EXPERT BARES: Franchising pitfalls

While the franchise system has become the most popular scheme for businesses to grow faster, and for entrepreneurs to have an instant business, it has its own pitfalls that both parties should be careful about.

Franchise expert Rodulf A Kotik warned that entrepreneurs who may want to venture into the franchise business, must carefully examine the franchisors and its system, as it may not offer a sound franchise system and will only lead to unachieved return of investments (ROI).

Franchisors or those who offer their businesses for franchise must invest well in the system, like getting professional franchise consultants, rather than formulating their own packages.

“Be careful of the ‘cheapy-cheapy’ franchise packages,” Kotik sends the warning to would-be entrepreneurs.

On the other hand, franchisors must also have good professional background on the nature of franchise system, and it should also carefully study the interested franchisee before formally turning over the business.

He said there are franchisors or business owners who are only after the hefty franchise fees without giving the franchisees a clear direction of the business, no ROI timeframe, and no business support system after the turnover.

Kotik who owns one of the three largest franchising consultancy firms in the Philippines, RK Franchise Consultancy, said nowadays entrepreneurs must be very careful in getting a business franchise, as well as franchisors must also be perceptive enough in expanding their businesses through franchise.

Among other problems hounding the popularity of the franchising scheme is the unguarded “transfer of technology” that often leaves franchisors off guard with their business model now in the hands of spurious people.

A franchisor of a well-known service brand interviewed by The Freeman said that he had been overtaking at least two franchised outlets because of unprofessional performance of the franchisees.

He said some franchisees do not bother to renew their franchise deals after three years, as they have already opened the same kind of business under a different brand they now call their own.

Transfer of technology is very crucial in offering franchise, Kotik said stressing that serious businesses must get a professional franchise consultant to take care of these pitfalls otherwise they will fell prey to ill-minded entrepreneurs.