A partnership made in franchise heaven
July 10, 2006 | 12:00am
It’s a contract that boils down to having a relationship. It’s difficult when the relationship goes sour, communication breaks down, and promises aren’t kept," says Robert Trota, president of Max’s Restaurant.
No, he’s not referring to the pitfalls of marriage at all, but rather to unsuccessful franchise ventures that he, as head of the Philippine Franchise Association (PFA), has seen in his years in the business.
Franchising, according to Trota, has been in the country since the early ’80s when fastfood chains in the US such as McDonald’s reached local shores and started sprouting all over. Pretty soon, more companies followed suit and everybody was happy.
End of story? Not quite.
After the initial euphoria of finding their "soul mates" died down and companies settled into their easy chairs, they realized that hey, the honeymoon was over, and it was time to go to work. It happened then, it’s still happening now.
"It’s important for franchisers to look at their franchisees as partners. That way, they can really sit down and talk openly about their shared venture, take care of it and understand what is happening and what each other’s expectations are," offers Trota.
Like marriage, one has to be sure before plunging into a partnership. Trota says that the most critical part of a franchising business is choosing partners. "It takes about a year to choose, especially those involving big concepts. Smaller ones take a shorter time," says the master franchisee of the world famous Krispy Kreme, which is set to open in November. In Trota’s case, for instance, his Krispy Kreme venture took two years to finalize.
A common mistake among Filipino entrepreneurs, says Trota, is thinking that franchising is all about instant money. Nothing could be further from the truth. Money doesn’t grow on trees, and so it is that franchisers and franchisees cannot expect returns without doing anything. Both partners have to do their job in assuring that their business is not being neglected.
Don’t be like a pseudo-franchise where there are no systems in place, and where the promised support and research and development aren’t there. "You buy a whole system, a tried-and-tested brand that will support you all the way," he says. Trota clarifies that franchising is not just about copying or duplicating a business, but multiplying a good business. "You cannot franchise if you don’t have a track record. You cannot franchise a concept. You can only offer a franchise that exists, that has a good track record, profitability, with systems in place, sustainability, and is a good brand."
The good thing about buying a business that’s tried and tested, says Trota, is that you need not go into trial and error and experience growing pains. "You can’t afford to make a mistake, especially if you are investing hard-earned money. You want to put your money into a business that is stable," he says.
Well, the good news, folks, is that 90 percent of franchising businesses succeeds. The remaining 10 percent fails due to several factors such as location problems, regulations kinks, or simply a relationship going sour.
Another misconception is that only the big players can franchise. Certainly not, says Trota. If you’re observant enough, even those little "carts" scattered in malls and selling everything from hotdogs to accessories to vitamins and bibingka are all franchisees. Called "micro-concepts," these are the babies, if you will, of the franchising business, which cost below P3 million. And it’s a good way to start, if you don’t have that much money but are willing to invest in something worthwhile. But if you have the moolah, then, by all means, invest in something big. Remember the universal law of what goes around, comes around – and double or triple that.
Also, entrepreneurs are urged to be more creative. There’s more to the franchising business than just restaurants. Contrary to popular notion, the food business only comprises 40 percent of the franchise business. The rest is a combination of service and retail businesses.
According to a USAID-funded study, services such as security, printing and electronic publishing, food and beverage, car services and accessories, health, cosmetics and toiletries, maintenance and cleaning, laundry, retail, and hotels and motels, have tremendous growth potential in the country. Meanwhile, sunrise industries that are seen to shine soon include retirement villages, health and wellness, education, business outsourcing, telecom and tourism. All it really takes is a little imagination, plus good research on what concept will work well for you. The most important thing, says Trota, is it must be something that you love to do. Filipinos are ready for franchise, notes Trota.
There are some, though, who are quite hesitant to go into franchising for fear of their concepts being copied. "There are systems that protect them from such things. Certain items can be proprietary; for example, some food items are sent to the franchisees already in pre-mixed packs," he says.
This is also the reason why the PFA is very selective about taking in members, Trota says. Each applicant is put on probation for a year. If the PFA sees that proper systems are in place, their track record is good and promises are kept, then applicants are made full members. Launched in 1995, the PFA has done a lot to increase awareness among local entrepreneurs about the ins and outs of franchising. In its upcoming 14th Philippine International Franchise Conference and Expo on July 13 to 16 at the Hotel Philippine Plaza and World Trade Center, the PFA is expected to gather 250 concepts-exhibitors from both the big and small players. With an anticipated 20,000 guests coming in, Trota says the event is going to be the tiangge of business, where speakers from different franchise councils will share new trends, ideas and experiences.
What’s great about these partnerships is that at the end of the day, they can sit down with, say, Jollibee or KFC people and share experiences and tips. "It’s more like asking what I can do to help you. The Philippine franchising community, anyway, is not that big to begin with since players are not that many. Kung magaaway-away lang, sayang lang," says Trota.
Again, it all boils down to trust and deep commitment on the part of both partners. The honor system should be observed and whatever misunderstandings should be peacefully settled. Otherwise, both partners will end up with nothing. Separation or divorce – like marriage, after all – could get ugly and prove too costly.
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