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Franchising in the Philippines

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Franchising has been in the Philippines for 94 years. With the entry of Singer Sewing Machine in 1910, a new company came up with a product distributorship. For years, this form has been used by numerous companies as their route to expansion. From 1910 to 1965, business staked their flags in the Philippine economy through PRODUCT DISTRIBUTORSHIP. Some of these multinationals were tire and pharmaceutical companies.

The take off was slow in the early years as the succeeding companies like A&W Restaurant known for its root beer came about in 1965. The first outlet was established in what was formerly known as Highway 54 (now EDSA) near Araneta Coliseum. The concept was a drive-in where women food attendants garbed in mini-skirts, black stockings and in roller skates would serve customers inside the comfort of their cars. Trays were clamped by the side of the door and cold refreshing root beer in mugs plus foot long hotdogs were served. The set-up was exactly the same as found in the US branches during those years. What this company brought was another angle in franchising, which is known as BUSINESS FORMAT. From the year onwards most entrants into the market used this type. In fact so widely used not only in the Philippines but throughout the world.

Product Distributorship
This is a form of franchising where owners of products allow other parties to sell or distribute their products or even use their trademark as a dealer. There is minimal or no control of operations. The relationship is centered on the quality of products sold.

Business Format
A form of franchising used by 90% of companies involved in franchising. This is the reason why franchising is considered the most successful way of expansion worldwide.

In business format, the franchisor, more than his registered trademark and products, has developed a business system that is made available for use to franchisees. Compliance to the business system is the core and essential element of their contractual relationship embodied in a franchise agreement.

The first survey of franchising in the Philippines done in 1995 revealed that there were a total of 50 operating foreign franchisors at that time. The success rate of foreign franchisees is 97%. N 2003, there are now 315 foreign franchisors in the country with a success rate of 87%.

Philippine Based (Home-Grown) Franchises
Earliest recorded homegrown company that used business format franchising was PANCAKE HOUSE. It was franchising since 1978. PANCAKE HOUSE is still active in franchising and has transferred ownership a few years back.

In 1996, there were 94 companies using franchising as their route to expansion and the number has substantially increased to 481 in 2003. The success rate is a good 90%.

Philippine Franchise Scenario
Franchising in the country evolved from the US Franchise System. There are, however, no laws that regulate franchisng. Companies and franchise developers use franchise practices as reference and guide in pursuing franchising. The increasing number of homegrown companies using franchising in their expansion can be attributed to the presence and increasing number of foreign franchisors. They served as motivators and inspiration for the local entrepreneurs.

Franchising for years has been the monopoly of food sector. It was only in mid-1990’s that service and retail entrepreneurs used franchising.

There was an absence of franchise education in the country for decades. Franchise Conference and Seminars started only in the mid-1990’s. Franchise Associations were also formed with the vision of professionalizing franchising as well as police their own ranks.

Learn more from the Franchising Guru, Mr. Armando O. Bartolome. Click here to grab a copy of his "Overview of Franchising" eBook now!

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