon Opening Franchisee shall spend P5K-350K for initial awareness of outlet, which is spent by Franchisee directly
LOCAL STORE MARKETING 1%-2% of gross sales, spent by Franchisee directly to promote the business in the territory of Franchisee
COOP ADVERTISEMENT Joint advertisement in yellow pages or billboards among a group of Franchisees
NATIONAL ADVERTISEMENT FUND TV, Radio and Broadsheet ads. Administered by Franchisor and all outlets, Company owned or Franchised, have to pay into the pot.
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XV. FRANCHISE LEGAL REQUIREMENTS

Franchise agreements must be comprehensive. They are not sales brochures and there is not one standard work that fits any business. A good agreement is stretching from 25 to 60 pages and is just as much concerned to set out the obligations of you the Franchisor as well as your rights and the rights of the Franchisee as well as their obligations. That does not mean that franchise agreements are an equal balance of rights and obligation between equal business partners. Franchisors are responsible for the network as a whole and that sometimes means acting against the interests of an individual Franchisee for the greater good of the network. Franchise agreements have gone through more than twenty years of development to ensure that Franchisors have the appropriate rights to do their job within a framework of fair and reasonable treatment for Franchisees. However, any Franchise agreement is biased in favor of the Franchisor is a fact of life. There are only a limited number of Philippines lawyers familiar with the complexity of franchise agreements, and only some of those have the
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necessary skills to advise a business on the best way to structure a franchise agreement. In this area you must get fully experienced professional advice, like RK Franchise Consultancy. The following items constitute the Franchise agreement of a typical franchise, although this list is not comprehensive and agreements vary to a considerable extent: 1. Appointment 2. Duration of the Agreement 3. Fees and other payments 4. Responsibilities of the Franchisors 5. Responsibilities of the Franchisee 6. Proprietary marks 7. Operating Procedures and Confidentiality 8. Advertising and Promotions 9. Royalty 10. Financial Records 11. Training 12. Insurance 13. Products and services 14. Transferability of the Franchising Agreement 15. Termination 16. Right and duties upon termination 17. Covenants not to compete 18. Renewals 19. Arbitration 20. Right of first refusal 21. Applicable law 22. Severability and construction 23. Notices 24. Waivers and non-waivers
Other Legal Agreements which a Franchisor may need:
MEMORANDUM OF AGREEMENT Pre-Contract to Franchise Agreement, if Franchise Agreement can not be signed due to a.) location still under construction, b.) Shopping mall
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has no space available, c.) Franchisor still has to put his finances together
AGREEMENT WITH LANDLORD Agreement between Landlord, Franchisor and Franchisee to secure the location for Franchisor if Franchisee defaults on Landlord or Franchisor
SITE SELECTION AGREEMENT Territory protection while Franchisee signed already Franchise Agreement and is still looking for the appropriate location
GUARANTEE AND ASUMPTION OF OBLIGATIONS For Guarantee of low capitalized Franchisee (fresh graduates, etc.)
TRANSFER & RELEASE AGREEMENT If Franchisee sells his rights to be executed between Franchisor, Franchisee and Purchasee of the Franchise privileges
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XVI. FRANCHISE RELATIONS

Now that you have invested your time, energy and money in buying or establishing a franchise, how do work within the system? How do you take advantage of all your Franchisor has to offer? How do you deal with other Franchisees? In any franchise organization, its important to maintain open communications lines. A franchise is like a marriage and communication is the key. Communication in a franchise relationship occurs in numerous ways. You should remember to keep communication friendly, helpful, upbeat and honest. Too many times a Franchisors/Franchisee relationship will become adversarial, hostile and aggressive. If this happens, communications lines tend to go down and everyone suffers. The Franchisee has the power to keep communications on a positive note. There are many things that can be done to help your Franchisor communicate with you.
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Try not to be a chronic complainer. If you have a legitimate complaint, perhaps you could offer some praise first. Something that being done right and how happy you are. Then mention the little something thats caused a stress for you at your business. If you think you might have a solution-offer it or brainstorm. Offer to meet them at your store, your point of power so you can negotiate from a stronger position. Be friendly. Try to meet when youre having peak hours. Show the Franchisor or their representative how efficient you are, how clean your place is and how you are following standards. Treat it like a military inspection. Then explain the problem. Tell them your suggestions and ask what should you do? All Franchisors are not the same. Some have a very corporate attitude and some are very down to earth and almost folksy. No matter what type you belong to, communication is still the key. With a small Franchisor, you may be able to call the president or founder directly. A Franchisor with fewer than thirty units needs your input at the top level. He or she will still be working out administrative and organization bugs in the system. Your success is a very serious issue with them. They cant afford very many Franchisee failures this early in the game. Your problems and suggestions take precedence over all other aspects of their business. If you fail, it will affect future sales. It is important for the Founder to know how the franchised model performs in different locations, demographics and local economic environments. If they can solve these problems at a unit level now, it will insure the success of the future units one hundred fold. In medium sized franchises, you may not have the opportunity to be on a first name basis with the Founder or President. However, you will certainly get the chance to meet them. You must likely mirror the attitude of the Founder or President. A large Franchisor will have layers of corporate management and Managers assigned to different areas. Some large Franchisors may not have a Founder any more. The original Founder may have sold most of their stake in the company and no longer oversees any part of the actual
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Franchisor operation. Some large Franchisors may be publicly traded companies that may also own other franchise systems and may during your franchise term either buy more Franchisors out. If you have to expand your area and add another store, do some preliminary demographic work and a franchising study. Ask your Franchisor to review it and call you to talk. Youll definitely improve your chances of being approved. Also include a schedule of estimated increased income from royalties and purchases in your package to the Franchisor. Show them how you can help them. If you are in default of your Franchise Agreement, talk with your Franchisor. Develop a time line that you can live with to come back into compliance. Franchisors dont want to terminate good Franchisees. Think of the Franchisor as your coach and the other Franchisees as your teammates. Remember: Team is an acronym T E A M = Together Everyone Accomplishes More Whenever you hear anything said about a fellow Franchisee, say positive things. As a matter of fact, no matter which Franchisee in mentioned, say something positive. On rare occasions you may hear something negative. Be sure to down play anything you hear that is negative about a fellow Franchisee. It is important for you to join at least one service club. It helps your business become part of the town. If your neighboring Franchisees belong to certain groups, you should belong to a group, which they do not. For instance, if one belongs to the Rotary you should join the Lions. It is important to attend Chamber of Commerce meetings. Since most of the people at these meetings will already know you as a local businessperson, they will typically engage you in conversation and this will prevent you from meeting new people.
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In the Philippines, Franchisors should join any of the Franchise Association: the PFA, Philippine Franchise Association, the AFFI, the Association of Filipino Franchisers, Inc.; or the most flexible one, FIFA, Filipino international Franchise Association (http://www.fifa.ph), which allows local and international Franchisors and even Franchisees to join. This writer is a founding member of FIFA and a member of the PFA. It is important to call up and just say hi to your fellow Franchisees. It will remind them that you are always near by. You can also talk about the worst customer of the week or the most ridiculous complaint of the year. If a customer wants service outside your exclusive territory or its too far away to shop in your store, try to refer them to another Franchisee in your system. This will strengthen your companys good will and name recognition. It will also make someone just like you very happy. Im sure youll get referral customers in exchange. When owning a franchise, you are in business for yourself, but not by yourself. Use this fact to your advantage. Use the resources of your Franchisor, your vendors, and your fellow Franchisees. Make your business great. And no matter what you do dont ever give up. Communication is the first step. Youre going to do fine.
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XVII. DTI FRANCHISING RULING

To avoid more people being scammed by fake Franchisors selling their franchises (particular cart Franchises), the DTI came out with a Bureau Order (10-24 Series of 2010) to assist Franchise Buyers not being victimized by unscrupulous franchise sellers. We actually actively support the Bureau Order and prepare the FDI for all our clients. Bureau Order No. 10-24 Series of 2010 Subject: Advisory on Due Diligence to be Undertaken by a Prospective Franchisee
In order to protect the interest and welfare of a prospective franchisee, the DTI-Bureau of Trade Regulation and Consumer Protection (BTRCP) has issued the following Advisory: 1. Scope and Coverage This advisory is addressed to persons engaged or interested in the franchise business.
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2. Definition of Terms 2.1 Franchise Agreement is a written contract or agreement between two or more parties by which a Franchisor grants the Franchisee the right to engage in the business of offering, selling, or distributing goods or services under a marketing plan/system/concept, for a certain consideration. Unless otherwise provided, said right includes the use of a trademark, service mark, trade name / business name, know-how, logotype advertising, or other commercial symbols associated with a particular business. 2.2 Franchisor is a person, individual or a Corporation, duly registered with the Department of Trade and Industry (DTI) or the Security Exchange Commission (SEC). 2.3 Franchisee is a person, individual or a Corporation duly registered with the Department of Trade and Industry (DTI) or the Security Exchange Commission (SEC) 2.4 Franchise Disclosure Information refers to a set of information and documents that needs to be disclosed by the Franchisor to the Franchisee and / or prospective Franchisee. 3. Due Diligence to be undertaken by a prospective Franchisee Before a person decides to engage in or acquires a franchise business, due diligence should be done by the prospective franchisee. 3.1 Secure or ask Disclosure Information for the Franchisor as follows: 3.1.1 Business address, email address, internet home page / website, fax numbers and other contact details 3.1.2 Copy of DTI or SEC Registration 3.1.3 Parent companies and affiliates, if any, and their respective roles in the Franchise, and Franchisors
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declaration if any affiliate is a supplier and what they will supply 3.1.4 Names of the Board of Directors and officers with a brief description of their qualifications and background, ownership of interests and references 3.1.5 The contact number and business location of existing Franchisees 3.1.6 Executed promotional / marketing materials 3.1.7 Description of the business concept, which includes brand image, brand personality, unique selling proposition, target market, mission and vision, among others 3.1.8 Basic information on training, commercial and / or technical assistance 3.1.9 Certificate that the Franchisor is a member in good standing of any Franchisor Association and that the Franchisor has not pending administrative, civil or criminal case 3.1.10 Declaration of the Initial Fee, amount that will be collected and services covering these fees 3.1.11 Training that will be provided, number of persons, how long and training modules 3.1.12 Number of years Company has operated and number of years it has franchised with corresponding numbers of company owned branches and franchised outlets 3.1.13 Draft of Franchise Agreement 3.1.14 Full disclosure of the Financial requirements of the franchise business
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3.1.15 A provision that requires the franchise applicant to seek adequate legal and financial counsel before signing the Franchise agreement 3.1.16 Mechanism for dispute resolution 3.2 Call or visit or consult any of the following: 3.2.1 Franchisor Association (FIFA 995.0734) 3.2.2 Nearest DTI Regional or Provincial Offices 3.2.3 Securities and Exchange Commission 3.2.4 DTI Direct (Telephone Number 751-3330) 3.2.5 Certified Franchise Executive 3.2.6 Franchise 912.2973) Consultant (RK Franchise 912.2946,
4. Franchisor Association or Organization To establish a databank of Franchisor association or organization nationwide, Franchisor association or organization should submit to DTI-Bureau of Trade Regulation and Consumer Protection (BTRCP) the following documents: 4.1 A certified true copy of its Article of Incorporation and By-Laws 4.2 A current certified true copy of Certificate of Good Standing from the SEC 4.3 Updated list of trustees, officers and members of the organization including their addresses and 4.4 Other pertinent documents such as Code of Ethics and Standards.
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5. Self-Policing of Members This Advisory aims to promote and encourage the Franchise industry to self-police its own ranks by setting a Code of Ethics and Standards for grievance or dispute resolution mechanism to redress complaints against its members, including issues arising from transactions with their franchisees, prospective or otherwise. 6. Publication This advisory shall be published in newspapers of general circulation and shall be part of the DTI Information, Educational and Communication Program. Issued this 17th day of November 2010 in Makati City VICTORIO MARIO A. DIMAGIBA Director
NOTE: All clients of RK Franchise Consultancy become member of FIFA Filipino International Franchise Association. RK and FIFA were the 1st Consultant and Association respectively to register with the DTI under the Bureau Order.
New BUSINESS NAME registration fees in effect JANUARY 3, 2011 The Department of Trade and Industry (DTI) is now implementing the following registration fees for business name registration (original and renewal) depending on the territorial jurisdiction covered in the application: Barangay City / Municipality Regional National PHP 200.00 PHP 500.00 PHP 1,000.00 PHP 2,000.00
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XVIII. THE FUTURE OF FRANCHISING

Franchising is an answer in a growing number of sectors adapted to current ways of living, namely: retail and services, fast food, sports goods, specialized health and beauty retail, leisure, motorist services and others. It is a system that actively participates in the modernization of trade and craft practices. It is obvious that franchising has reaffirmed itself as the most profitable means to take advantage of traditional economic multipliers. Franchising provides a solution when faced with changes under way and is an offensive means that will help handle the economic and social paradoxes of this third millennium. We are searching for stability while calling for change. We are looking for solidarity but we can grant more and more consideration to our individuality and wont infringe on our personal rights. We have an international outlook, and simultaneously we do love our native soil even better. The Philippines is becoming familiar and we change into Globalization but still, we feel we belong where we were born or where we live, be it Manila, Cebu, Mindanao or anywhere else in the Archipelago.
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We want to take part in scale economies while having the capacity to develop and adapt our own local energy and strategy. We call for rules, guarantees and ethics but we wish very much to preserve the necessary flexibility that makes innovation possible. We want to preserve the whole but respect the particular. Because the franchising network is a place of mutual enrichment and profitability, because the Franchisor and the Franchisee, two partners that are co-responsible for their common business have institutionalized their dialogue. It is the only trading model that eases the partnership between two strong economic actors, both deeply engaged in a daily battle, having complementary capacities and clear separate responsibilities; the keeping a straight long term objective in mind. For would be Franchisors, don't be scared, go for it if you have the qualifications to Franchise. Grow big with OPM, "others people money", instead of investing your own in the growth of your Company. Think big and grow big through Franchising. Franchising is here to stay and to grow stronger and bigger in the third millennium not only in the Philippines but worldwide. One step towards globalization for established Philippine Franchisors may be franchising out internationally as 25 of the more than 400 Franchisor clients of RK Franchise Consultancy do already.
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For advertisement in FranchisingPH please contact Jen at (02) 995.0734. 40,000 copies are printed every two month and distributed at major events and in Coffee shops, Restaurants, Salons, DTI Offices, IPO Office and all SM Global Pinoy Centers nationwide. Emailed to more than 40,000 addressee and available online on www.franchising.ph
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FIFA FILIPINO INTERNATIONAL FRANCHISE ASSOCIATION AND RK FRANCHISE CONSULTANCY ANNOUNCES THEIR SCHEDULES FOR "ALL ABOUT FRANCHISING" SEMINARS WITH "TRADEMARK YOUR BUSINESS" FOR 2011 AND 2012 MANILA FRANCHISE SEMINARS: FIFA-RK FRANCHISE CENTER G/F Minnesota Mansion 267 Ermin Garcia Street Cubao, Quezon City Saturday, October 01, 2011 Saturday, November 05, 2011 Saturday, December 10, 2011 Saturday, January 28, 2012 Saturday, March 10, 2012 Saturday, April 21, 2012 Saturday, May 26, 2012 SPECIAL EARLY BIRD RATE: prepaid Pesos 750.00 only (regular Participation Fee: P 1,200.00 if paid upon seminar day), for details call Dhel or Bernadette at (02) 912.2946 or 912.2973 Seminar starts at 1.30 pm until 5 pm, including seminar materials, CD "All about Franchising", snacks FREE BASEMENT PARKING CEBU FRANCHISE SEMINARS: RK Franchise Consultancy Cebu Office Unit 11 St. Patrick Square Don Ramon Aboitiz Street (Back of Redemptorist Church across St. Therese) Saturday, October 8, 2011, 1.30 pm Participation Fee: P 750.00 (Due to limited space only pre-paid participants possible) For prepayment and details call (032) 254.0473 or 253.5010 SM CITY CEBU CONFERENCE HALL D Saturday, March 3, 2012
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CAYAGAN DE ORO CITY SEMINAR: Dynasty Court Hotel Thursday, October 25, 2011, Participation Fee: P 750.00
Seminar topics: What is Franchising, History of Franchising, Defining Franchising, Franchising 101, What does a Franchise provide, Benefits of buying a Franchise, How to select a Franchise, Advantages and Demands of Franchising, Mistakes by Franchise Buyers, Buying a Franchise, Franchising your business, Legal Franchise Requirements, Franchise Operations Manual, DTI Bureau Order on Franchising, The Future of Franchising and Introduction to Franchise Opportunities SEMINAR SPEAKERS RUDOLF A. KOTIK Franchise expert for 33 years in 3 Continents, developed more than 400 Filipino Companies into Franchise Systems ATTY. KARLO NICOLAS Expert in Intellectual Property Laws (in Manila seminars only) For updates on seminar and expo schedules please visit www.franchise.ph and click at Seminars & Expos. For special group seminars or for associations please contact us. For Reservation and details please contact: RK Franchise Consultancy Manila (02) 912.2946, 912.2973, 995.0734, 911.1966 Cebu (032) 254.0473 or 253.5010 Email: rk@rkfranchise.com, rkfranchiseconsultancy@yahoo.com www.rkfranchise.com, www.franchise.ph , www.franchising.ph
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March 2-4, 2012 SM CITY CEBU TRADEHALL For details call (02) 995.0734 www.cebufranchise.com
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THIS CD IS BROUGHT TO YOU BY
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