Pros and Cons of Franchising in the Philippines

Franchising in the Philippines is the ultimate dream of the many Filipinos who do not want to indulge in the traditional hassles of business. There is no surprising fact that doing business is a difficult task, and it can result in losing your hard-earned money. So, in this situation, “Franchising” is one of the best and ultimate options with a guaranteed success rate. The advantages of franchising are more than any other form of business. 

 

What is Franchising?

“Franchising is the method for expanding businesses and services channels through a legal and licensed relationship.”

(Int. franchise association)

 

Franchising is a concept in which one company pays (Franchisee) to another person or company (Franchiser) a set amount to do business by using their name. The set amount called royalty for using the name of the franchiser’s trademark, products, services, or even business model. 

 

Famous Examples of franchising Philippines; 

  • McDonald’s
  • KFC
  • Jollibee
  • Subway
  • And Pizza Hut along with many other examples.

Types of Franchising

 

Before heading towards the advantages of franchising and its disadvantages, it is essential to know about its types. 

 

    • Job-Franchise: (A low investment-based franchise taken by a person who wants to run a small business).

 

    • Product/distribution franchise: (It is based on supplier dealer relationships to distribute the franchisor’s products).

 

    • Business Format Franchise: (In which franchisee takes the trademark and whole system to operate the business.)

 

Advantages and Disadvantages of franchise

 

“Franchising is being in business for yourself, but not by yourself.”

The system of franchise works systematically, and it mainly involves two parties in it for smooth working;

 

    • Franchisee (The person who pays to do business)

 

  • Franchisor (The person who receive money from others for using the business’s name)
The advantages of franchising (for franchisor)

There are the following advantages of franchising for the person who decides to give the franchises.

 

    • Franchising helps the franchiser to build the brand worth in the eye of masses. It helps to gain goodwill for business by contributing to local advertisements.

 

    • Through franchising, the owner can get the capital investment for their business. Most of the time, capital investment remains the biggest problem for business owners.

 

    • Successful franchising outlets in the Philippines earn a handsome amount of money in the shape of royalties. Business owners can increase the amount based on monthly profits and sales.

 

  • It is good to give the franchise of your business to any other person who is directly investing his time and money. The owner who spends his money put more effort and managerial skills for the success of the business.
Disadvantages of franchising (for franchisor) 

There are the following disadvantages of the franchising that the franchiser receives most of the time. 

 

    • The franchiser needs to ensure legal regulations. So, it is essential to work with an experienced franchise lawyer to establish the blueprints for franchising.

 

  • However, through franchising, you can earn capital investment; but it has some cons as well. You will have to bear extra-legal expenses and the cost of establishing the legal infrastructure.
Advantages of franchising (for the franchisee) 
    • You will not have to put extra effort to establish your business name; you can focus on the managerial sides for smooth working.

 

    • You will receive an established business system with the approved policies and methods. All procedures are already approved, tested, and approved in the marketplace.

 

    • You have the opportunity to receive the training and support from your mother organization in case if you need any. It will help you to extend your business with continued developments according to set standards.

 

    • There are minimal chances that your business will fail; you can earn money by following the set standards.

 

Disadvantages of Franchising (For franchisee) 
    • If you choose the wrong business for franchising, then all the benefits could backfire at you. So, it could waste your investment if you do not make the right decision to choose the franchise.

 

  • After every specific time, you will have to pay royalties based on your gross sales. So, it can potentially reduce your profit margins. 
Take proper research

If you are planning to take the business franchise in the Philippines, you should thoroughly research the pros and cons and other factors. Research is essential for smooth working and saving your money. So, to do the research, you need to search for an authentic Philippine-based platform for all required knowledge. www.franchiseko.com is the perfect place to find the answers to your franchising business-related questions and concerns. 

Browse and find the perfect franchise to meet your aspirations. 

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